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.