MARC has affirmed its AA-_IS rating on UiTM Solar Power Sdn Bhd’s (UiTM Solar) outstanding Green Sustainable and Responsible Investment (SRI) Sukuk of RM202.3 million. The rating outlook is stable.

UiTM Solar owns a 50MWac solar photovoltaic plant in Gambang, Pahang which was developed under a 21-year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB) and became operational in April 2019. The affirmed rating continues to mainly reflect the strength of the PPA under which the demand risk is eliminated as the energy generated by the plant will be purchased at a fixed tariff by TNB.

In 1H2021, the plant generated electricity output of 40,617 MWh, 2.6% higher than its P90 forecast. The good performance during the period was due to solar irradiance that largely exceeded forecast while no major outages were encountered. Accordingly, UiTM Solar recorded revenue of RM16.4 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of RM14.8 million. This represents 52.2% and 53.5% of projected revenue and EBITDA in 2021, keeping the plant on track to achieving its projections for the year.

Cash flow from operations stood at RM11.9 million in 1H2021. Its cash and cash equivalents of RM27.4 million as at end-June 2021 are more than sufficient to cover the next sukuk profit payment amounting to RM6.0 million due in October 2021.

Under P90 base case projections, the project’s minimum and average finance service coverage ratios (FSCR) with cash stand at 2.29x and 2.89x. Our sensitivity analysis demonstrates that the projected cash flow can withstand moderate stress, such as plant unavailability of up to 13.7% and a 50% increase in operational costs before the minimum FSCR covenant of 1.25x is breached. The rating remains moderated by the variability in solar irradiance and operational risk that may affect the amount of electricity generated.

Contacts:
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my;