CREDIT ANALYSIS REPORT

QUANTUM SOLAR PARK (SEMENANJUNG) SDN BHD - 2021

Report ID 605409 Popularity 204 views 91 downloads 
Report Date Mar 2021 Product  
Company / Issuer Quantum Solar Park (Semenanjung) Sdn Bhd Sector Infrastructure & Utilities - Solar
Price (RM)
Normal: RM500.00        
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Rationale
Rating action     
MARC has upgraded Quantum Solar Park (Semenanjung) Sdn Bhd’s (QSP Semenanjung) RM1.0 billion Green Sustainable and Responsible Investment (SRI) Sukuk rating to AA-IS from A+IS. The total outstanding sukuk amount stands at RM905.0 million. MARC has concurrently revised the rating outlook to stable from positive.

Rationale     
The rating upgrade incorporates the steady operational performance exhibited by QSP Semenanjung’s three 50MW solar power plants that is in line with our expectations. Actual energy production has been consistently higher than base case P90 estimates since the plants’ full commercial operation dates (COD) in 2019. As a result, revenue generation was 5.2% higher than the projected RM136.8 million in 2020. Its finance service coverage ratio (FSCR) without cash of 1.51x  is in line with initial projections.

The strength of the project fundamentals remains underpinned by the 21-year solar power purchase agreements (SPPA) entered into by each of QSP Semenanjung’s three project companies – QSP (Kedah) Sdn Bhd, QSP (Melaka) Sdn Bhd and QSP (Terengganu) Sdn Bhd – with Tenaga Nasional Berhad (TNB) (AAA/Stable). The agreements mitigate demand risk as TNB has committed to purchasing energy generated by the plants at a fixed rate up to the maximum annual allowable quantity (MAAQ). 

In 2020, on the back of the plants’ performance, QSP Semenanjung recorded total revenue of RM143.9 million and earnings before interest, tax, amortisation and depreciation (EBITDA) of RM126.6 million which was 7.2% higher than projections. QSP Semenanjung has sufficient liquidity, as reflected by cash and cash balances of RM126.3 million as at end-2020 against the total sukuk profit payment and principal repayment amount of RM100.4 million in 2021. Its liquidity position was bolstered by the receipt of the remaining GST refunds of RM21.0 million in 2020. The project’s minimum and average pre-distribution FSCR with cash are forecast at 1.72x and 2.10x throughout the tenure of the sukuk, slightly higher than the initial projections of 1.59x and 2.09x at the inception of the project.

Rating outlook     
The stable outlook incorporates our view that QSP Semenanjung’s plants will continue to meet P90 energy generation projections and not encounter significant operational issues. 

Rating trajectory

Upside scenario     
No further rating upgrade is expected over the next 12 months unless the plants demonstrate stronger operating performance that yields higher FSCR without cash of at least above 1.50x on a consistent basis. 

Downward scenario     
Downward pressure on the rating would materialise if the plants’ performance falls substantially below expectations due to unforeseen events such that QSP Semenanjung’s debt service coverage metrics are significantly impacted.

Key strengths
  • Demand risk mitigated by terms in the solar power purchase agreements
  • Energy generation higher than projections
  • Geographic diversification of solar power plants
Key risks
  • Unexpected events weighing on plants’ operational performance
  • Significant variability in solar irradiance


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