RAM Ratings affirms Solar Management (Seremban)’s AA3/Stable rating

Published on 02 May 2024.

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RAM Ratings has affirmed the AA3/Stable rating of Solar Management (Seremban) Sdn Bhd’s (SMS or the Company) RM260 mil ASEAN Green SRI Sukuk (2020/2038) (the Sukuk). 

SMS’s debt servicing ability is expected to remain robust, supported by the strong operational performance of its 50 MWac solar photovoltaic plant in Rembau, Negeri Sembilan (the Plant). Despite the year’s lengthier unscheduled outages, the Plant’s net energy output (NEO) came in stronger in FY Dec 2023 at 77,624 MWh thanks to better irradiance levels (FY Dec 2022: 77,366 MWh). This was equivalent to 94% of it declared annual quantity (DAQ) and exceeded RAM’s projection by 5%.

Of the 283 hours of forced outages SMS recorded in fiscal 2023 (fiscal 2022: 201 hours), most of the downtime occurred due to a single lightning strike on one of the Plant’s transformer busducts alongside the subsequent replacement works. Meanwhile, the Plant’s average performance ratio for 2023 came below the 79% level guaranteed under SMS’s Operations and Maintenance Agreement, entitling management to liquidated damages. 

SMS’s FY Dec 2023 pre-tax profits were back in black at RM6.33 mil (FY Dec 2022: RM0.82 mil loss), reflecting the Company’s steady revenue generation and the year’s significantly lower operating expenses in absence of the one-off RM6.7 mil land title conversion charge incurred in fiscal 2022. The Company’s finance service coverage ratio (FSCR) including cash balances as at the latest repayment date in October 2023 was a healthy 2.95 times – better than RAM’s projected 2.76 times. The Plant’s performance stayed strong in the first month of 2024 with the Plant recording an NEO of 6,282 MWh (90% of its seasonally prorated DAQ).
Under RAM’s sensitised projection, SMS is expected to record minimum and average annual FSCRs of at least 1.50 times throughout the Sukuk’s remaining tenure, commensurate with the AA3 rating. Our stressed assumptions incorporate a lower energy output, higher degradation, heftier operating expenditure, non-receipt of liquidated damages and the optimisation of distributions - including the RM2.5 mil management intends to pay out in October 2024. Meanwhile, SMS successfully obtained a Certificate of Compliance and Completion (CCC) on 16 February 2024, marking the fulfillment of all conditions subsequent (CS) under the Sukuk terms. 


Analytical contacts
Seri Nuralya Munawir
(603) 3385 2484

Chong Van Nee, CFA
(603) 3385 2482


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Published by RAM Rating Services Berhad
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