RAM Ratings maintains Cypark Ref’s sukuk rating at AA3/Negative

Published on 03 Apr 2023.

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RAM Ratings has reaffirmed the AA3/Negative rating of Cypark Ref Sdn Bhd’s RM550 mil SRI Sukuk Murabahah Programme (2019/2041) (the Sukuk). 

The negative outlook reflects our continuing concerns about extended delays in the completion of two floating solar farms in Kelantan (the DTU plants). Its ground-mounted solar farm in Kedah (the Sik plant) has been operational since 1 January 2022, although initial teething problems and lower than projected solar irradiance weakened its electricity output in 2022 (12% below our initial expectations). So far though, the impact of diminished cashflow from the Sik plant and the delayed DTU projects is moderated by financial support procured by Cypark Resources Berhad (CRB, the transaction sponsor and Cypark Ref’s ultimate holding company) and Cypark Renewable Energy Sdn Bhd (CRE, the engineering, procurement, construction and commissioning (EPCC) contractor and Cypark Ref’s immediate holding company). Further hold-ups of the DTU plants beyond our stress scenario will necessitate additional financial support, which are uncertain at this juncture. Cypark Ref is dependent on cashflows from these three 30 MWac solar photovoltaic projects to service its Sukuk.

CRB secured two irrevocable and unconditional liquidity bank guarantees (BGs) for RM46 mil to be utilised by Cypark Ref. These have been assigned to the security agent, enabling it to make demands on the BGs in the event of liquidity shortfalls. CRE also deferred its remaining EPCC entitlement of RM18.5 mil to retain cash within the transaction. Repayment of EPCC claims is subject to the transaction’s distribution covenants, full retirement of the liquidity BGs, provided that such claims will not adversely affect the sukuk rating. These initiatives will address any near-term liquidity crunch. 

The long-drawn-out process of securing the approval of the offtaker, given its additional requirements and onsite inspection, largely held up completion of the DTU plants. Against the independent technical adviser’s guidance of end-August 2023, RAM’s revised projections assume a completion date at end-December 2023. This incorporates an added four-month time buffer to account for potential hiccups arising from the construction of interconnection facilities, the possibility of a lengthy testing and commissioning process, and erratic weather conditions. 

Assuming no fresh capital injection from the shareholders, our sensitised cashflow estimate indicates that the BGs will be partially drawn to help service the Sukuk over the next two years. Overall, Cypark Ref’s projected annual consolidated finance service coverage ratios (with cash balances, post-distribution) of above 1.50 times remain supportive of the AA3 rating. 


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.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
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