MARC has affirmed its AA-IS rating on Leader Energy Sdn Bhd’s outstanding ASEAN Green Sustainable and Responsible Investment (SRI) Sukuk Wakalah of RM255.0 million. The rating outlook is stable. Leader Energy is the investment holding company of two solar power project companies with solar power projects in Kuala Muda, Kedah. The solar power plants have a combined capacity of 49MW.
The rating affirmation is underpinned by the strength of the 21-year Power Purchase Agreement (PPA) between Leader Energy’s two solar power project companies and the offtaker Tenaga Nasional Berhad (TNB, AAA/Stable). The energy generated by the solar power plants is purchased by TNB at certain tariffs, thereby mitigating demand risk. The rating is supported by Leader Energy and its related companies’ healthy track record in energy generation.
Leader Solar Energy Sdn Bhd (LSE I), one of the two project companies under Leader Energy, continued its good performance during 1H2021, exceeding P90 estimates by 12.4% mainly due to good weather conditions. The other company, Leader Solar Energy II Sdn Bhd (LSE II), experienced forced outages of about 11 days during this period that led to a 2.1% decline in actual energy production against P90 estimates. The outages were caused by damaged underground cables from unrelated construction work near the site. We understand the damaged cables have been replaced while the repair cost and loss of revenue of RM0.8 million are being claimed from the third party undertaking the construction work.
In 1H2021, total revenue for LSE I and LSE II was RM20.0 million, accounting for 56.8% of projected total revenue of RM35.2 million for full year 2021. Cash flow from operations was healthy at RM16.3 million during this period while minimum and average finance service cover ratios stood at 2.70x and 3.30x based on cash flow projections.