MARC RATINGS ASSIGNS PRELIMINARY RATING OF AAIS TO TADAU ENERGY'S PROPOSED SUKUK WAKALAH

MARC Ratings has assigned a preliminary rating of AAIS to Tadau Energy Sdn Bhd's proposed ASEAN Green Sustainable and Responsible Investment Sukuk Wakalah of up to RM215 million with a stable outlook. Proceeds from the issuance will primarily be used to refinance Tadau Energy's existing sukuk, which will be cancelled following the planned refinancing. The company owns and operates two solar photovoltaic plants in Kudat, Sabah, with Unit 1 (2MWac) achieving commercial operation on 15 September 2017 and Unit 2 (48MWac) on 26 September 2018.

The rating reflects Tadau Energy's fully contracted revenue profile stemming from two fixed-price, 21-year power purchase agreements with counterparty Sabah Electricity Sdn Bhd (AAA/Stable), which mitigate price and demand risks. It is further supported by strong operational performance, stable cost structures, and high plant availability. Key risks include potential variability in energy generation due to adverse weather conditions or operational disruptions, which could negatively affect plant performance and revenue generation. Under the base case, the finance service coverage ratio (FSCR) averages 2.05x, with a minimum of 1.83x. In a sensitised scenario - which incorporates assumptions of lower energy generation, higher degradation, and increased operating costs - the FSCR still averages 1.83x, with a minimum of 1.66x, indicating a strong cushion for debt service. The debt structure includes a relatively high distribution test of 1.80x for the first three years, and 1.65x thereafter, mitigating distribution-related risk.

Strong plant availability of above 98% over the past five years has driven solid operating performance, resulting in robust cash flow and a healthy financial position. Annual revenue remained steady at between RM43 million and RM50 million, with average earnings before interest, tax, depreciation and amortisation m