In a statement, the credit rating agency said Tenaga Nasional Bhd (TNB) and Sarawak Energy Bhd are both rated AAA/Stable, and continue to exhibit healthy operational and financial profiles.
It said Sabah Electricity Sdn Bhd (not rated) also boasts a strong financial position, underscored by the government’s solid support.
"The sector’s still-supportive regulatory landscape helps uphold the credit strength of the vertically integrated utility companies and independent power producers (IPPs) within their jurisdictions," it said in a statement in conjunction with its latest publication titled 'Malaysian Power Sector: Long road to liberalisation'.
RAM Ratings sees the Malaysian power industry as one of the most active sectors tapping the domestic bond market with a five-year annual issuance of about RM8.4 billion for 2015–2019.
The sector’s outstanding power bonds and sukuk summed up to some RM65 billion as at end-January 2020, equivalent to about 9% of Malaysia’s total outstanding corporate bonds.
"Mirroring the government’s agenda, the power sukuk market was driven by renewable energy (RE) projects in 2019. While the facility sizes are much smaller than those of conventional power projects, the RE segment has been driving Malaysia’s Sustainable and Responsible Investment (SRI) sukuk market," it said.
RAM Ratings has rated numerous prominent firsts in the SRI sukuk market along with innovative financing structures that have involved the pooling of multiple plants that enable smaller IPPs to successfully tap the market.
“As the award of RE projects becomes more competitive, we expect financing structures to evolve to help bridge the funding needs of RE producers.
"That said, the key considerations of sound project economics backed by strong counterparties and robust cashflow matching are still critical to our credit analysis,” said its Infrastructure and Utilities Ratings co-head Chong Van Nee.
Main highlights of RAM’s latest publication include the power industry masterplan promotes market efficiency, reforms credit neutral to TNB and existing IPPs - new risks for future projects, goal of 20% RE mix to complement fossil fuel-powered generation, Malaysian sukuk market still the main funding source and innovative financing structures facilitate access to sukuk market.
For further insights, the publication is available for download at www.ram.com.my.