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Thursday, July 18, 2024

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Case study: Air Selangor’s fifth SRI Sukuk

Pengurusan Air Selangor (Air Selangor) has on the 19th April 2023 issued the fifth tranche of its SRI Sukuk worth RM700 million (US$157.45 million). The four-series facility was issued under its RM10 billion (US$2.25 billion) Murabahah Islamic medium term note program established in 2020.

Arranged by Bank Islam, the facility, although still considerably smaller than the issuer’s largest tranche worth RM900 million (US$202.41 million), represents a RM300 million (US$67.47 million) upsize from its fourth tranche issued in September last year worth RM400 million (US$89.96 million).

The tranche consists of four issuances worth RM250 million (US$56.22 million), RM250 million, RM100 million (US$22.49 million) and RM100 million carrying tenors of 10, 15, 20 and 25 years with semi-annual coupons of 4.66%, 4.89%, 5.03% and 5.14% respectively.

The sustainable Sukuk under the RM10 billion program, dubbed ‘Sukuk Kelestarian’, will be channeled toward sustainable water supply, sustainable water management, renewable energy and green building projects evaluated and selected by its internal Sukuk Kelestarian working group.

Ultimately owned by Menteri Besar Selangor Inc, Air Selangor is the sole licensee for water treatment and distribution in the state of Selangor, Kuala Lumpur and Putrajaya. As such, RAM Ratings, which affirmed Air Selangor’s ‘AAA’ rating on the 27th September last year following the issuance of its fourth Sukuk tranche, considers it a dependent entity of the Selangor state government.

According to the rating agency, the water distributor is expected to depend on funding from its Sukuk program in the near term. The existing tarif adjustments, coming after 16 years of no tariff changes, have resulted in the company having to rely on both the Sukuk program and the financial stability from the state government.

“Continual capital expenditure investment will be required for the construction of new infrastructure to meet increasing water demand as well as the replacement and refurbishment of ageing infrastructure. This will be funded by drawdowns from the Sukuk as well as via Pengurusan Aset Air,” the rating agency noted.

Pengurusan Air Selangor SRI Sukuk T5

RM700 million (US$157.45 million)


19th April 2023
Summary of terms and conditions
Issuer
Pengurusan Air Selangor
Size of issue
RM700 million (US$157.45 million)
Purpose
To finance eligible sustainable projects
Tenor
Series 1: 10 years
Series 2: 15 years
Series 3: 20 years
Series 4: 25 years
Profit rate
Series 1: 4.66%
Series 2: 4.89%
Series 3: 5.03%
Series 4: 5.14%
Payment
Semi-annual
Currency
Malaysian ringgit
Maturity date
Series 1: 19th July 2033
Series 2: 19th July 2038
Series 3: 17th July 2043
Series 4: 17th July 2048
Lead arranger(s)
Bank Islam
Principal advisor(s)
Bank Islam
Lead manager(s)
Affin Hwang Investment Bank, Bank Islam, CIMB Investment Bank, Maybank Investment Bank, OCBC Al-Amin Bank
Governing law
Malaysian law
Legal advisor(s)/council
Shook Lin & Bok
Islamic structure
Murabahah (via Tawarruq arrangement)
Underlying asset
Shariah compliant commodities
Shariah advisor(s)
Bank Islam
Rating
AAA (RAM Ratings)

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