KUALA LUMPUR (June 15): S&P Global Ratings raised its long-term issue rating on Tenaga Nasional Bhd (TNB) notes to reflect expectations of a lower secured debt ratio and risk of subordination.
In a statement released Thursday, June 16, the rating agency raised the long-term issue rating of TNB’s senior unsecured notes and US dollar-denominated senior unsecured medium-term note program from “BBB+” to “BBB+”.
“We also upgraded our long-term issuance rating on the wakala trust certificates and multi-currency sukuk issuance program that TNB’s wholly-owned subsidiary, TNB Global Ventures Capital Bhd., issued to ‘BBB+’ from ‘BBB’.
“At the same time, we have affirmed our ‘BBB+’ long-term issuer credit rating on TNB,” he said.
S&P Global said the stable outlook for TNB reflects expectations that the company will maintain its adjusted funds-from-operations (FFO)-to-debt ratio above 15% over the next 12 to 18 months.
The agency said it expects TNB to raise more unsecured debt than secured debt in the future.
He said that would mean keeping the utility company’s secured debt ratio below 50% for the next 12 to 24 months.
S*P said TNB has typically issued secured debt for project financing of its generation assets, while it has issued unsecured debt otherwise.
“He currently has no major projects requiring secured debt financing.
“We do not expect TNB to invest in new coal or gas-fired power plants in the next two to three years.
“This is given the currently high reserve margin in Malaysia,” he said.
S&P said that while the company may need secured debt financing for a few revolving projects, the size of those projects is unlikely to be large.
“We expect its transmission and distribution business to continue to account for the bulk of consolidated capital expenditure (capex) over the period,” he said.