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RAM Ratings affirms reNIKOLA Solar II’s AA2 sukuk rating
Published on 23 Sep 2025.
RAM Ratings has affirmed the AA2/Stable rating of reNIKOLA Solar II Sdn Bhd’s (reNIKOLA Solar II or the Issuer) RM390 mil ASEAN Green SRI Sukuk Programme (2023/2041). The rating affirmation is premised on its strong debt coverage ratios, underpinned by the healthy energy generation and strong cashflows from the two underlying operating solar photovoltaic (PV) plants in Kuala Muda and Machang (the Plants). The Plants are held by its sister companies, RE Kuala Muda Sdn Bhd (REKM) and RE Machang Sdn Bhd (REMC) (Project Companies). Favourable power purchase agreement (PPA) terms between the Project Companies and offtaker, Tenaga Nasional Berhad (TNB, issues rated AAA/Stable by RAM), which translates to minimal demand risk for the Plant’s output, also support the rating.
The Plants recorded full availability without any unscheduled outages since they commenced operations in March 2022 and April 2023. Good weather conditions last year enabled both Plants to generate aggregate net energy output (NEO) of 128,529 MWh, exceeding RAM’s forecast by 5.1%. However, the Plants’ NEO was 8% lower y-o-y in 8M 2025 and 1.5% below expectations due to unfavourable weather. Despite this, the Plants’ NEO remained above the PPAs’ minimum requirements. The Plants’ output also recovered to above sensitised assumptions in recent months amid better weather. We expect the Plants to register healthy performances that are within our sensitised assumptions over the longer run.
RAM’s sensitised cashflows incorporate lower energy generation and heftier operating expenditure. Even so, reNIKOLA Solar II is projected to maintain minimum and average annual post-distribution finance service coverage ratios of 1.65 times and 1.95 times, respectively, over the Sukuk’s remaining tenure, supportive of its AA2 rating. As with other solar farms, the Plants are exposed to solar irradiance especially with the increasingly erratic weather conditions in recent times. The concession-based business also faces regulatory risk, despite the federal government’s favourable stance on renewable energy projects.
The arbitration between the Project Companies and the Plants’ engineering, procurement, construction and commissioning (EPCC) contractors – triggered by delivery issues – remain ongoing, which RAM will continue to monitor. Last October, RM66 mil in performance bonds (PBs) were released into the Project Companies’ Revenue Accounts after the High Court lifted an ad-interim injunction obtained by the EPCC Contractors. The EPCC Contractors subsequently filed an appeal. Pending its resolution, the PB proceeds will be retained in their Revenue Accounts. Given the long-drawn nature and uncertain outcome, these monies as well as any outflows related to these proceedings have not been factored in our analysis.
reNIKOLA Solar II is wholly owned by reNIKOLA Holdings. The latter is 55% owned by reNIKOLA Sdn Bhd and 45% owned by B. Grimm Power Sdn Bhd (a subsidiary of Thailand-based power player, B. Grimm Power Public Co. Ltd.). The Intercompany Financing Agreements between reNIKOLA Solar ll, the Project Companies and the Land Companies (landlords and sister companies of the Project Companies), govern fund flows between the entities, with the repayment of the Sukuk ultimately derived from cashflows generated by the Project Companies and the Land Companies.
Analytical contacts
Karin Koh, CFA
(603) 2708 8237
karin@ram.com.my
Chong Van Nee, CFA
(603) 2708 8210
vannee@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8212
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 2025 by RAM Rating Services Berhad
