RAM Ratings has affirmed the AAA/Stable rating of Manjung Island Energy Berhad's (MIEB) RM3.86 bil Islamic Securities (2011/2030) (Series 1) and the enhanced AAA(s)/Stable rating of its RM990 mil Islamic Securities (2011/2031) (Series 2). Series 2s enhanced rating reflects an irrevocable and unconditional corporate guarantee from Tenaga Nasional Berhad (TNB, sukuk rated AAA/Stable by RAM).

The affirmation of Series 1's rating is premised on our expectation that TNB Janamanjung Sdn Bhd's (TNBJ or the Company) debt servicing profile will remain intact despite the prolonged outage of one of its power plants - the 1,010 MW coal-fired power plant known as Generating Facility 2 (GF2 or Unit 4). GF2 was offline since 4 December 2023 due to damage sustained by the rotor and casing of its intermediate-pressure steam turbine. Repair works for Unit 4's faulty turbine is complete and the unit recommenced operations on 5 November 2024, slightly ahead of TNBJ's expectations. 

MIEB is a special-purpose vehicle established to raise funding for the construction of GF2, which sits adjacent to TNBJ's 2,070 MW Sultan Azlan Shah power plant in Perak (GF1) (collectively, the Plants). By virtue of a Purchase Undertaking between MIEB and TNBJ, RAM views both entities in aggregate from a credit perspective.

TNBJ obtained approval from TNB to place GF2 under planned outage for this incident, a key development since our review in June 2024. This allows the Company to be eligible for full available capacity payments (ACPs) between January 2024 and November 2024, in exchange, incurring an AT penalty of RM365 mil in 2028 instead. The arrangement alleviates our previous concerns of near-term cashflow pressure, where we now foresee TNBJ's debt servicing metrices to improve and remain superior. This is despite GF2's higher repair cost of RM202 mil against the previous estimate of RM132 mil.

Within our stressed analysis, we projected minimum finance service coverage ratio (FSCR, with ca