Published: Monday July 16, 2012 MYT 3:39:00 PM

Construction of Kimanis power plant 66.06% completed

KUALA LUMPUR: The construction of Kimanis Power Sdn Bhd's 285 MW combined-cycle gas turbine power plant in Kimanis Bay, Sabah is on schedule with physical progress at 66.06% as at May 31, 2012.

Malaysian Rating Corporation Bhd (MARC) said on Monday the plant was ahead of the scheduled progress of 66.01%.

The ratings agency said the project's independent consulting engineer, Sinclair Knight Merz, opined that the Taiwan-based construction consortium leader, CTCI Corporation (CTCI Corp) had the experience and resources to undertake its role.

CTCI has provided a 10% performance bond and performance guarantee for the power plant. The performance guarantee is backed by a similar guarantee from General Electric Company (GE), the manufacturer of the plant's three 6FA+e gas turbines.

MARC assigned a preliminary rating of AA-IS to Kimanis's RM1.16bil Sukuk programme. The outlook on the rating was stable.

Kimanis is a 60:40 joint venture between Petronas Gas Bhd and Sabah state-owned entity NRG Consortium (Sabah) Sdn Bhd (NRG). NRG is an indirect unit of Sabah state's investment arm Yayasan Sabah Group (YSG). MARC said Kimanis would issue the sukuk in two series under the programme, the first series of up to RM860mil would begin to amortise in 2016 while the second series of up to RM300mil would start to amortise in 2015.

Drawdowns from the Sukuk programme would be used to part-finance the power and its initial working capital. The estimated project costs of RM1.47bil including financing costs during construction will be funded through a 78:22 debt-to-equity financing mix.

The rating was constrained by remaining construction and completion risk in the project prior to achieving the commercial operations date of generating blocks 1, 2 and 3 by December 2013, February 2014 and April 2014, respectively.

MARC said the power purchase agreement (PPA) would provide for two-tiered capacity payment rates which would step down from RM53 per kW per month to RM31.50 per kW per month from the 16th year of operations onwards.

The tariff structure supports strong projected debt service coverage with base case minimum and average finance service cover ratios (FSCRs) of 2.89 times and 6.84 times respectively over the tenure of the Sukuk programme.

"Projected cash flows assume a net plant capacity factor of 90% and heat rates within the limits of the PPA. MARC's cash flow sensitivity analyses indicate that Kimanis' cash flows are most susceptible to construction cost overruns, project delays and longer collection of receivables followed by lower plant availability and higher actual O&M variable costs.

"The project's exposure to construction cost overruns and delays in start-up is partly mitigated by the project sponsors' undertaking to provide contingency financial support of up to RM50mil for the purpose of meeting debt service obligations during the construction phase and a further RM50mil for construction cost overruns," it said. MARC said the stable outlook reflected MARC's expectations that the construction of the power plant would be completed on schedule and within budget.

"With the completion and successful commissioning of the power plant, Kimanis' rating may be revised upwards to reflect the elimination of construction risk in the project," said the ratings agency.

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