MARC has been informed that UiTM Solar Power Sdn Bhd’s (UiTM Solar) 50MWac solar photovoltaic plant in Gambang, Pahang had experienced technical issues at its gas-insulated switchgear (GIS) and power transformer. The events have led to the plant currently being non-operational. UiTM Solar’s rating was affirmed at AA-_IS/stable during the latest review in August 2021.

The investigation into the root causes of the issues is still ongoing as at date. Based on preliminary findings, UiTM Solar has indicated that full replacement of both the GIS and transformer may be necessary in order for the plant to fully resume operations. Replacement time is estimated by the project company to range between 4-6 months for the GIS and 2-9 months for the transformer. The plant’s existing insurance policy provides coverage for both revenue loss and equipment replacement cost; the amount claimable is still being determined by the insurer. MARC understands that total capex of about RM6.0 million is required to purchase the new equipment.

In the rating agency’s assessment, UiTM Solar’s liquidity position as reflected by cash balances of RM26.6 million as at end-October 2021 would be sufficient to repay upcoming sukuk obligations of RM21.8 million in 2022. In MARC’s sensitivity analysis, UiTM Solar would be able to withstand six months of revenue loss in 2022 inclusive of non-delivery payment to TNB before the pre-distribution finance service coverage ratio of 1.25x is breached.

This notwithstanding, the rating would come under the pressure if UiTM Solar is unable to execute the rectification work in a timely manner, and/or if insurance claims which also cover revenue loss do not materialise in time. The rating agency will continue to monitor developments at the plant and review its rating position before the end of 1Q2022.

Contacts:
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my;
Lee Chi Han, +603-2717 2939/ chihan@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my.

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