RAM Ratings Upgrades TNB's Debt Rating to AAA

25/07/2010

RAM Ratings has upgraded the rating of Tenaga Nasional Berhad’s USD500 million equivalent Murabahah Medium-Term Notes Programme (2005/2025), from AA1 to AAA; the long-term rating has a stable outlook.

The upgrade is premised upon TNB’s improving financial profile, which has significantly trimmed its debt levels in the past 6 years. By the end of 31 August 2009, the Group’s lighter debt load had eased its adjusted gearing ratio from 4.78 times to 2.07 times over the same period. In turn, this had lifted its adjusted funds from operations debt coverage (FFODC) ratio, from 0.10 times in fiscal 2003 to 0.19 times in fiscal 2009.

RAM Ratings highlights that the adjustments to these ratios consider the fixed payment obligations under TNB’s Power Purchase Agreements as the financial obligations of a utility company that buys electricity from Independent Power Producers (IPPs). On an unadjusted basis, its gearing and FFODC ratios had improved from 2.20 times to 0.87 times and 0.16 times to 0.32 times, respectively.

Despite the upgrade in TNB’s credit rating, RAM Ratings highlights that there will be no change in the ratings of our portfolio of IPPs in Peninsular Malaysia and Sabah.

RAM said it expected the next tariff revision to be granted soon in view of the current high coal prices and also the frequent tariff revisions in recent years.