By Malaysian Business
Gambang, 5 December 2022 – UiTM Solar Power Sdn Bhd (USP), a wholly-owned subsidiary of UiTM Holdings Sdn Bhd (UHSB) which owns and operates a 50MWac Large Scale Solar Photovoltaic (LSSPV) power plant in Gambang, Pahang, known as UiTM Solar Park l (USP l), is confident of meeting all its upcoming financial obligations following a 7-month shutdown due to equipment malfunction between November 2021 and June 2022.
UHSB Group Chief Executive Officer (GCEO), Muhammad Mubarak Ishak, was replying to the recent announcement by the Malaysian Rating Corporation Berhad (MARC) Ratings that it had removed USP’s Green SRI Sukuk rating from MARCWatch Negative placement and concurrently lowered the rating to A+IS from AA-IS with a negative outlook. USP’s current Green SRI Sukuk outstanding is RM192.3 million.
Earlier in January 2022, MARC had placed USP’s Green SRI Sukuk rating of AA-IS on MARCWatch Negative after the plant became non-operational in November 2021 due to an unexpected malfunction of its gas-insulated switchgear (GIS) and power transformer.
According to MARC, the rating downgrade reflects USP’s weakened liquidity position following the prolonged shutdown and the fact that the proceeds of the insurance settlement relating to the GIS and transformer malfunctions have yet to materialize to date. MARC’s negative outlook considers UiTM Solar’s thin liquidity buffer and its reliance on consistently healthy operating cash flows from the Plant to meet working capital and financial obligations.
MARC notes, however, that the Plant has managed to record operational performance largely in line with projections since resuming operations at full capacity in mid-August 2022, averaging an availability of 99.1% up to end October 2022.
“USP is confident of meeting all its upcoming financial obligations since the Plant is operating without major issues since reenergization and the Company has been generating revenues since June 2022. With the insurance settlement offer expected in December 2022, USP is confident of meeting its next Sukuk profit and principal repayment scheduled for April 2023 without any issue,” said Encik Mubarak.
He added that USP is confident of receiving a final settlement offer (from claims relating to the GIS and transformer malfunctions) of up to policy sub-limit in the second half of December 2022. The long lead time between filing and conclusion of USP’s insurance claim is to be expected given the very large claim size and complexity of investigation.
To date, USP has received an interim settlement offer of 10% of the estimated material damage claims. USP takes comfort in the fact that this indicates that the equipment malfunctions were due to a sudden and unexpected external cause, and not due to inadequate or improper operation and maintenance.
MARC has announced that it would continue to monitor developments and take the appropriate rating action when necessary. The rating outlook would be revised to stable if the plant continues to demonstrate operational performance in line with P90 projections and strengthens its liquidity buffer.
UiTM Solar Park I (USP I) in Gambang has a generation capacity of 61MWp and had successfully achieved commercial operation on 5th April 2019. UiTM Holdings’ second LSSPV power plant known as UiTM Solar Park II (USP II) with a generation capacity of 31MWp, which was undertaken by UHSB’s 100% subsidiary, UiTM Solar Power Dua Sdn Bhd (USPDSB), had successfully commenced commercial operation on 2nd December 2020.
USP I and USP II were both awarded by the Ministry of Energy, Green Technology and Water (KeTTHA or now known as Ministry of Energy and Natural Resources – KETSA) through Suruhanjaya Tenaga via LSS competitive bidding exercises. Both power plants, USP I and USP II, were developed by UHSB’s wholly owned subsidiaries, USPSB and USPDSB, respectively. The subsidiaries are part of UHSB’s Energy Division which is principally involved in Renewable Energy, Energy Efficiency and Green Technology businesses.