MARC has assigned a preliminary rating of AA-IS to Southern Power Generation’s proposed Sukuk Wakalah of up to RM4bn. The outlook on the rating is stable. Southern Power, a 51:49 joint venture between Tenaga Nasional and SIPP Energy, will utilise proceeds from the Sukuk to develop a 2×720-megawatt combined cycle gas-fired plant in Pasir Gudang, Johor.
The rating reflects Southern Power’s predictable operational cash flow on the back of the availability-based tariff structure under a 21-year power purchase agreement with TNB, on which MARC has a senior unsecured debt rating of AAA/Stable. The absence of demand and fuel price risks offered by the PPA, supports the project fundamentals. The rating also considers the strong commitment from Southern Power’s shareholders, through a two-way undertaking to address any shortfall in capital contributions from either shareholder.