RAM Ratings affirms Bakun Hydro's sukuk at AAA/Stable

RAM Ratings has affirmed the AAA/Stable rating of Bakun Hydro Power Generation Sdn Bhd's (Bakun Hydro or the Company) RM5.54 bil Sukuk Murabahah (2016/2031) (the Sukuk). The affirmation reflects the Company's solid financial performance and support provided by the Government of Malaysia in the form of a strongly-worded irrevocable and unconditional letter of undertaking to ensure the Company's finance service coverage ratio (FSCR) remains at a minimum of 2.0 times throughout the Sukuk's tenure. 

Operational performance at the Company's 2,520 MW hydroelectric plant in Belaga, Sarawak (the Plant) remains sound. Net electricity output increased by 5% y-o-y in 2024 and 6% y-o-y in 1H 2025, driven by greater demand from related company Syarikat SESCO Berhad - Sarawak's sole energy off-taker - and improved plant efficiency, as seen in lower outage hours. Bakun Hydro reported revenue of RM785.39 mil and pre-tax profit of RM304.18 mil in 1H FY Dec 2025, positioning it for another strong full year performance (FY Dec 2024: RM1.52 bil and RM555.13 mil, respectively).

The FSCR (with cash balances) as of the latest repayment date of 11 August 2025 stood at 2.94 times, surpassing our expectations of 2.58 times and kept Bakun Hydro's liquidity profile strong. Cash and bank balances were robust at RM1.33 bil as at end-August 2025. The Company is anticipated to maintain superior minimum and average annual FSCRs (with cash balances) of 2.0 times and 4.65 times, respectively, over the remaining tenure of the Sukuk underpinned by healthy internal cash generation and accumulated cash reserves. 

A potential credit risk arises under RAM's sensitivity analysis (though not under management's expectations) from the 2028 bullet repayment of Bakun Hydro's unrated RM1.0 bil government-guaranteed sukuk. If not refinanced, and following a RM239.25 mil dividend payout in June 2025, a one-time government top-up of about RM270.0 mila