RAM Ratings has placed the A1 rating of Telekosang Hydro One Sdn Bhd's (TH1 or the Issuer) RM470 mil ASEAN Green SRI Sukuk (2019/2037) (Senior Sukuk) and the BBB1 rating of its RM120 mil ASEAN Green Junior Bond (2019/2039) (Junior Bonds) on Rating Watch with a negative outlook. 

The combined cashflow generation from TH1's 24 MW small hydro plant and the 16 MW plant operated by its sister company, Telekosang Hydro Two Sdn Bhd (TH2), supports debt service obligations under the Senior Sukuk and Junior Bonds. 

The Rating Watch is prompted by the force majeure notice issued by TH1 and TH2 (together, the project companies) on 3 March 2026 to Sabah Electricity Sdn Bhd (SE), the offtaker for the plants' electricity output. The notice follows severe flooding in the Tenom region in late February, which resulted in the temporary inability of both plants to generate and deliver electricity. The Tenom District Officer declared disaster status for the district on 25 February 2026.

As the event is beyond the control of the project companies, the force majeure declaration was made in accordance with provisions of the Renewable Energy Power Purchase Agreements (REPPAs) with SE. This allows the project companies to be excused from their contractual obligations under the REPPAs to the extent that the plants' performance is affected by the force majeure event.  

Flood water has since receded and TH1 is conducting a full assessment of damage to the plants. While steps are expected to be taken to restore plant operations as soon as possible, the timeline for full resumption remains uncertain at this juncture. 

In the immediate term, the Senior Sukuk is supported by cash and bank balances of RM35 mil as at 5 March 2026. This, along with about RM8.4 mil of outstanding payments from SE, should provide adequate cover for TH1's Senior Sukuk obligations of about RM43 mil, due within the next 12 months.

We expect the Rating Watch to be resolved within the next few months as mo