RAM Ratings reaffirms Cypark Ref’s AA3 sukuk rating, revises outlook to negative

Published on 17 Dec 2021.

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RAM Ratings has lowered the outlook on Cypark Ref Sdn Bhd’s (the Turnkey Contractor) RM550 mil SRI Sukuk Murabahah Programme (2019/2041) (the Sukuk) to negative from stable while reaffirming the AA3 rating of the facility. 

Cypark Ref is a funding conduit set up to raise financing for the development of three 30 MWac solar photovoltaic projects (the Projects) separately owned by three entities (the Project Companies) (Table 1). Post-completion, Cypark Ref will receive deferred turnkey contract payments from the Project Companies to service its sukuk obligations (Figure 1). 



The negative outlook reflects the potential downside of extended delays in the construction of the two floating solar plants in Danau Tok Uban, Kelantan (the DTU plants). Delays beyond our stressed assumption of 30 June 2022 (management’s base case: 31 March 2022) may cause the transaction a further liquidity shortfall. We have reaffirmed the rating in view of the expected irrevocable and unconditional RM26 mil liquidity bank guarantee (Liquidity BG) – to be procured by Cypark Resources Berhad (CRB, the transaction sponsor) for the benefit of Cypark Ref – that would replenish loss of cashflow from the delays under our sensitised case. Targeted to take effect by January 2022, the Liquidity BG will provide much needed support to help Cypark Ref tide over a potential default in June 2022 and restore the transaction’s liquidity buffers to a level commensurate with the AA3 rating. 

The prolonged pandemic and unexpected reinstatement of movement controls this year have further hampered the Projects’ construction progress. While the Sik plant is on track to achieving commercial operations by year end, progress at the DTU plants stood at only 61.72% as at end-October 2021. This is due to earlier complications arising from the plants’ relocation from Negeri Sembilan, which had compelled the Project Companies and Cypark Renewable Energy Sdn Bhd (the EPCC Contractor) to obtain new approvals, relocate the equipment and rebuild the plant. 

Given Kelantan’s less contained COVID-19 situation and the emergence of new virus variant, the resurgence of infections and reimposition of mobility curbs cannot be fully discounted. The monsoon season, which may stretch up to February 2022, presents further challenges to construction progress, particularly in Kelantan. With the installation of the floating solar system almost finished, the completion of the DTU plants’ interconnection facilities is crucial to enable the timely commencement of operations. The independent technical adviser views the EPCC Contractor’s targeted COD as aggressive.

During construction, our analysis places greater emphasis on Cypark Ref’s liquidity profile as the collection of deferred turnkey contract payments will only commence after the Projects reach the COD. We do not envisage any immediate liquidity crunch, thanks to CRB’s explicit commitment in providing RM15 mil EPCC cost waiver (through CRE) in December 2020 and the RM26 mil Liquidity BG, which would adequately cover sukuk obligations up to June 2022. Post-completion, we will focus on the underlying project fundamentals and the Project Companies’ ability to service deferred turnkey contract payments, which anchor Cypark Ref’s debt servicing ability.

Analytical contacts
Chu Jia Ying
(603) 3385 2519

Chong Van Nee, CFA
(603) 3385 2482


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

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