Launch Partners

Tuesday, June 18, 2024

Launch Partners

Case study: ER2E’s waste management facility SRI Sukuk

Econas Resource to Energy (ER2E) has on the 7th March 2023 issued two SRI Sukuk Murabahah facilities, one government guaranteed and the other a non-guaranteed facility, worth RM96 million (US$21.38 million) combined to finance a waste management facility in Pengerang, Johor, Malaysia.

Issued under its RM500 million (US$111.37 million) SRI sukuk program lodged with the Securities Commission Malaysia (SC) on the 10th November 2022, the Sukuk papers are the inaugural issuances under the program. The papers, which are arranged by AmInvestment Bank, are set to mature on the 7th March 2035.

ER2E is an SPV jointly established and owned by Perisind Samudra and Econas, with the former holding the majority share at 90%. The first issuance under the SRI Sukuk program will finance the mobilization of the Pengerang resource recovery and disposal complex.

Located near the Pengerang Integrated Petroleum Complex which houses Malaysian national oil company Petroliam Nasional’s Refinery and Petrochemical Integrated Development project and the Pengerang Deepwater Terminal, a petroleum terminal jointly developed by Dialog Group, Royal Vopak NV and Johor State Secretary Incorporated, the facility will primarily provide hazardous waste management solutions.

The issuer is currently developing its inaugural integrated scheduled waste management facility in Pengerang and targets its 3 MW waste-to-energy plant to be operational in Q1 2026.

The inaugural issuance consists of a Kafalah guaranteed tranche by Danajamin Nasional (Danajamin), which is wholly owned by government-owned Bank Pembangunan Malaysia,a development financial institution, worth RM76.8 million (US$17.11 million) and a non Danajamin-guaranteed tranche worth RM19.2 million (US$4.28 million).

The RM19.2 million tranche is guaranteed by Kafalah guarantees from Perisind Samudra, the majority owner of ER2E, and irrevocable guarantees by three individuals, two of whom are on Perisind Samudra’s board of directors with the remaining individual being from ERSE’s board of directors.

“We believe ER2E’s ASEAN Sustainability SRI Sukuk Murabahah innovatively brings together sustainable scheduled waste management and elements of social benefit, another Malaysian bond market first,” said Gladys Chua, the head of sustainability services at RAM Sustainability.

RAM Sustainability’s external review of ER2E’s ASEAN Sustainability SRI Sukuk Murabahah Framework concluded that it meets sustainability guidelines including the SC’s SRI Sukuk framework, and green, social and sustainability bond guidelines by the ASEAN Capital Market Forum and the International Capital Market Association.

ER2E’s inaugural SRI Sukuk

RM96 million (US$21.38 million)


7th March 2023
Summary of terms and conditions
Issuer
Econas Resource to Energy
Obligor
PIJ Holdings
Size of issue
RM96 million (US$21.38 million)
Purpose
To finance the Pengerang waste management facility
Tenor
12 years
Mode of issue
Private placement, bought deal
Profit rate
0% floating rate
Payment
Quarterly
Currency
Malaysian ringgit
Maturity date
7th March 2035
Lead Manager(s)
AmInvestment Bank
Principal advisor(s)
AmInvestment Bank
Guarantor(s)
Perisind Samudra
Governing law
Malaysian law
Legal advisor(s)/council
– Rahmat Lim & Partners (acting for AmInvestment Bank)
– Abdul Raman Saad & Associates (acting for the issuer and Perisind Samudra)
Islamic structure
Murabahah via Tawarruq arrangement
Sukuk Trustee
AmanahRaya Trustees
Underlying asset
Shariah compliant commodities provided through Bursa Suq al-Sila’
Shariah advisor(s)
AmBank Islamic
Tradability
Yes

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