MARC has affirmed its A+_IS rating on Quantum Solar Park (Semenanjung) Sdn Bhd’s (QSP Semenanjung) Green Sustainable and Responsible Investment (SRI) Sukuk rating of up to RM1.0 billion. The rating outlook has been revised to positive from stable.

The affirmed rating incorporates the mitigation of demand risk through the 21-year power purchase agreement (PPA) that the three project companies, each of which owns a 50MWac solar photovoltaic plant, have entered into with Tenaga Nasional Berhad (TNB) (AAA/Stable). Under the PPAs, TNB will purchase the energy generated by the plants at a fixed rate that is deemed sufficient to meet the sukuk obligations. Moderating the rating are the variability of solar irradiance and risks associated with plant performance.

In its outlook revision, MARC considers the improvement in QSP Semenanjung’s financial service cover ratio (FSCR) following the full commencement of operations of its three plants. The FSCR is now in line with the initial projections at the inception of the project in 2017, with minimum and average FSCR forecast at 1.61x and 2.04x throughout the tenure of the sukuk. The rating agency notes that the support extended by engineering, procurement and construction (EPC) contractor, Scatec Solar Solutions Malaysia Sdn Bhd, to defer its RM152.1 million payment has enhanced QSP Semenanjung’s liquidity position. This has also been bolstered by a GST refund of RM32.5 million.

The rating agency will continue to monitor the plants’ operational performances over the coming quarters and if the plants continue to exhibit operational performance consistent with projections, the rating could be upgraded. The Gurun, Jasin and Merchang plants achieved commercial operation on December 19, 2018, April 30, 2019 and May 31, 2019 following some construction delays. Arising from the delays, QSP Semenanjung deferred payments to the EPC contractor, which is conditional upon meeting post-distribution FSCR of 1.5x.

In terms of operations, the Jasin and Merchang plants surpassed P90 estimates by 1.8% during 2019. However, the Gurun plant slightly underperformed P90 estimates by 0.4% due to teething issues that were rectified in March 2019. Total revenue from electricity generation of RM104.8 million in 2019 was 0.8% higher than the projection. Under the rating agency’s sensitivity scenarios, QSP Semenanjung is expected to comply with the post-distribution FSCR of 1.50x throughout the sukuk tenure.

As electricity production is classified as essential services, the plants’ operations were not affected by the imposition of the Movement Control Order following the COVID-19 outbreak.

Contacts:
Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my;
Neo Xue Wei, +603 2717 2937/ xuewei@marc.com.my;
Sharidan Salleh, +603 2717 2954/ sharidan@marc.com.my.