MARC has published for public comment an exposure draft which outlines the rating agency’s methodology for the rating of solar power project (SPP) financings. This methodology focuses on utility-scale grid connected solar power generation facilities which have capacities of 5MW or more.
MARC intends to apply the proposed rating methodology in its SPP ratings in conjunction with its Project Finance and Independent Power Producer rating methodologies which it uses to assign ratings to independent power project financing transactions. The proposed rating methodology discusses risks that are specific to solar power generation, the primary ones among which are solar resource risk and solar power plant operational risk. The solar resource risk analysis component of MARC’s SPP analytical framework will capture the uncertainties associated with solar resource evaluation while its operational risk analysis considers plant performance, including performance degradation over time of solar panels and inverters. Consistent with MARC’s general project finance rating framework, other key rating drivers are project sponsor, regulatory, offtaker & power purchase agreement, construction risk, financial and financing structure risks.
The initial credit ratings assigned by MARC to greenfield solar project financings will capture the additional uncertainty associated with the evaluation of the solar resource estimates and system performance. The methodology provides guidance on MARC’s identifying characteristics of “secure” and “vulnerable" solar power project financings. For instance, solar power project financings rated in the secure range are expected to exhibit satisfactory risk mitigation through the use of high quality data for solar resource and plant performance in the development phase of the project to reduce the margin of error in predicted energy output. Accurate monitoring of production and plant performance should be in place once the plant commences operations to enable evaluation of actual performance against projected energy yields. To the extent that the actual energy output meets or exceeds the earlier projected estimates, the rating could migrate upwards.
MARC welcomes comments on any aspect of the draft methodology during the public comment period and will consider all comments received in writing by March 6, 2017. Comments on the exposure draft should be sent to ratingmethodology@marc.com.my. All responses will be regarded as on the public record unless confidentiality is requested by the commentator. MARC will finalise the rating methodology following a review of comments received during the comment period.
The aforementioned exposure draft can be accessed on MARC’s website at Rating of Solar Power Project Financings.
Contacts:
David Lee, +603-2082 2255/ david@marc.com.my;
Yap Lai Ken, +603-2082 2247/ laiken@marc.com.my.
