Sarawak Petchem issued RM4 billion (US$856.3 million) in Sukuk on the 27th July 2022. The hybrid facility was issued in 13 tranches and will finance the development of the first methanol plant in the state of Sarawak.
The facility is touted as Malaysia’s largest greenfield project financing issuance since Edra Energy’s RM5.09 billion (US$1.09 billion) Sukuk issued in 2018.
The Sukuk facility is guaranteed by the issuer’s joint owners, the Sarawak Economic Development Corporation and Permodalan Satok, which is the investment arm of Yayasan Hartanah Bumiputera Sarawak.
According to RAM Ratings, which assigned the methanol plant project a ‘Silver3p’ sustainability rating, Sarawak Petchem is expected to be a key contributor to the earnings of its Sukuk guarantors upon the completion and commissioning of the plant.
According to the rating agency’s recent ratings affirmation for the Sukuk on the 19th June this year, the methanol plant is expected to commence operations in April 2024.
In a bid to assist in the Sarawak state government’s sustainability efforts in the oil and gas industry, Petroliam Nasional, or PETRONAS, entered into an agreement in August last year to supply natural gas to Sarawak Petchem and Sarawak Energy.
“The cost of Sarawak Petchem’s main input, natural gas, is tied to methanol prices net of freight charges under an agreement with PETRONAS, which offers the company some protection against the volatile prices of methanol, a globally traded commodity,” RAM said in a statement.
The multi-tranched issuance, which carries tenors of three to 15 years, received an orderbook of RM5.27 billion (US$1.13 billion), allowing the issuer to upsize the facility from its initial target of RM2 billion (US$428.15 million).
“Despite challenging and volatile market conditions, investors’ demand across all tranches was healthy with an average book-to-cover [ratio] of 1.3 times,” RHB Investment Bank, which acted as the joint principal advisor for the facility alongside Maybank Investment Bank, noted.
According to Maybank Investment Bank, the final orderbook consisted of a diverse group of investors from over 38 accounts.
Asset management firms represented 50% of the final orderbook while financial institutions and insurance companies accounted for 15% and 33% respectively.
Sarawak Petchem has a remaining RM2 billion available limit to issue further Sukuk under its RM6 billion (US$1.28 billion) Sukuk Wakalah program.
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Sarawak Petchem’s Project Financing Sukuk RM4 billion (US$856.3 million)  27th July 2022 |
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| Summary of terms and conditions | |
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Issuer |
Sarawak Petchem |
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Guarantor |
Permodalan Satok, Sarawak Economic Development Corporation |
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Size of issue |
RM4 billion (US$856.3 million) |
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Mode of issue |
Bookbuilding |
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Purpose |
To part-finance the costs and expenses of the development and operation of the first methanol plant in the state of Sarawak |
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Tenor |
Three to 15 years |
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Profit rate |
4.38–5.5% |
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Payment |
Semi-annually |
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Currency |
Malaysian ringgit |
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Principal advisor(s) |
Maybank Investment Bank, RHB Investment Bank |
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Bookrunner(s) |
Maybank Investment Bank, RHB Investment Bank |
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Governing law |
Malaysian law |
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Legal advisor(s)/council |
Rahmat Lim & Partners |
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Islamic structure |
Wakalah Bi Istithmar |
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Underlying asset |
Shariah compliant securities |
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Rating |
‘AAA’ by RAM Ratings |
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Shariah advisor(s) |
RHB Islamic Bank |
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Investor breakdown |
Asset management firms 50%; insurance companies 33%; financial institutions 15%; others 2% |