RAM Ratings affirms AA3 rating of reNIKOLA Solar’s ASEAN Green SRI Sukuk

Published on 04 Sep 2023.

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RAM Ratings has affirmed the rating of reNIKOLA Solar Sdn Bhd’s (the Issuer) RM390 mil ASEAN Green SRI Sukuk (the Sukuk) at AA3/Stable. 

The rating is supported by the healthy energy output of the three solar photovoltaic plants (the Projects or the Plants) backing the transaction and their solid consolidated cashflow generation. The Projects consist of a 3.996 MWac plant in Arau, Perlis which commenced operations on 3 March 2018 (held under SBU Power Sdn Bhd); a 29.916 MWac plant in Gebeng, Pahang which became operational on 22 January 2020 (under RE Gebeng Sdn Bhd); and a 30 MWac plant in Pekan, Pahang that started operations on 29 June 2021 (under Halpro Engineering Sdn Bhd).

The project companies’ strong fundamentals, supported by favourable power purchase agreements (PPAs) with the offtaker Tenaga Nasional Berhad (TNB) (rated AAA by RAM), is another rating strength. TNB is obligated to purchase a specified limit of energy generated by the Plants, moderating the absence of fixed availability-based revenue. Since commercial operations, the Plants have consistently surpassed the minimum 70% Declared Annual Quantity (DAQ) required by the PPAs. 

In 2022, the Plants’ net energy output (NEO) ranged from 85% to 96% of their respective DAQs, with cumulative electricity generation reaching 129,661 MWh (91.0% of consolidated DAQ) – 2.7% above P90 estimates. For January to June 2023, the cumulative energy output was 67,651 MWh, outperforming the P90 forecast by 1.3%. Going forward, we expect the output performance to stay at the P90 forecasted level. The Plants demonstrated high availability throughout both periods, facing minimal disruptions.

The Plants’ robust operations have positively contributed to the financial performance of the project companies despite the Sponsor’s limited experience in the solar business. All three companies were operationally profitable last year. Healthy energy output levels and cost control covenants are expected to support their strong financial performances going forward. Long-term operation and maintenance (O&M) agreements ensure relatively fixed O&M fees while the transaction’s terms limit operating and capital expenditure to 10% of the budget approved before the issuance of the Sukuk.

The Issuer’s debt servicing ability relies on the combined cash generation of the project companies. Intercompany financing agreements entered into by the Issuer with each project company govern the flow of funds, ensuring timely profit and principal payments. Our sensitised cashflow projection, considering lower NEO and heightened operating expenditure, indicates minimum and average annual finance service coverage ratios (with cash balances, post-distribution) of 1.61 times and 1.89 times, respectively, over the Sukuk’s remaining tenure, in line with the requirements for an AA3 rating.

The Plants however remain exposed to long-term solar irradiance variability, regulatory and force majeure risks. A longer operating track record would enhance our assessment of O&M quality and energy output sustainability. The Issuer and the project companies benefit from a lower risk of force majeure and operational failures in view of the geographical diversification of the three plant sites, with vast land banks. Insurance coverage (required by the PPAs) mitigates force majeure risk, though compensation may not be sufficient to cover all financial losses.


Analytical contacts
Zachary Tan
(603) 3385 2612

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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