UiTM SOLAR POWER DUA SDN BHD |
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| Report ID | 6053890026 | Popularity | 740 views 67 downloads | |||||
| Report Date | Sep 2021 | Product | ||||||
| Company / Issuer | UITM Solar Power Dua Sdn Bhd | Sector | Infrastructure & Utilities - Solar | |||||
| Price (RM) |
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| Rationale |
Rating action MARC has affirmed its AA-IS rating on UiTM Solar Power Dua Sdn Bhd’s (UiTM Solar 2) outstanding Green Sustainable and Responsible Investment (SRI) Sukuk of RM100.0 million. The rating outlook is stable. Rationale In affirming the rating, we considered UiTM Solar 2’s 21-year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB) under which the demand risk is mitigated as energy generated by UiTM Solar 2’s 25MWac solar photovoltaic plant will be purchased at a fixed tariff. The affirmed rating also reflects the plant’s satisfactory energy generation since achieving commercial operation date (COD) on December 2, 2020. As with other solar power plants, moderating factors are the variability in solar irradiance and operational risk that may affect the amount of electricity generated. The plant generated an electricity output of 20,334MWh in 1H2021, in line with the P90 estimate of 20,292MWh. While some volatility in the plant's energy production due to variabilities in solar irradiance was recorded, no major outages were encountered. Accordingly, UiTM Solar 2 recorded revenue of RM7.7 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of RM6.4 million, representing 50.4% and 51.4% of projected revenue and EBITDA for the year. Achieving the 2H2021 revenue forecast could be challenged by lower-than-expected irradiance if the northeast monsoon season from November onwards is worse than anticipated. Notwithstanding the revenue risk, UiTM Solar 2’s cash and bank balances of RM9.9 million as at end-1H2021 is sufficient to cover its first sukuk repayment of RM3.0 million in March 2022. Under its base case projections, the minimum and average pre-distribution finance service coverage ratios (FSCR) stand at 1.92x and 3.12x. Sensitivity analysis indicates that the projected cash flow can withstand moderate stress scenarios, such as annual energy production at P95 levels, a 10% increase in operating expenses and plant unavailability of 2.4%. Rating outlook The stable outlook reflects our expectation that the plant will continue to maintain good operational performance and meet P90 energy generation projections. Rating trajectory Upside scenario We do not envisage a rating upgrade in the near term. The rating could be improved if the plant demonstrates a consistent track record of strong operating performance while building up and maintaining a strong liquidity buffer. Downward scenario Downward pressure on the rating would materialise if plant performance falls substantially below expectations, such that UiTM Solar 2’s debt service coverage metrics are significantly impacted. Key strengths • Demand risk mitigated by PPA terms • Satisfactory project debt coverage Key risks • Variability of solar resource • Plant’s operational performance |
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