[RAM] RAM Ratings affirms Edra Energy's AA3/Stable sukuk rating

RAM Ratings has affirmed the AA₃/Stable rating of Edra Energy Sdn Bhd’s (the Company) Sukuk Wakalah of up to RM5.085 bil in nominal value (2018/2038). 

The affirmation is based on Edra Energy’s projected steady cashflow generation, supported by a healthy operational showing despite lingering fleet-wide defects at its 2,242 MW combined-cycle gas turbine power plant in Alor Gajah, Melaka (the Plant). The rating also incorporates explicit credit support from Edra Energy’s sole owner, Edra Power Holdings Sdn Bhd (Edra Power, rated AAA/Stable by RAM), as outlined in a letter of undertaking (LoU). This commitment ensures sufficient liquidity to maintain the Company’s annual finance service coverage ratio (FSCR) at a minimum of 1.50 times to sustain the AA3 rating.

Edra Energy’s robust business profile is underpinned by a 21-year power purchase agreement (PPA) with offtaker Tenaga Nasional Berhad (TNB, whose sukuk is rated AAA/Stable). The Plant’s rolling unscheduled outage rates of 0.75% in 2023 and 1.74% in 6M 2024 were comfortably within the PPA limit, qualifying the Company for full available capacity payments. Edra Energy also effectively passed on fuel costs to TNB on meeting the stipulated heat rate requirements. However, the Plant’s availability factor fell short of the PPA annual availability target (AT) due to extended scheduled outages to address ongoing defects that are common to the Plant’s model, resulting in RM123.86 mil of penalties, which were settled in November 2024. These issues, including potential revenue recovery, are being resolved in line with the equipment manufacturer, General Electric (GE)’s recommended action plan, at no additional cost to the Company. 

While further hiccups are possible, given the nascent phase of the GE 9HA.02 gas turbine’s operation, Edra Energy can rely on a Long-Term Service Agreement with GE Global Parts & Products GmbH (equipment supplier), which guarantees output, heat rates and both planned and unplanned outage performance. 

Moving forward, Edra Energy expects higher capital expenditure for parts procurement, driven by potentially adverse foreign exchange movement and increased inspection frequency. Our sensitised cash flow projection assumes longer forced outage durations, zero fuel margin, AT penalties and lower cash flow generation. Under these conditions and including management’s revised operating cost estimates, Edra Energy may require periodic liquidity support from Edra Power, amounting to RM660 mil between 2028 and 2034. The Company, however, in its base case, foresees no need for shareholder liquidity injections and has projected RM2.05 bil in cumulative distributions from 2025 to 2038. 

Edra Power has robust liquidity and financial position as reflected by its RM1.09 bil of unencumbered cash reserves as of end-June 2024 and a near-net cash balance sheet. This supports its capacity to support its commitment for the Company under the LoU, if required.

On its own, Edra Energy held RM1.04 bil in cash as at July 2024, comfortably covering RM586.10 mil in financial obligations over the next 12 months. Sukuk profit and principal obligations of RM256.57 mil due in January 2025 are secured by the transaction’s Finance Service Reserve Account (FSRA) standby letter of credit procured by Edra Power.


Analytical contacts
Zachary Tan
(603) 3385 2612
zachary@ram.com.my

Chong Van Nee, CFA
(603) 3385 2482
vannee@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my