[RAM] Committed shareholder support critical in RAM maintaining Cypark Ref's AA3 rating, outlook remains on negative

RAM Ratings has maintained the negative outlook on the AA3 rating of Cypark Ref Sdn Bhd’s RM550 mil SRI Sukuk Murabahah Programme (2019/2041) (the Sukuk). While the overall completion progress is already in advanced stages, two of the three solar photovoltaic plants underpinning the Sukuk have yet to be completed. As such, Cypark Ref remains heavily reliant on external liquidity support to meet its sukuk obligations on a timely basis.

The financial support provided by Cypark Ref’s parent companies – Cypark Renewable Energy Sdn Bhd (CRE) and Cypark Resources Berhad (CRB) (collectively, the Group) – as well as its ultimate single largest shareholder, Jakel Capital Sdn Bhd, have been critical in ensuring the transaction’s finance service coverage ratio stays above 1.50 times. CRB recently injected a further RM25.3 mil cash into Cypark Ref to meet its sukuk obligations of RM34.2 mil due on 28 June 2024. The renewal of the RM46 mil irrevocable and unconditional bank guarantee (now expiring 31 May 2025) by CRB also provides liquidity support, if required.  

The negative outlook reflects ongoing challenges in completion of the two floating solar farms in Kelantan (the DTU Plants or the Projects). As at 31 December 2023, the plants were 97.98% complete, with remaining works delayed primarily due to the non-performance of its subcontractors though little details have been made available on the areas that need to be addressed. Management attributes this to subcontractors’ financial constraints and is still formulating a definitive resolution plan, hence the visibility on the Projects’ eventual commissioning date remains limited at this juncture.

We are, however, wary that the appointment of a new subcontractor may take a longer period. Year-end monsoon season may also affect the plants' testing and commissioning procedure. For now, we estimate that the transaction can still withstand delays until January 2025, given the extension of the bank guarantee and new funds from shareholders, without impairing Cypark Ref’s credit metrics. 

We view the DTU Plants, making up 28% of CRB’s solar portfolio, to be strategically and financially significant to the Group. The shareholders’ commitment to the projects is evident in their funding 22% of the project cost (RM151 mil), plus monetary assistance totalling a sizeable RM108 mil (including bank guarantee) to date. Jakel Capital, CRB’s single largest shareholder since January 2023 has so far invested over RM332 mil to bolster the Group’s liquidity and accelerate the completion of the DTU Plants.


Analytical contacts
Chu Jia Ying
(603) 3385 2519
jiaying@ram.com.my

Chong Van Nee, CFA
(603) 3385 2482
vannee@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my