PEFINDO: “idAAA(sf)” final rating for PT Tamaris Hidro’s proposed bond

PEFINDO has assigned its “idAAA(sf)” final rating for PT Tamaris Hidro (TMHD)’s proposed Bond I Year 2022 of a maximum of IDR750.0 billion. The proceeds of the bond will be used to refinance part of its existing syndicated bank loans. The bond is enhanced by a subordination credit facility from PT Sarana Multi Infrastruktur (Persero) (SMII, idAAA/stable).

A debt security rated idAAA has the highest rating assigned by PEFINDO. The obligor’s capacity to meet its long-term financial commitments on the debt security, relative to other Indonesian obligors, is superior.

The rating suffix (sf) means the rating is for a structured-finance transaction.

The instrument rating reflects a very strong structures of the bond and SMII’s superior financial strength. The rating is somewhat constrained by TMHD’s moderate cash flow protection measures. The instrument rating may be lowered if the credit enhancer’s corporate rating is downgraded or if TMHD utilizes the non-revolving credit enhancement facility more than expected, such that the remaining facility is deemed incommensurate with the level of protection for the assigned rating.

The bondholders are exposed to a risk of loss in which they may not get timely or full repayment on the bond principal and/or coupon if TMHD’s output generation deteriorate significantly, adversely affecting incoming cash flows to be utilized to service the financial obligations. PEFINDO views the risk is mitigated by the proposed transaction structures protected by subordinated credit facility of a maximum of IDR750.0 billion from SMII as the credit enhancement, cash flow waterfall mechanism, and bond sinking funds for the coupon and principal. Under our stress test, we project TMHD to incur additional debt in 2028 to repay the last phase of its proposed bond if significant deterioration takes place. Under such circumstance, we anticipate TMHD will utilize part of SMII’s subordinated facility during that period to mitigate the refinancing risk under the proposed transaction structures. We also view this transaction as based on a robust cash flow protection profile, bolstered by the remaining ample subordinated credit facility from SMII if it is utilized. The cash waterfall mechanism also ensures that the collected cash inflows will prioritize the payments for bond coupon and debt services of bank loans. TMHD’s commitment to providing a one-time bond coupon sinking fund and fully reserving its bond principal payments three months prior to the due date will augment the cushion for debt services payment.

TMHD is an investment holding company for hydro and mini hydro power plant projects (HMHPP). It is actively seeking potential locations for HMHPP, developing greenfield and brownfield projects, and acquiring power plants. Currently, its power generation portfolio includes ten operating companies with a total capacity of 100.8 megawatts (MW) and two sites under construction with a total capacity of 17 MW. In terms of installed capacity based on type, mini-hydro power plants account for 70.2%, while the remainder hydro-power plants (29.8%). It also has an affiliated company providing construction for its projects and operation and maintenance (O&M) services. As of June 30, 2021, its shareholders consisted of PT Tatajabar Sejahtera (85%), part of Salim Group, and PT Tamaris Hijau Lestari (15%).

As a credit enhancer, SMII is established to serve as a catalyst in the acceleration of infrastructure development in Indonesia by providing an alternative source of funds for project financing and promoting public-private partnerships (PPP). It is wholly owned by the government. (ends)