MARC has affirmed its AA-IS rating on UiTM Solar Power Sdn Bhd's (UiTM Solar) Green Sustainable and Responsible Investment (SRI) Sukuk of up to RM240.0 million. The rating outlook is stable.
The rating is mainly driven by UiTM Solar's 21-year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB) under which the demand risk is largely eliminated as the national power company will purchase the energy generated by UiTM Solar's 50MW solar photovoltaic plant at a fixed tariff. The rating is moderated by the variability risk in solar irradiance that would determine the amount of electricity generated. The stable outlook reflects MARC's expectation that the plant will continue to maintain good operational performance and generate stable income streams.
For 1H2020, the plant generated electricity output of 43,957MW, about 10.2% higher than its P90 forecast. This was supported by better plant performance as reflected by the average plant performance ratio of 78.3% (April-Dec 2019: 70.2%). MARC also notes that since UiTM Solar's holding company, UiTM Energy and Facilities Sdn Bhd, took over the operations and maintenance of the plant in October 2019, there has been no major outage. Accordingly, UiTM Solar posted higher than expected revenue of RM17.6 million for 1H2020, about 55.8% of the projected full 2020 revenue. Profit before tax stood at RM3.4 million, while cash flow from operations was RM11.7 million. As at end-June 2020, total cash and bank balances of RM38.6 million would be sufficient to meet the next sukuk principal repayment and profit payment of RM10 million and RM12.2 million due in April 2021.
Under the base case cash flow projections, the minimum and average financial service coverage ratios (FSCR) with cash stood at 2.88x and 5.39x throughout the sukuk tenure. The projected cash flow can withstand a moderate stress of 2.4% in plant outages and a 20% increase in operational costs before the FSCR covenant of 1.25x is breached.