SINAR KAMIRI SDN BHD - 2019

MARC has affirmed its AA-_IS rating on Sinar Kamiri Sdn Bhd’s Green Sustainable and Responsible Investment (SRI) Sukuk Wakalah of up to RM245.0 million. The rating outlook is stable.

Sinar Kamiri is a special purpose project company incorporated to build, own and operate a 49.0MWac solar photovoltaic plant (SPP) in Sungai Siput, Perak. The rating primarily reflects Sinar Kamiri’s healthy project fundamentals that are underpinned by a 21-year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB). Under this PPA, energy generated by Sinar Kamiri’s SPP up to a certain quantity will be accepted and purchased by TNB at a fixed tariff.

Since commencing operations on November 27, 2018, the plant has achieved better-than-expected performance metrics and accordingly, Sinar Kamiri is expected to maintain adequate cash flow and project debt coverages. Actual electricity generated in the first five full months of operations outperformed the P90 estimates by 15.1%. In addition, the average SPP’s performance ratio (PR) of 80.9% is also higher than the PR of 78.0% guaranteed by the operations and maintenance provider. Based on the actual energy generated up to April 2019, the likelihood that the performance threshold of at least 70% of the declared annual quantity (DAQ) would be breached is low.

Under MARC’s sensitised case, the company would be able to comply with the minimum FSCR with cash of 1.25x throughout the sukuk tenure. The sensitised case assumes no GST refunds, higher plant unavailability and an increase in operational cost. Meanwhile, liquidated damages payable by Sinar Kamiri to TNB due to an 88-day delay in achieving the commercial operation date (COD) were correspondingly compensated by the engineering, procurement and construction contractor.

The rating is, however, moderated by the risk of variability in solar irradiance which also determines the amount of energy generated. The rating agency notes that between the period of December 2018 and April 2019, the plant’s incline irradiation fluctuated between 144kWh/m2 and 189kWh/m2.

The stable outlook reflects MARC’s expectation that Sinar Kamiri will continue to maintain the SPP’s operational performance and generate stable income streams that are supportive of project fundamentals.

Major Rating Factors

Strengths

• Sturdy project fundamentals backed by PPA terms;
• Adequate cash flow generation from solar power plant operation; and
• Satisfactory project debt coverages.

Challenges/Risks

• Variability of solar resource; and
• Plant performance risks.