View Credit Analysis Report (605372)

Date Article2020-12-31 00:00:00
MARC has affirmed its rating of AA-IS to Leader Energy Sdn Bhd’s (Leader Energy) ASEAN Green Sustainable and Responsible Investment (SRI) Sukuk Wakalah of up to RM260.0 million. The rating outlook is stable.

The affirmed rating reflects MARC’s assessment that Leader Energy’s two solar power projects with a combined capacity of 49MWac would generate steady cash flow to meet its financial obligations under the Sukuk Wakalah programme. The rating is supported by the 21-year Power Purchase Agreement (PPA) between Leader Energy’s two project companies and the offtaker Tenaga Nasional Berhad (TNB, AAA/Stable) under which the energy generated by solar power plants will be purchased by TNB at certain tariffs. The rating draws comfort from the strength of project sponsor and ultimate owner HNG Capital Sdn Bhd that has been involved in the power sector since 1994.

The solar power projects are in Kuala Muda, Kedah, undertaken by Leader Solar Energy Sdn Bhd (LSE I, 29.0MWac) and Leader Solar Energy II Sdn Bhd (LSE II, 20.0MWac) and have achieved commercial operation date (COD) on October 11, 2018 and February 11, 2020. For 9M2020, LSE I and LSE II recorded electricity generation that had exceeded the P90 forecast by 6.8% and 2.7%. 

LSE I recorded 100% plant availability during the period while LSE II experienced some technical issues at end-February 2020 with the rectification works, which owing to the movement control order (MCO), were only completed in May 2020. As a result, LSE II’s plant availability reduced to 93% during the period before increasing to 100% from June 2020 onwards. 

In 9M2020, total revenue recorded was RM27.7 million, constituting 82.9% of the total projected revenue of RM33.4 million for 2020. MARC is of the view the project companies are on track to meet the 2020 projected revenue. Under MARC’s base case cash flow projection, Leader Energy’s minimum and average finance service cover ratios (FSCR) stood at 2.88x and 3.48x. In MARC’s sensitivity assessment, which incorporates a lower energy generation, higher plant outage and increase in operation cost, the average and minimum FSCRs remain strong. 

The stable outlook reflects MARC’s expectation that project companies’ power plants will maintain good operational metrics and generate stable income streams to meet the financial obligations under the rated programme.

Major Rating Factors

Demand risk mitigated by PPA terms;
Satisfactory energy generation from solar power plant; and
Project sponsor’s healthy track record in power projects.

Variability of solar resource; and
Plant performance risk.

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