brainless never mind, as long you have both eye functioning well, not blind. your concern of ppa and pre construction cost is in the webinar i shared, but you don't even bother to watch. talking nonsense here. how's your very latest kaf report of tp 28 sen? i'm good friend of chairman too. he's confident in both projects. feeling pity to your mental disorder.
Liquidity concern amid construction delays…RAM Ratings has placed Telekosang Hydro One Sdn Bhd’s (TH1) Senior Sukuk (rated AA3) and Junior Bonds (rated A2) on a Negative Rating Watch in its latest project finance ratings report published on 14th June 2022. This is following the rating agency’s concern that TH1 may face severe credit stress in the near term due to the absence of cashflow generation amid further construction delays at the small hydro power plants and that if its plans to seek additional liquidity support fails. Recall that TH1 is the issuer of both the Senior Sukuk and Junior Bonds to finance development of both power plants. of TH1 (Plant 1 – 24 MW) and Telekosang Hydro Two Sdn Bhd (TH2) (Plant 2 – 16 MW).
Construction of these plants has been held up mainly by manpower shortages, Covid-19 related challenges and inclement weather. As of April 2022, Plant 1 was 97.7% while Plant 2 was at 95.7% completion (contrary to previous expectation of commercial operations by end of March 2022). Based on the revised work plans, management expects Plant 1 and Plant 2 can be completed by September 2022 and November 2022, respectively. Thereafter, both plants will be acquired by Jentayu Sustainables following its commercial operations. Note that the construction-related risks are moderated by the lump-sum turnkey contract, the provision of delay liquidated damages and the performance guarantees under the EPCC contract.
That said, according to RAM, TH1 will still potentially breach the distribution covenant to maintain a minimum finance service coverage ratio (FSCR) required by February 2023 even after assuming a more conservative completion date by the end of December 2022. Essentially, the group is expected to maintain a project subordination distribution FSCR of at least 1.45x throughout the Senior Sukuk’s tenure. The ratio considers available cash against principal and profit repayments under the Senior Sukuk and Junior Bonds.
All parties are working towards amicable resolution.
Up to RM40m is required to make up for the absence of cashflow generation from the projects and restore the group’s liquidity position. We understand that currently all parties are working towards amicable resolution. This includes: (i) a settlement agreement with the EPCC contractor, Sinohydro to withhold part of the remaining contractual payments payable given the late delivery of the projects and; (ii) MIDF to extend its bank guarantee (BG) or to provide a new facility to cover the sukuk obligation until end of 2023. Based on the progress of these plans, the Negative Rating Watch is expected to be lifted within the next two to three months. In addition, The Sustainable Energy Development Authority (SEDA) has also extended the Feed-in tariff commencement date to 31 December 2022 (from 31 July 2021).
Maintain Buy. Maintain Buy recommendation on Jentayu Sustainables with a slightly lower TP of RM1.27 (previously RM1.28), based on sum-of-parts valuation. On a separate note, we view the recently announced proposed private placement positively. The exercise which entails the issuance of up to 142.6m new shares (30% of the total number of issued shares) is intended to be placed to a credible strategic partner that will support the group to become a leading player in the renewable energy space and also instill investors’ confidence.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....