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RAM Ratings affirms Tadau Energy’s AA3/Stable SRI Sukuk rating
Published on 03 Sep 2024.
RAM Ratings has affirmed the AA3/Stable rating of Tadau Energy Sdn Bhd’s (Tadau or the Issuer) RM250 mil SRI Sukuk Programme (Sukuk). The affirmation of its rating reflects the exceptional operational performance of Tadau’s two solar photovoltaic plants in Kudat, Sabah, with a combined capacity of 50 MWac, (Unit 1: 2MWac; Unit 2: 48MWac) (the Plants). Tadau’s cashflow is strong, with robust projected average finance coverage ratios of above 2 times under RAM’s sensitised scenario, supported by the favourable terms of its two power purchase agreements with the offtaker, Sabah Electricity Sdn Bhd (SESB).
In 2023, the Plants’ energy production continued to exceed our sensitised projection and the declared annual quantity (DAQ) (forecast provided to SESB at the start of each year) by 11.4% and 8.5%, respectively, supported by higher solar irradiance. Their performance remained robust as of May 2024, surpassing RAM’s projection and the prorated DAQ. During the review period, the Plants experienced minimal downtime, with detected issues swiftly resolved within an hour, achieving monthly availability of above 99%.
The increased energy generation boosted Tadau’s FY Jun 2023 revenue and operating profit before depreciation, interest and tax to RM45.7 mil and RM37.7 mil, respectively (FY Jun 2022: RM44.8 mil and RM36.0 mil). Lower finance costs contributed to a higher pre-tax profit of RM15.4 million for the period (FY Jun 2022: RM13.5 million). With pre-tax profit already at RM14.8 million for 9M fiscal 2024, the full-year profit is poised to exceed the previous year’s, assuming the current trend persists. Our sensitivity indicates projected minimum and average annual FSCRs will be 1.50 times and 2.08 times, respectively, over the Sukuk’s remaining tenure.
Like other solar plants, Tadau’s plants are exposed to solar irradiance variability and operational risks. Although energy output has consistently surpassed expectations since the start of operations, ongoing diligence in operations and maintenance is crucial to ensuring sustained long-term performance. The Issuer faces risks associated with its dependence on a single project and regulatory uncertainties, despite the federal government’s favourable stance on renewable energy projects.
Analytical contacts
L Nurisya Abdullah
(603) 3385 2492
nurisya@ram.com.my
Chong Van Nee, CFA
(603) 3385 2482
vannee@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
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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