Commercial operation date of TNB’s Prai power plant delayed: MARC

PETALING JAYA: Tenaga Nasional Bhd (TNB) has been forced to delay the commercial operation date (COD) of the Seberang Prai power plant due to defects uncovered, said Malaysian Rating Corporation Bhd (MARC).

In a ratings update yesterday, MARC said TNB Northern Energy Bhd, an indirect wholly-owned subsidiary of TNB, has postponed the COD of the Prai power plant to Feb 13, 2016 from Jan 1, 2016 “to address design issues and defects discovered during the project commissioning phase”.

“TNB Northern Energy is expected to recover the losses in relation to the delay via liquidated damage claims from the engineering, procurement and construction contractor Samsung C&T (KL) Sdn Bhd,” MARC said in a statement yesterday.

The power plant has a 21-year power purchase agreement (PPA) between TNB Prai Sdn Bhd (TNB Prai) and TNB. According to the PPA, the project power plant’s initial operation date was on July 1, 2015, which provides a period of about six months for TNB Prai to complete the commissioning and start-up process.

According MARC, TNB Northern Energy is undertaking necessary steps to achieve the COD within the revised date.
The rating agency said it will monitor the progress of TNB Northern Energy and take appropriate rating action, if necessary.

TNB Northern Energy is a wholly-owned funding vehicle of TNB Prai for the construction of the 1,071.43-megawatt combined-cycle gas turbine power plant. TNB Prai is in turn wholly owned by TNB.

MARC said that no rating action is warranted at this juncture on TNB Northern Energy’s RM1.625 billion serial senior secured Islamic sukuk as a result of the postponement given that the structural enhancement on the sukuk provides sufficient recourse for delays.

The sukuk has a rating of ‘AAAIS ‘with a stable outlook from MARC.