MARC Ratings has assigned a preliminary AA+IS rating, with a stable outlook, to TI TNB Genco Solar Kenyir 1 Sdn Bhd’s (TTSK1) proposed ASEAN Sustainability Sustainable and Responsible Investment (SRI) Sukuk Wakalah of up to RM2.0 billion.
TTSK1 is a special-purpose vehicle established to develop, own and operate a 595MWac floating solar facility with a 297.5MW/1,190MWh battery energy storage system (BESS) at Tasik Kenyir, Terengganu. The power generated will be supplied to DayOne Data Centers Malaysia II Sdn Bhd (DayOne Malaysia II), an indirect subsidiary of DayOne Data Centers Singapore Pte Ltd, under a 21-year bilateral energy supply contract (BESC). TTSK1 is 70%-owned by TNB Power Generation Sdn Bhd (TPGSB), a wholly-owned subsidiary of Tenaga Nasional Berhad (TNB, AAA/Stable), and 30%-owned by Terengganu Incorporated Sdn Bhd, the Terengganu state government’s strategic investment arm. Proceeds from the sukuk will finance 80% of the project’s RM2.5 billion cost, with the remaining 20% funded by equity.
The rating incorporates a two-notch uplift on the high likelihood of strong and timely financial and operational support from TNB, TTSK1’s ultimate parent, if required. This assessment reflects the project’s strategic importance to TNB Group’s renewable energy expansion and its strong financial and operational linkages with the group. TTSK1’s standalone credit profile is underpinned by long-term revenue and demand visibility under the 21-year take-or-pay BESC with DayOne Malaysia II, a well-structured project framework, and robust risk mitigants covering the construction and operational phases. These strengths are moderated by execution risks arising from the project’s scale relative to the contractors’ track records, variability in solar resource and plant performance, and concentration risk, given DayOne Malaysia II’s status as the sole offtaker.
With a capacity of 595MWac, the project is among TNB Group’s largest renewable energy initiatives and supports the group’s renewable capacity expansion and net-zero aspirations. MARC Ratings expects TNB to provide strong support for the project, given its demonstrated willingness to support strategically important power projects, including those that are not wholly owned. Financial support includes TPGSB’s undertaking, proportionate to its shareholding, to fund construction-phase liquidity shortfalls of up to 10% of total project cost. TPGSB may also provide a shareholder guarantee or undertaking, if required, to meet the sukuk’s finance service reserve account (FSRA) and maintenance reserve account (MRA) requirements. Operational linkages are also strong, with TTSK1 relying on TNB Group personnel for project execution, oversight and corporate support services.
Construction will be undertaken under a RM1.962 billion fixed-price, lump-sum engineering, procurement, construction and commissioning (EPCC) contract by a consortium comprising Cypark Renewable Energy Sdn Bhd (CRE) and Fabulous Sunview Sdn Bhd. While the project is larger than the contractors’ previous projects, execution risk is mitigated by TPGSB’s close oversight, supported by the Owner’s Engineer and TNB Group’s broader technical and project management resources. TPGSB’s experience in operating its 100kW floating solar pilot at Tasik Kenyir for approximately two years also provides relevant site-specific insights for the project’s design and installation. Cost-overrun risk is mitigated by the fixed-price EPCC contract, a RM98.1 million contingency provision and sponsor undertakings covering cost overruns of up to 10% of total project cost.
The EPCC’s scheduled commercial operation date (COD) of 29 September 2028 is two days ahead of the scheduled COD under the BESC. Construction delays will trigger liquidated damages (LDs) of RM1.962 million per day, capped at RM196.2 million. Under the BESC, COD delays of up to six months will not attract compensation, subject to DayOne Malaysia II’s consent, while longer delays require further agreement and compensation through renewable energy certificates (RECs) or their cash equivalent.
Following the COD, DayOne Malaysia II is obligated to purchase Contracted Energy, defined as the lower of the plant’s declared maximum monthly energy output and actual generation. The energy tariff is fixed for the first 10 years, followed by a slightly lower fixed tariff rate applicable for the remaining tenure of the BESC, while the System Access Charge (SAC) is fully passed through. TTSK1 is projected to generate annual gross revenue of RM511.7 million to RM588.7 million during 2029–2047, including SAC collections. Nevertheless, revenue remains exposed to variability in solar irradiance and plant output.
DayOne Malaysia II bears the energy purchase and payment obligations under the BESC. Its credit profile is supported by strong demand for data centre services from high-credit-quality tenants, while its contractual obligations are backed by an irrevocable and unconditional RM130 million on-demand bank guarantee and joint guarantees from its corporate and ultimate shareholders for the duration of the BESC. Termination risk is moderated by the campus’ substantial power requirements, the benefits of securing renewable energy and associated RECs, and contractual restrictions on voluntary exit unless a replacement consumer assumes equivalent obligations and provides the required security. The campus is already partially operational and is expected to be fully operational by end-2026, well ahead of the BESC’s scheduled COD, with electricity currently supplied by TNB at commercial tariffs.
Post-COD, CRE is expected to operate and maintain the floating solar plant and BESS under an initial five-year operations and maintenance (O&M) contract, with automatic extensions (unless TTSK1 provides notice otherwise) to cover the full 21-year BESC tenure. As the lead EPCC contractor, CRE’s familiarity with the plant’s design and systems should facilitate the transition into operations. The Cypark group also has relevant experience in operating floating and hybrid solar assets.
TTSK1’s projected cash flows provide strong debt-servicing headroom. Based on P90 energy production, the average finance service coverage ratio (FSCR), including cash balances, is projected at 2.04x, with a minimum of 1.89x. Distributions are subject to a minimum post-distribution FSCR of 1.50x.
Sensitivity analysis indicates that the project can withstand construction delays of up to 12 months. The full RM196.2 million EPCC LD coverage offsets a six-month delay, while liquidity remains adequate under a 12-month delay. Cash flows also remain resilient under moderate stress scenarios, including P99 energy production, a 10% increase in O&M costs, an additional 2.4% plant outage, and a combination of these stresses.