[RAM] RAM Ratings assigns preliminary AA2 rating to GBS Green's proposed RM180 mil Tranche 1 sukuk

RAM Ratings has assigned a preliminary AA₂/Stable rating to GBS Green Sdn Bhd’s (the Issuer) proposed RM180 mil Tranche 1 sukuk (2024/2044) (Tranche 1) under the ASEAN Green SRI Sukuk Wakalah Programme of up to RM500 mil (2024/2054). GBS Green is a special purpose funding vehicle of Gopeng Bhd (Gopeng or Group). The Group owns a 50 MWac solar photovoltaic plant in Gopeng, Perak (the Plant), via GBS Suria Sdn Bhd, a sister company of the Issuer. 

Under the sukuk programme, GBS Green has the option to issue secured and unsecured sukuk, from time to time, with recourse only to the underlying project and associated security package, no comingling of funds and no cross-default clauses between other issuances. Each tranche will have its own covenants, designated accounts and if applicable, securities and guarantees. Tranche 1 proceeds are earmarked to settle outstanding deferred engineering, procurement, construction and commissioning (EPCC) costs due to Sunway Construction Sdn Bhd (SunCon).

In arriving at the preliminary rating for the Tranche 1 sukuk, we have considered the ‘non petition and limited recourse’ clauses as mitigating measures against the Issuer’s bankruptcy risks if any other tranches were to default. In this regard, the repayment of Tranche 1 relies on cashflows from GBS Suria. Gopeng and GBS Suria will extend corporate guarantees in favour of the Tranche 1 Security Trustee, aligning interests to ensure timely sukuk repayments. 

The rating also considers GBS Suria’s sturdy project fundamentals, underscored by the favourable terms of its power purchase agreement (PPA) with a strong utility offtaker, as well as the use of proven solar technology and equipment. The straightforward operations and maintenance of the Plant are undertaken in-house, with SunCon appointed to manage more technically demanding glitches, if any. 

The Plant’s first three-month performance up to end-August 2024 was adversely affected by initial operational hiccups, which have since been resolved. Our cashflow analysis incorporates a lower energy output and heftier operating expenditure, and a higher plant downtime to reflect the risk of potential disruptions from significantly lower equipment spares and maintenance reserves. Against these sensitivities, GBS Suria’s projected annual finance service coverage ratios (post-distribution FSCRs, with cash balances) will be at least 1.65 times. The outcome of RAM’s sensitivity analysis reflects our expectation that the Issuer will maintain higher cash balances to ensure continuous compliance of covenanted terms whilst preserving the commensurate FSCR profile for a AA₂ rating. The risk of cashflow leakages is moderated by the transaction’s tight covenants and structure. 

Awarded under Malaysia’s fourth Large Scale Solar scheme, the Energy Commission granted GBS Suria the extension of the Plant’s commissioning date to 22 May 2024 from the PPA’s scheduled date of 31 December 2023, in which the Plant achieved commissioning on the said date. GBS Suria had accepted the offer by the Energy Commission to shorten the PPA tenure in exchange of liquidated damages. This is neutral to the transaction as Tranche 1’s last scheduled maturity would still fall within the shorter concession period. We believe Gopeng has the financial means to cover the Issuer’s running expenses, despite it being lossmaking. The Group’s intention to bid for future concession-based renewable energy projects also underlines its support for this transaction. As of end-June 2024, Gopeng had unrestricted cash reserves of RM61 mil with the only outstanding debt being the deferred EPCC payments owed to SunCon.   


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

Chew Chiang Lim
(603) 3385 2516
chianglim@ram.com.my

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