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RAM Ratings affirms AA3 rating of reNIKOLA Solar
Published on 02 Oct 2024.
RAM Ratings has affirmed the AA3/Stable rating of reNIKOLA Solar Sdn Bhd’s (the Issuer) RM390 mil ASEAN Green SRI Sukuk Programme (the Sukuk).
The rating is underpinned by the healthy energy output and strong consolidated cashflow generation of the three underlying solar photovoltaic plants (the Plants) owned separately by sister companies of the Issuer (the project companies). The favourable terms of the project companies’ power purchase agreements with the offtaker, Tenaga Nasional Berhad (issues rated AAA/Stable by RAM), further support the rating.
In 2023, the Plants achieved net energy output (NEO) ranging from 89% to 97% of their respective declared annual quantities (DAQs), with cumulative electricity generation reaching 130,188 MWh (92.4% of consolidated DAQ) – 3.6% above P90 estimates. The cumulative energy output of 70,483 MWh from January to June 2024 outperformed the P90 forecast by 6.0%. The Plants maintained high availability throughout both periods, experiencing minimal disruptions. Moving forward, output performance is expected to stay at P90 forecasted levels, notwithstanding the planned replacement of their existing operations and maintenance (O&M) service providers. The new O&M agreements will carry existing terms, but at a reduced fee structure.
We do not expect the replacement of the respective O&M service providers with the project companies’ sister company, reNIKOLA Management Sdn Bhd, to have material impact on plant performance. reNIKOLA Management presently manages two 30 MWac solar PV plants under related entities – RE Kuala Muda Sdn Bhd and RE Machang Sdn Bhd – achieving full availability over the past year. To ensure operational continuity, key personnel from the existing O&M providers will be integrated into the experienced team at reNIKOLA Management. Furthermore, with B. Grimm Power Sdn Bhd – a subsidiary of B. Grimm Power Public Co. Ltd. – as its substantial shareholder, the reNIKOLA group can benefit from operational synergies and leverage on B. Grimm’s extensive green energy experience.
RAM’s sensitised cashflow projection, which considers lower NEO and higher permitted operating and capital expenditure, indicates minimum and average covenanted annual finance service coverage ratios of 1.61 times and 1.94 times, respectively, over the Sukuk’s remaining tenure. These projected ratios align with the requirements for an AA3 rating.
A longer plant operating performance record, however, would enhance our assessment of O&M quality and energy output sustainability. Furthermore, the Plants remain exposed to risks associated with solar irradiance variability, regulatory changes and force majeure events. The diverse locations of the three plants across a vast land bank of 246 acres reduce the Issuer’s susceptibility to force majeure and operational risks.
The Issuer is a wholly owned subsidiary of reNIKOLA Holdings Sdn Bhd, which is in turn 55% owned by reNIKOLA Sdn Bhd and 45% owned by B. Grimm Power Sdn Bhd. The Plants are located in Arau, Perlis (3.996 MWac, operational since 3 March 2018, held under SBU Power Sdn Bhd); Gebeng, Pahang (29.916 MWac, operational since 22 January 2020, held under RE Gebeng Sdn Bhd); and Pekan, Pahang (30 MWac, operational since 29 June 2021, held under RE Pekan Sdn Bhd). Intercompany financing agreements between the Issuer and each project company govern the flow of funds, ensuring timely profit and principal payments.
Analytical contacts
Zachary Tan
(603) 3385 2612
zachary@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
© Copyright 2024 by RAM Rating Services Berhad
