Published on 21 Oct 2022.
RAM Ratings has reaffirmed the AA3/Stable rating of Tadau Energy Sdn Bhd’s (Tadau or the Company) RM250 mil SRI Sukuk Programme (2017/2033).
The rating reflects the sound operational performance of Tadau’s two solar photovoltaic (PV) plants in Kudat, Sabah, with a combined capacity of 50 MWac (the Plants). Comprising Unit 1 (2MWac) and Unit 2 (48MWac), the Plants supply electricity to Sabah Electricity Sdn Bhd (SESB) under two power purchase agreements (PPAs).
In 2021, the Plants’ energy production surpassed RAM’s expectations under our sensitivity scenario with its combined declared annual quantity (DAQ)– the forecast provided to SESB at the start of each year – by 9% and 6.9%, respectively. In 6M 2022, the Plants’ energy output remains slightly higher than our projection, although it was 14.2% lower than the DAQ – skewed by seasonally lower solar irradiance. The PPAs require the Plants to meet only 70% of their DAQ. The Plants did not experience any unexpected downtime during the review period, with issues detected resolved within an hour of detection, resulting in monthly availability surpassing 99%.
Tadau’s top line for FY Jun 2022 was relatively unchanged from the previous year as energy output, like FY Jun 2021’s, was weaker than that recorded in FY Jun 2020. A lower finance cost coupled with higher income from permitted investments pushed net profit for FY Jun 2022 up to RM12.9 mil (FY Jun 2021: RM9.8 mil). The Company’s cashflow is anticipated to be within our stressed scenario, with the unaudited funds from operations (FFO) of RM37.2 mil exceeding our expectation of RM29.8 mil.
Tadau’s performance permitted a dividend payout totalling RM29.4 mil in early 2022. Despite reduced cash reserves, our sensitised cashflow analysis estimates Tadau’s minimum and average annual FSCRs at a respective 1.50 times and 2.36 times over the Sukuk’s remaining tenure provided the Company maintains prudence in future distributions.
The Plants remain exposed to solar irradiance variability and plant performance risks. While the Plants’ energy output has largely exceeded our expectations since their commercial operations dates, diligent operation and maintenance remains key to ensuring their satisfactory long-term performance. The Company is also exposed to single-project and regulatory risks despite the federal government’s supportive stance on renewable energy projects.
L Nurisya Abdullah
(603) 3385 2492
Chong Van Nee, CFA
(603) 3385 2482
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Ratings on Tadau Energy Sdn Bhd