KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) today affirmed Tenaga Nasional Bhd’s (TNB) corporate credit rating of AAA and sukuk rating of AAAIS on its outstanding RM2 billion Al-Bai’ Bithaman Ajil Bonds, with a stable ratings outlook.
“The ratings incorporate a two-notch uplift from TNB’s standalone corporate credit rating of AA/Stable to reflect MARC’s assessment of a high likelihood of government support premised on the company’s critical role as the country’s principal energy provider,” MARC said in an emailed statement.
The ratings agency also said that it made note of the government’s indirect majority ownership and its golden share in TNB in making the assessment.
MARC made note of the fact that electricity demand grew 4 per cent during the financial year ended August 31, 2016 (FY2016) in Peninsular Malaysia following a declining trend since 2012.
TNB’s Q3FY2016 saw revenue and pre-tax profit rise to RM44.5 billion and RM8.1 billion, respectively (FY2015: RM43.3 billion; RM7.1 billion).
“TNB’s credit strength reflects its monopolistic position in electricity transmission and distribution in Peninsular Malaysia and Sabah, its significant electricity generation capacity and strong operational track record. TNB’s generation capacity has increased to 12,904MW or 56.3 per cent of total installed capacity in Peninsular Malaysia in 2016 following the completion and commissioning of the 250-megawatt (MW) Hulu Terengganu hydro power station, 1071MW Prai gas-fired power station, 375MW Connaught Bridge gas-fired power station and 186MW Ulu Jelai Hydro Power Station,” MARC explained.
The firm said TNB’s total borrowings increased by 28.2 per cent y-o-y to RM40.3 billion during the year, mainly from the sukuk issuance for Jimah East Power (JEP) of RM8.98 billion and the acquisition of GAMA Enerji A.S. (GAMA Enerji) for RM1.2 billion.
As a result, it said, the group’s debt-to-equity (DE) ratio weakened to 0.77 times in FY2016 from 0.66 times in the previous year.
“The DE could rise further in FY2017 following the issuance of US$750 million sukuk under the US$2.5 billion multi-currency sukuk issuance programme to mainly fund its overseas ventures. Although TNB’s debt-to-capital employed ratio has increased slightly from the previous year, it remained low at 0.40 times below its optimal level at 0.55 times,” MARC wrote in its report.
Additional, it said that it viewed TNB’s recent acquisition of a 30 per cent stake each in Turkey-based GAMA Enerji and India-based GMR Energy Limited as well as the proposed subscription of 50 per cent stake UK-based Vortex Solar Investments S.A.R.L. as expanding Malaysia’s energy giant’s footprint globally.
“These acquisitions are expected to broaden TNB’s earnings base going forward,” it said, adding a note that TNB hedges its foreign currency risk by requiring a minimum of 50 per cent of the group’s known foreign currency exposure to be hedged for up to 12 months’ via forward exchange and currency options contracts.