MARC Ratings has affirmed its AA-IS rating on Sinar Kamiri Sdn Bhd’s outstanding RM185.0 million Green Sustainable and Responsible Investment Sukuk Wakalah. The rating outlook is stable.
The rating affirmation reflects Sinar Kamiri’s stable operational performance, steady cash flow generation and adequate finance service coverage ratio (FSCR) profile. The rating is underpinned by a 21-year fixed-price power purchase agreement with Tenaga Nasional Berhad, expiring in November 2039. Moderating the rating are the inherent risks associated with solar resource variations and plant performance, although Sinar Kamiri’s energy production has to date been generally consistent with P90 estimates, illustrating sufficient solar resources and high plant availability.
Sinar Kamiri recorded better-than-expected energy production from its 49MWac Sungai Siput solar plant in 2023. Electricity generation was 5.8% higher than the P90 estimate in 2023, primarily due to more favourable irradiance during the year compared to the past three years. Excluding 2023, energy production has been broadly in line with expectations, though with a slightly lower output of between 0.8% and 1.7% against P90 estimates in 2020-2022. The plant also maintained a high 99% availability in 2023.
Revenue of RM34.7 million in 2023 was 5.8% above budget, driven by the higher energy generation. Cash flow from operations of RM29.3 million in 2023 was adequate to cover debt service with FSCR (without cash) of 1.10x. Cash balances stood at a healthy RM21.9 million as at end-February 2024 and will be built up to meet the sukuk profit payment and principal repayment amounting to RM5.4 million and RM20 million in July 2024 and January 2025.
Base case FSCR over the sukuk tenure averages 2.78x, with a minimum of 2.62x. The cash flows can withstand moderate stress scenarios, including plant unavailability of 2.4%, a 10% increase in operations and maintenance cost, and lower electricity generation under P99 estimates. The financial profile is stable with FSCRs gradually improving through the sukuk’s maturity. The terms of the fully amortising sukuk also include the maintenance of a minimum post-distribution FSCR of 1.50x.