Sarawak’s state-owned electric utility company Sarawak Energy issued three Islamic medium-term notes worth a total of RM3.5 billion (US$755.54 million) on the 4th July 2023. The Sukuk facilities were issued under the company’s RM15 billion (US$3.24 billion) Sukuk Musharakah program.
“Proceeds raised from the Sukuk will be used as capital contribution of the Sukukholders in the Musharakah venture,” the program documentation read.
Under the Sukuk structure, a fixed-term Musharakah partnership will be formed for each facility issuance with the same issue and maturity date.
With RHB Investment Bank as the lead arranger, the facilities carry tenors of five, seven and 10 years and fixed coupon rates of 4.05%, 4.19% and 4.27% respectively.
Under the Sukuk program, the largest allocation of the proceeds are earmarked to part-finance Sarawak Energy’s acquisition of Sarawak Hidro, which it completed in 2017.
The remainder of the proceeds from the Sukuk program standing at RM7.92 billion (US$1.71 billion) are allocated toward meeting the group’s capital expenditure requirements and service its existing borrowings.
The acquisition gave the issuer ownership of Malaysia’s largest hydropower plant, the 2,400 megawatt Bakun hydroelectric plant.
“This will allow us to consolidate power production, enabling us to have full ownership and operatorship of all major electricity generation facilities in Sarawak,” Sharbini Suhaili, group CEO of Sarawak Energy, remarked.
While the hydroelectric plant was developed as a means to generate sustainable energy, the project has been under considerable scrutiny for its role in deforestation and displacing nearly 10,000 people.
According to a research paper published by the Malaysia Sustainable Cities Program, the negative social impact of the project includes the contribution to the loss of land, income and employment, social structure, traditional living patterns and culture, as well as a loss of control over natural resources such as forests and rivers.
According to Sarawak Energy, citing third-party consultants, the Bakun dam has helped mitigate the impact of heavy rainfall in upstream catchments, regulating the flow rates in the downstream regions by half.
With RM14.3 billion (US$3.09 billion) outstanding, the issuer has a remaining RM700 million (US$151.11 million) under its Sukuk Musharakah program which is set to expire in 2036.
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Sarawak Energy’s July 2023 Sukuk RM3.5 billion (US$755.54 million)  4th July 2023 |
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| Summary of terms and conditions | |
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Issuer |
Sarawak Energy |
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Size of issue |
RM3.5 billion (US$755.54 million) Tranche 1: RM2 billion (US$431.74 million) Tranche 2: RM1 billion (US$215.87 million) Tranche 3: RM500 million (US$107.93 million) |
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Mode of issue |
Private placement, bought deal, bookbuilding |
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Tenor |
Tranche 1: 10 years Tranche 2: Seven years Tranche 3: Five years |
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Profit rate |
Tranche 1:4.27% Tranche 2:4.19% Tranche 3: 4.05% |
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Payment |
Semi-annual |
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Currency |
Malaysian ringgit |
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Maturity date |
Tranche 1: 4th July 2033 Tranche 2: 4th July 2030 Tranche 3: 4th July 2028 |
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Lead manager(s) |
AmInvestment Bank, RHB Investment Bank |
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Principal advisor(s) |
RHB Investment Bank |
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Bookrunner(s) |
AmInvestment Bank, RHB Investment Bank |
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Governing law |
Malaysian law |
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Legal advisor(s)/council |
Shook Lin & Bok |
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Islamic structure |
Musharakah |
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Rating |
‘AAA/Stable’ by RAM Rating Services |
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Shariah advisor(s) |
Dr Mohd Daud Bakar |