RAM Ratings Reaffirms Musteq Hydro’s AAA(bg) Sukuk Rating

RAM Ratings has reaffirmed the enhanced AAA(bg)/Stable rating of Musteq Hydro Sdn Bhd’s MYR 80 million Bank-Guaranteed Sukuk Musharakah.

The rating reflects an unconditional and irrevocable bank guarantee provided by Maybank Islamic Berhad (rated AAA/Stable/P1 by RAM), which enhances the credit profile of the sukuk beyond Musteq’s stand-alone credit strength. Musteq is an independent power producer (IPP) that owns and operates a 20-MW hydro power plant in Sungai Kenerong, Kelantan, under a Power Purchase Agreement with Tenaga Nasional Berhad that will expire on 19 December 2030.

“Musteq’s debt-servicing ability has weakened unexpectedly since our previous review as a result of poor operational performance. We do not expect the Company to generate sufficient operational cashflow to meet financing obligations on the Sukuk amounting to MYR 6.54 million due on 26 January 2015 (instead of our earlier projected January 2017). It has not met the minimum required finance service reserve account (FSRA) balance for the Sukuk since 27 October 2014.

However, the Company has informed us that it is exploring every means to make full and prompt payments on its obligations to avoid the bank guarantee having to be called on. It expects to receive an advance from its holding company, Eden Inc Berhad, by early January 2015. “Nonetheless, even if Musteq receives sufficient financial support to meet obligations due in January 2015, we expect it to face another liquidity crunch in January 2016 under our sensitised scenario.”

Originally published on www.cpifinancial.net