[RAM] RAM Ratings affirms Northern Gateway's AA1 issue rating

RAM Ratings has affirmed the AA₁/Stable rating of Northern Gateway Infrastructure Sdn Bhd’s (the Company) RM340 mil MTN Programme (2017/2034). 

The affirmation is based on Northern Gateway’s strong debt servicing ability, notwithstanding additional construction work approved in 2024. This is largely attributable to healthy cash reserves and a steady, timely stream of concession-based cash flow. Northern Gateway holds the concession to build and maintain the immigration, customs, quarantine and security complex in Bukit Kayu Hitam, Kedah (the Project), which was completed in two phases – the latter on 26 June 2019. 

Maintenance of the Project was commendable in 2024 and 7M 2025, with minimal penalties incurred. Maintenance work is undertaken by Genesis Facility Solutions Sdn Bhd, a related party. In line with its strong operational performance, the Company’s debt service coverage ratio (DSCR) performance over the review period exceeded RAM’s projections. Considering our stressed assumptions, which included delayed concession payments, no maintenance margins and optimised dividend payouts, DSCRs are projected to stay above 1.50 times throughout the tenure of the bond, comfortably supporting the AA₁ rating. 

These metrics are expected to also remain stable, even with the additional construction work Northern Gateway is embarking on. This involves the construction of a new 0.9 km road and accompanying infrastructure to connect the customs, immigration and quarantine complex at the Sadao border checkpoint in Songkhla, Thailand to the Project (collectively, Additional Works, permissible under the existing concession agreement). 

These works, funded by government upfront and interim progress billing payments, advances from DRB-HICOM – Northern Gateway’s parent, were expected to be completed by 20 September 2025. However, an extension of time was granted until 4 February 2026 due to delays by the Thai government in constructing the road connecting the Sadao border checkpoint to the Project, with no cost variations and overruns incurred to date. Our assessment also considers the mitigation steps taken to limit the credit risks arising from the Additional Works from risks of the completed Bukit Kayu Hitam facility. At present, a supplemental concession agreement to formalise this separation is still pending. Nonetheless, our assessment indicates that concession cash flows and earnings supporting the Company’s MTN debt payments will remain unaffected by delays, cost overruns or non-performance of the Additional Works.

As with other concession-based transactions, Northern Gateway is exposed to concession termination risk. While the compensation scheme is spelt out, risk arises from potential delays in the receipt of reimbursements. That said, termination is viewed as remote, considering the non-complex nature of maintenance work and low counterparty risk posed by the government.


Analytical contacts
Liew Kar Ling
(603) 2708 8216
karling@ram.com.my

Davinder Kaur Gill
(603) 2708 8220
davinder@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my