RM6bil Manjung 4 power plant to be switched on this Sunday

PETALING JAYA – Tenaga Nasional Bhd’s (TNB) 1,000 MW ultra-supercritical coal-fired power plant dubbed Manjung 4 will be powered up this Sunday.

According to sources, TNB is currently conducting test runs. The estimated RM6bil power plant will be switched on following a delay of 12 days. The targeted commercial operation date (COD) for Manjung 4 was on March 31.

“It (Manjung 4) is the first coal-fired power plant in Malaysia using supercritical technology and the single largest unit in South-East Asia,” a source said, adding that the construction had already been completed.

The power plant is owned by TNB Janamanjung Sdn Bhd (TNBJ), a wholly-owned subsidiary of TNB.

Currently, Janamanjung comprises 3 x 700MW coal power plants known as Manjung 1, Manjung 2 and Manjung 3 located on a reclaimed island.

TNB was awarded the contract to build Manjung 4 and Manjung 5 which would cost an estimated RM6bil each to build. Manjung 5 is expected to be ready by October 2017.

“The Manjung 4 power plant is now undergoing the final test that must be completed as stipulated under the Power Purchase Agreement (PPA) before being given certificate to officially begin COD.

“During the current delay in COD, Manjung 4 is still generating electricity and connected to the grid,” Association of Water and Energy Research (Awer) president S. Piarapakaran said. He said based on the PPA, fuel used during testing was a fuel cost pass through mechanism and that the capacity charges would not be paid until COD was achieved.

In addition, Piarapakaran noted that TNB was paying the daily penalty as stipulated in the PPA and therefore there was no additional cost to electricity tariff.

Nonetheless, RAM Ratings Services Bhd said TNBJ’s failure to commence commercial operations of its new 1,000-MW super-critical coal-fired power plant on March 31 would have “no rating impact” on Manjung Island Energy Bhd’s Islamic Securities Programme of up to RM5bil.

However, TNBJ is liable to pay TNB liquidated damages and is expected to suffer losses in available capacity payments from TNB.

These are, however, anticipated to be adequately compensated by liquidated damages payable by the engineering, procurement and construction contractors as a consequence of the delay.

“What drives the Series 1 sukuk rating is Manjung Island’s superior debt-servicing ability, supported by cashflow from TNBJ’s existing 2,100-MW coal-fired power plant,” RAM Ratings co-head of infrastructure and utilities ratings Chong Van Nee said in a statement.

The AAA/stable rating of Series 1 of Manjung Island’s Securities Programme is premised on TNBJ’s exceptional debt-coverage metrics, with a minimum finance service coverage ratio (with cash balances, post-distribution and calculated on principal-repayment dates) of two times under RAM’s sensitised cashflow analysis.

The enhanced AAA(s)/stable rating of Series 2 of the programme reflects a corporate guarantee from TNB.

Manjung Island is a special-purpose vehicle set up to raise funds required for the development of TNBJ’s 1,000-MW plant. Manjung Island will derive lease payments from TNBJ.

In addition, the securities holders’ recourse to TNBJ under the Ijarah structure of the RM5bil programme is recognised in the purchase undertaking between Manjung Island and TNBJ.

“In this regard, RAM considers the strong credit link between these entities and views both companies in aggregate,” RAM Ratings said.

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