No immediate impact from solar power plant delays: MARC

KUALA LUMPUR: The Malaysian Rating Corp Bhd (MARC) sees no immediate impact on Quantum Solar Park (Semenanjung) Sdn Bhd’s (QSP Semenanjung) AA-IS/Stable rating on its RM1 billion Green SRI Sukuk (sukuk) following delays in commercial operation dates (COD) for its three solar power plants.
The scheduled COD had been extended by Tenaga Nasional Bhd (TNB) to March 31, 2018 from Dec 31, 2017 for all three plants at Gurun, Merchang and Jasin. The CODs are now targeted to occur by end-June 2018 at the three plants.
“MARC’s view of no immediate rating impact is premised on QSP Semenanjung’s sufficient cash buffers and sponsors’ support to provide liquidity should the need arise,” it said.
Additional liquidity buffer will be provided by Scatec Solar Solutions Malaysia Sdn Bhd, the engineering, procurement and construction (EPC) contractor, through a deferment of the final 5% payment of the EPC contract (RM52.1 million) from QSP Semenanjung for up to one year after all plants have achieved COD.
“MARC notes that Scatec may receive partial payments if the Goods and Services Tax input refunds are received by the project companies or if QSP Semenanjung has excess cash after setting aside the finance service reserves for October 2018 and April 2019.”
The completion delays are not expected to result in a breach in the covenanted minimum finance service cover ratio (FSCR) with cash under the sukuk. Any project cost overruns (including liquidated damages payable to TNB if not claimable from the EPC contractor) will be paid by the sponsors either from the RM50 million contingency equity backed by a bank guarantee or cash injections.
MARC said it will continue to monitor construction progress and take the necessary rating action should the plants encounter extended delays beyond the revised target completion date that could result in a weakening of QSP Semenanjung’s FSCR and liquidity.