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Monday, June 17, 2024

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Case study: TNB Power Generation’s RM2 billion (US$453.98 million) hydroelectric power Sukuk

TNB Power Generation (TNBPG), Tenaga Nasional’s sustainable energy arm, issued a RM2 billion (US$453.98 million) four-tranched sustainability Sukuk facility on the 29th March 2023 to finance its 300 megawatt Nenggiri hydroelectric power plant project in Kelantan, Malaysia. The facility is the second issuance under the issuer’s RM10 billion (US$2.27 billion) sustainability Sukuk Wakalah program.

“The orderbook was oversubscribed by 2.02 times representing an orderbook size of RM4.04 billion (US$917.35 million) against the issuance size of RM2 billion … This deal achieved a stronger orderbook from a broad range of investors of over 44 accounts, allowing the initial issue size of RM1.5 billion (US$340.48 million) to be upsized to RM2 billion,” a spokesperson from Tenaga Nasional commented.

Notably, its inaugural issuance on the 2nd June last year was oversubscribed by a larger margin with a bid-to-cover ratio of 3.4 times.

Based on TNBPG’s Sustainability Sukuk Framework, the entirety of the Sukuk program will be channeled toward the Nenggiri project which will have three dams and generate 599.5 gigawatt hours of power per year. The expected commercial operation date of the project is the 1st June 2027.

“The project will help reduce the carbon intensity of energy supplied by the national grid as well as the economy, in addition to allowing the state of Kelantan to better cope with climate change impacts including floods,” MARC Ratings said in its sustainability assessment of the Sukuk program.

According to the issuer, the project will contribute to flood mitigation by lowering the water level in its main reservoir to provide rainwater space during the monsoon season. This will reduce downstream flooding as the dams will control the flow of water from upstream.

While the rating agency affirmed the contribution of the project to flood mitigation in assigning the framework a ‘Gold’ sustainability Sukuk assessment, the potential positive outcomes of the project have been contested by several parties.

ISFI previously reported that iJaringan Kampung Orang Asli Kelantan (JKOAK), an indigenous persons organization from the state of Kelantan, held a protest last year in front of the Prime Minister’s Office a week before the project broke ground, calling for Tenaga Nasional to cancel the project. JKOAK argued that the project will flood 5,384 hectares of their ancestral land. Their concerns challenged the Sukuk framework’s assertion that the project will contribute to flood mitigation as well as the socioeconomic improvement of the indigenous community.

Waytha Moorthy Ponnusamy, the former minister in the Prime Minister’s Department responsible for national unity and social wellbeing, also urged the government to cancel the project, arguing that the project site is of historical significance to the indigenous community.

TNB Power Generation’s RM2 billion (US$453.98 million) Sustainability Sukuk

29th March 2023
Summary of terms and conditions
TNB Power Generation (TNBPG)
Size of issue
RM2 billion (US$453.98 million)
Tranche 1: RM200 million (US$45.4 million)
Tranche 2: RM600 million (US$136.19 million)
Tranche 3: RM300 million (US$68.1 million)
Tranche 4: RM900 million (US$204.29 million)
To finance and/or refinance loans obtained to finance the development costs of the Nenggiri hydroelectric power plant project.
Tranche 1: Seven years
Tranche 2: 10 years
Tranche 3: 15 years
Tranche 4: 20 years
Profit rate
Tranche 1: 4.3%
Tranche 2: 4.58%
Tranche 3: 4.67%
Tranche 4: 4.84%
Semi-annual basis
Malaysian ringgit
Maturity date
Tranche 1: 29th March 2030
Tranche 2: 29th March 2033
Tranche 3: 29th March 2038
Tranche 4: 29th March 2043
Lead manager(s)
CIMB Investment Bank, Maybank Investment Bank
Principal advisor(s)
CIMB Investment Bank, Maybank Investment Bank
Governing law
Malaysian Law
Legal advisor(s)/council
Solicitors to joint principal advisors/joint lead arrangers/joint lead managers: Adnan Sundra & Low
Solicitors to the issuer: Zaid Ibrahim & Co
Islamic structure
Wakalah Bi Istithmar
Underlying asset
An investment portfolio consisting of a portion of TNBPG’s Shariah compliant general business (at least 33%) and commodities purchased and sold to TNBPG as the purchaser under the Shariah principle of Murabahah (via Tawarruq arrangement).
‘AAAIS’ by MARC Ratings
Shariah advisor(s)
CIMB Islamic Bank, Maybank Islamic Bank
Face value/minimum investment
RM1,000 (US$226.99)

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