KUALA LUMPUR, Nov 5 — RAM Rating Services Bhd (RAM Ratings) has reaffirmed the AA1/Stable/P1 corporate credit ratings of Edra Power Holdings Sdn Bhd (EPH).
RAM said the reaffirmation was premised on the resilience of EPH’s independent power producer (IPP) businesses which supported EPH’s healthy cashflow-generating ability.
“This, coupled with a lightly geared company-level balance sheet, translates into a sturdy debt-servicing aptitude, which saw EPH’s robust company-level adjusted operating cash flow debt coverage ratio come up to 1.17 times in financial year December 2017,” said RAM Ratings.
EPH has a stable of 13 mature power plants operating in regulated and concession-based segments that have performed strongly to date, with operating track records spanning nine to 23 years.
It is the second-largest IPP group in Malaysia (by equity capacity) after Malakoff Corporation Bhd, accounting for 10 per cent of the nation’s total installed capacity.
EPH also has a presence in Bangladesh, Egypt, the United Arab Emirates and Pakistan, with an aggregate owned capacity of 5.5 gigawatt (GW).
In a statement today, RAM said its assessment of EPH’s credit profile placed greater emphasis on its company-level credit metrics, given that the bulk of its debts (those belonging to its operating entities) were concession-related, ring-fenced and had no recourse to the holding company.
“The risk of distribution disruptions is deemed low, underpinned by steady revenue from its operating entities. This largely comprises availability-based payments and bears minimal demand risk.
“While EPH’s foreign investments are vulnerable to potential policy changes given that the power sector is heavily regulated, it has yet to experience any major regulatory upheaval in the markets in which it operates,” said the credit rating agency.
Meanwhile, RAM Ratings said the ratings were moderated by the limited lives of the EPH’s power purchase agreements which necessitated earnings replenishment.
“To this end, EPH has intended to double its capacity from the current 5.5 GW to 11 GW over the next five years, which would largely be met by Edra Energy Sdn Bhd’s 2.2-GW combined-cycle gas-turbine power plant in Alor Gajah, Melaka.
“We do not preclude heightened execution and regulatory risks arising from new projects, although we derive comfort from EPH’s strong operating track record,” said RAM Ratings.
It said that EPH boasted a strong liquidity profile and balance sheet and considering its RM138.2 million of cash balances against minimal on-balance-sheet debts as at end-June 2018, it was in a net-cash position.
“Concurrently, EPH’s burdenless cash reserves amounted to RM1.8 billion as at end-June 2018. Most of which reside under its operating subsidiaries and intermediate holding companies, and could be directed back to EPH,” it added. — Bernama