[MARC] MARC Ratings affirms AA-IS rating on Tanjung Bin O&M’s sukuk

MARC Ratings has affirmed its AA-IS rating on Tanjung Bin O&M Berhad’s outstanding RM165.0 million Sukuk Wakalah with a stable outlook.

The rating reflects the credit strength of Tanjung Bin O&M’s parent, Malakoff Power Berhad (MPower)(AA-IS/Stable), which has provided an unconditional and irrevocable undertaking to top up any shortfall in the finance service reserve account for the Sukuk Wakalah. The rating equalisation also considers the strong operational and financial linkages between the issuer and its parent. Wholly owned by Malakoff Corporation Berhad, MPower provides operations and maintenance (O&M) services to the domestic, independent power producers that are majority-owned by its parent.

Tanjung Bin O&M provides O&M services under an O&M agreement (OMA) with sister company Tanjung Bin Power Sdn Bhd (TBP) pertaining to the latter’s 2,100MW power plant in Pontian, Johor. Tanjung Bin O&M subsequently engaged MPower to undertake part of the services under a subcontract agreement between them (sub-OMA); both the OMA and sub-OMA are coterminous with the 25-year power purchase agreement between TBP and Tenaga Nasional Berhad.

Tanjung Bin O&M derives most of its revenue from fixed and variable operating fees, with the latter based on the TBP plant’s net electricity output. In 1H2024, revenue rose to RM166.1 million (1H2023: RM137.4 million) on higher net electricity output. The company, however, reported pre-tax loss of RM72.6 million, primarily due to higher scheduled maintenance costs during the period. Profitability is expected to improve in 2025, as the company has no major maintenance work planned for that year. As at end-August 2024, Tanjung Bin O&M had available cash and cash equivalents of RM64.9 million, with the next repayment of RM60.0 million only due on July 1, 2026.

Ahmad Kamal Syauki, +603-2717 2958/ kamal@marc.com.my
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my