KUALA LUMPUR (Nov 10): Cenergi SEA Bhd received preliminary A1/Stable rating for the senior sukuk and A3/Stable rating for the subordinated perpetual sukuk with a combined limit of RM1.5 billion from RAM Ratings.
The rating agency has also assigned A1/Stable/P1 corporate ratings to the country’s largest biogas power plant operator, which is backed by sovereign wealth fund Khazanah Nasional Bhd.
“RAM’s rating analysis considered the issuance of only RM280 million of Senior Sukuk under the Proposed Sukuk Programme over the next three years to support Cenergi’s refinancing and expansion plans,” the rating agency said in a statement.
“The Group has no intentions to issue the Subordinated Perpetual Sukuk in the near-term,” RAM Ratings said, although it said that the rating is also moderated by Cenergi’s small size.
In its assessment, RAM Ratings said Cenergi “is deemed to benefit from a moderate likelihood of extraordinary support” from Khazanah, in the event of financial distress.
This considers Cenergi's role as Khazanah’s only sustainable energy arm, as well as the strong relationship between the two parties.
“Khazanah has provided explicit financial backing (totalling RM163.2 million as at end-October 2021) and is actively involved in Cenergi’s key investment decisions through board representation,” it said.
Cenergi has a market share of 11.5%, comprising 26.6 megawatt (MW) of awarded capacity across 16 projects as of mid-October 2021. It plans to add another 13 biogas projects totalling 25.5MW over the next two years.
The group is also involved in solar energy (rooftop solar and small-scale solar farms), energy efficiency and biomass pellet businesses, RAM said.
“We believe Cenergi — as one of the pioneer biogas players — will be a key beneficiary of the Twelfth Malaysia Plan, which gears towards a carbon-neutral economy.
“Specifically, the plan indicates increased deployment of biogas energy and introduces new policies and frameworks to intensify renewable energy (RE) adoption and energy efficiency investments,” it said.
Cenergi turned to profit in the financial year ended Dec 31, 2020 (FY20) — its first year in the black since FY13 — with net profit of RM2.6 million on revenue of RM67 million. RAM Ratings in the statement also pointed to the group’s hefty depreciation and amortisation costs as potential risk to its performance.
“Overall, RAM expects Cenergi’s financial position to strengthen alongside the commissioning of new projects, with average projected funds from operation debt coverage improving to 0.14 times between fiscal 2022 and 2024.
“Average gearing will however deteriorate to 1.31 times, in line with the corresponding higher debts taken to fund its expansion. We also expect Cenergi to continue relying on capital injections from Khazanah (around 30% of project cost),” it said.