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Sunday, February 25, 2024

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Case study: JAKS Solar Nibong Tebal’s multilateral financing facility

JAKS Solar Nibong Tebal (JAKS Solar), a wholly-owned subsidiary of JAKS Resources, obtained a RM112.5 million (US$26.5 million) financing facility from AmBank Islamic in March 2022 as part of a multilateral financing facility worth RM220 million (US$51.82 million).

AmBank Islamic provided the Islamic portion of the facilities while United Overseas Bank (UOB) provided conventional facilities worth RM125 million (US$29.44 million).

The facilities will fund the development of a 50 MW fourth large-scale solar (LSS4) photovoltaic plant in Seberang Perai Selatan, in the state of Penang in Malaysia in addition to financing working capital requirements.

While JAKS Resources’s principal activity is the construction of power plants, JAKS Solar was incorporated specifically to undertake the development of the LSS4 photovoltaic plant in Penang.

The underlying asset for the multilateral facility is the solar plant which is inherently a sustainable power generation facility.

The Islamic facilities in the multilateral financing comprise a Murabahah Tawaruq term financing facility worth RM80 million (US$18.84 million), two bank guarantees worth RM27.5 million (US$6.48 million) combined and a Murabahah Tawaruq cash line facility worth RM5 million (US$1.18 million).

The bank guarantees consist of a RM10 million (US$2.35 million) facility with a complementary term financing facility with a limit of up to RM10 million and a second bank guarantee of RM17.5 million (US$4.12 million) with a Murabahah Tawarruq complementary term financing facility with a limit of up to RM17.5 million.

According to Ng Kit Ho, the senior vice-president of loan markets and debt markets 1 at AmInvestment Bank, the primary challenge faced by the bank in executing the financing facility was the time constraint.

“The time between execution of the power purchase agreement and financials was extremely tight (four months) and was over the festive period,” Ng told ISFI.

According to Albar & Partners, which acted as the legal counsel on behalf of the financiers in this multilateral financing facility, the guarantees required in the facility also posed a challenge.

“Tenaga Nasional, as the off-taker of the power project, would only accept one single performance guarantee for the performance of the borrower under this power project, therefore AmBank Islamic and UOB were required to enter into a fronting arrangement for AmBank Islamic to issue a bank guarantee to UOB as a fronting guarantor, who shall then issue its own conventional bank guarantee to TNB as the performance bond of the power project on behalf of the borrower,” the law firm shared.

While sustainability-linked financing is steadily increasing in popularity as a financing cost-saving mechanism, Ng shared that JAKS Solar had considered sustainability-linked financing but ultimately decided against it.

Listed on Bursa Malaysia’s Main Market, JAKS Resources’s activities also include construction, power, energy and property investment and it is involved in the development of residential and commercial properties. Its principal geographical areas for its operations are located in Malaysia and Vietnam.

JAKS Solar Nibong Tebal: multilateral financing facility

RM112.5 million (US$26.5 million)


March 2022
Summary of terms and conditions
Islamic facilities amount
RM112.5 million (US$26.5 million)
– Term financing facility RM80 million (US$18.84 million)
– Bank guarantees RM27.5 million (US$6.48 million)
– Cash line facility worth RM5 million (US$1.18 million)
Type of facility
Mixture of project finance and working capital facilities.
Use of proceeds
1. Working capital requirements
2. Project costs including engineering, procurement, construction and commissioning works, professional fees, land leases and related expenses
3. Prefunding debt service reserve account
4. Financing cost of the facilities during construction
5. Fees and expenses in relation to the facilities
Tenor
Term financing facility: Up to 16.5 years (inclusive of an 18-month grace period)
Cash line facility: On demand
Bank guarantees: Up to two years (inclusive of claim period)
Profit rate/yield
Undisclosed
Payment frequency
Term financing facility: Monthly
Cash line facility: Quarterly/on demand
Bank guarantees: Not applicable
Legal advisor
Albar & Partners
Governing law
Malaysian law

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