Launch Partners

Monday, April 15, 2024

Launch Partners

Case study: Idiwan Solar’s solar power Sukuk

Malaysian energy infrastructure project company Idiwan Solar issued a one-year RM50 million (US$11.76 million) Sukuk on the 19th January 2023. The fixed rate Murabahah facility carries a 7% coupon rate with a quarterly payment schedule.

Idiwan is an SPV established by Idiqa Holding and Hasilwan in 2018, with Idiqa Holding owning 95% of the shares of the SPV at the time of the lodging of its RM115 million (US$27.05 million) Sukuk Murabahah program in 2019. Idiqa Holding is a civil engineering and electrical works company while Hasilwan is an engineering firm specializing in renewable energy.

The recent issuance follows three Sukuk papers issued under the program in 2021 worth RM12 million (US$2.82 million) combined, all of which are set to mature in the first quarter of this year.

The infrastructure company is one of the developers for solar power plants in the state of Kelantan under a 21-year solar power purchase agreement with Malaysia’s largest electricity utility provider Tenaga Nasional. The other developer is BGMC Bras Power.

The solar power plants were initially planned to be funded by Sparks Energy 1’s proposed RM220 million (US$51.75 million) SRI Sukuk program. Sparks Energy 1 is an SPV established by Sparks Energy Group to raise funding to develop the 30 MW solar power plant.

The construction of the solar power plants is currently underway while the proposed Sparks Energy 1 SRI Sukuk has yet to be issued. Additionally, MARC withdrew its preliminary rating of ‘AA-IS’ for the proposed Sukuk on the 8th July 2022 citing concerns over the delayed commercial operating date.

Based on Sparks Energy 1’s initial plan, proceeds from the proposed Sukuk would be utilized to subscribe to Sukuk to be issued by Idiwan and BGMC BRAS Power. BGMC BRAS Power also issued a RM50 million Sukuk Murabahah facility on the 19th January 2023.

Sparks Energy 1’s plan however changed. The proposed issuance will instead be used to repay a RM220 million bridging loan from OCBC Bank Malaysia, which was used to subscribe to the unrated Sukuk issued by BGMC BRAS Power and Idiwan, according to a 2021 note by MARC Ratings.

According to the lodgment data for Idiwan’s Sukuk Murabahah program, the repayment of the Sukuk will primarily be from the cash flow of the power purchase agreement received by the issuer from Tenaga Nasional.

Idiwan Solar’s Energy Sukuk 2023

RM50 million (US$11.76 million)


19th January 2023
Summary of terms and conditions
Issuer
Idiwan Solar
Size of issue
RM50 million (US$11.76 million)
Tenor
One year
Profit rate
7%
Purpose
To fund the construction of solar power projects
Payment
Quarterly
Currency
Malaysian ringgit
Maturity date
19th January 2024
Principal advisor, lead manager and lead arranger
OCBC Al-Amin Bank
Financial advisor
CIMB Investment Bank
Legal counsel(s)
– Adnan Sundra & Low (acting for the principal advisor/lead arranger/lead manager).
– Zaid Ibrahim & Co (acting for the issuer).
Independent Takaful advisor
Jardine Lloyd Thompson
Governing law
Malaysian law
Islamic structure
Murabahah via Tawarruq arrangement
Listing
Malaysian Bond and Sukuk Information Exchange
Underlying asset
Shariah compliant commodities
Rating
Not rated
Shariah advisor
Shariah advisory board of OCBC Al-Amin Bank
Tradability
Yes

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here