View Credit Analysis Report (6053663)

Aid6053663
StatusPublished
CategoryReport
SubcategoryInfrastructure & Utilities - Power
CoidSINARKAMIRI
Appoletid0
Date Article2021-05-25 00:00:00
PublicYes
TitleSINAR KAMIRI SDN BHD - 2021
Content
Rating action     
MARC has affirmed its AA-IS rating on Sinar Kamiri Sdn Bhd’s (Sinar Kamiri) RM245.0 million Green Sustainable and Responsible Investment (SRI) Sukuk Wakalah. The rating outlook is stable. Sinar Kamiri is a special purpose project company that owns and operates a 49.0MWac solar power plant (SPP) in Sungai Siput, Perak.

Rationale     
The rating affirmation primarily reflects Sinar Kamiri’s satisfactory project fundamentals that are underpinned by the terms of the 21-year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB), among which is to purchase energy generated by the plant at a fixed tariff. The rating is moderated by the risk of variability in solar irradiance which determines the amount of energy generated and performance risks associated with the plant operations.

In 2020, lower-than-projected irradiance had affected the plant’s electricity output by about 1.1% from P90 estimates. The lower irradiation was due to weather conditions. Accordingly, Sinar Kamiri posted marginally lower revenue of RM33.1 million against a projected RM33.4 million. Cash flow from operations (CFO) was recorded at RM31.3 million while CFO interest coverage was 2.29x. As at end-February 2021, total cash and bank balances stood at RM32.4 million, which is sufficient to meet sukuk obligations of RM6.6 million and RM15.0 million due at end-July 2021 and end-January 2022.

The project is expected to achieve minimum and average FSCRs with cash of 3.09x and 3.29x under base case. On sensitising the plant’s unavailability of 2.4% and the increase in operation and maintenance (O&M) cost by 10% under the more stringent P99 estimates, the minimum and average FSCRs are 2.47x and 2.77x. These suggest the cash flow projections can withstand moderate sensitivities to P99 estimates. 

Rating outlook     
The stable outlook incorporates our view that Sinar Kamiri will meet P90 energy generation projections without significant operational issue. 

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 to build up and maintain a healthy liquidity buffer.

Downward scenario     
Downward pressure on the rating could happen if the plant was to experience operational issues that will significantly impact energy generation and debt service coverage metrics. 

Key strengths
Demand risk mitigated by PPA terms
Adequate cash flow generation from solar power plant operation
Satisfactory project debt coverages

Key risks
Variability of solar resource
Plant performance risks


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