MARC Ratings has affirmed its AA-IS rating on Leader Energy Sdn Bhd’s outstanding ASEAN Green Sustainable and Responsible Investment Sukuk Wakalah of RM245.0 million. The rating outlook is stable.
Leader Energy is the investment holding company of two solar power project companies with large-scale solar projects in Kuala Muda, Kedah. The solar power plants have a combined capacity of 49MW.
The rating affirmation reflects the strength of the 21-year power purchase agreement between Leader Energy’s two solar power project companies, Leader Solar Energy Sdn Bhd (LSE I) and Leader Solar Energy II Sdn Bhd (LSE II), and the offtaker TNB (AAA/Stable). Under the agreement, the energy generated by the two plants will be purchased by TNB at certain tariffs, thereby mitigating demand risk. The rating also incorporates the plants’ track record of energy generation that has been in line with forecasts.
In 2021, both LSE I and LSE II recorded good operational performance, with energy production exceeding P90 estimates by 14.5% and 3.0%. In line with the plants’ good operational performance, total revenue for LSE I and LSE II was recorded at RM38.9 million, above the projected RM35.2 million. Energy production at both plants continued to exceed P90 projections in 1Q2022.
Cash flow from operations remained healthy at RM38.2 million in 2021. Based on Leader Energy’s cash flow projections, minimum and average finance service coverage ratios were strong at 2.36x and 2.71x. Projected cash flows remain capable of withstanding multiple stress scenarios, including lower energy generation, higher plant outage and increased operating cost. The group has liquidity of RM53.6 million after repaying its sukuk obligations in July 2022, more than sufficient to meet its sukuk obligations of RM5.5 million in January 2023.