MARC has extended its MARCWatch Negative on Quantum Solar Park (Semenanjung) Sdn Bhd’s (QSP Semenanjung) RM1.0 billion Green SRI Sukuk rating while noting the fairly advanced stage of completion of QSP Semenanjung’s two remaining plants namely the Jasin and Merchang solar power plants. The rating was downgraded to A+IS and placed on MARCWatch Negative on January 25, 2019 on concerns that the power plants will not be completed by the then walkaway event date.

Since the rating action, MARC notes that the Jasin power plant has achieved initial operation date (IOD) on April 15, 2019, a key milestone under the project schedule. The Jasin plant is expected to achieve commercial operation date (COD) on April 29, 2019. In the case of the Merchang plant, the rating agency understands the IOD is expected to be achieved by April 29, 2019 and the COD by May 17, 2019, which will exceed the extended walkaway event date granted by the Energy Commission (EC) to April 30, 2019 for completion of both plants. The MARCWatch Negative extension reflects the termination risk of the power purchase agreements by Tenaga Nasional Berhad (TNB) arising from the failure to achieve COD by the extended walkaway event date.

The rating agency notes that QSP Semenanjung has now requested for a further extension of time from the EC up to June 30, 2019 to achieve COD for the power plants. MARC is of the view that the EC would likely take into account the considerable progress that both remaining plants have attained in granting the extension. QSP Semenanjung’s other power plant in Gurun has been operational since achieving COD in December 2018.

However, should the EC exercise the walkaway clause or if the sukukholders do not grant a waiver to avert an event of default on the Green SRI Sukuk, the rating would be exposed to a multi-notch downgrade.

Contacts:
Hari Vijay, +603-2717 2937/ harivijay@marc.com.my;
Lim Hui Boon, +603-2717 2959/ huiboon@marc.com.my.