Edra Solar’s sustainable and responsible investment (SRI) Sukuk issuance broke new ground as the first in Malaysia to receive three different types of ratings. NESSREEN TAMANO reports on the details.
Touted as a benchmark in Malaysia’s Sukuk market for being its first solar socio-agricultural Sukuk, the RM245 million (US$58.44 million) Edra SRI Sukuk also met the ASEAN Green Bond Standards, the ASEAN Social Bond Standards, as well as the globally recognized Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines.
Proceeds from the Sukuk will be used to finance Edra Solar’s 260-acre 50MWac solar power plant in Kedah, of which 40 acres — or 15% of the plant’s total area — the company has allocated for the local community to farm fruit and other crops, opening up income and employment opportunities. A study on the soil’s condition was conducted by the Kuala Ketil Area Farmers Organisation and the land was found fit for agriculture activities and has been earmarked for pineapple cultivation.
OCBC Al-Amin Bank, the Islamic banking subsidiary of OCBC Bank, was the lead arranger and Sukuk sustainability framework advisor for the issuance, while Standard Chartered Saadiq was the lead manager and joint bookrunner. OCBC Al-Amin said that investors were keen at the prospect of investing in the first project financing Sukuk for a completed solar plant.
“This is the first solar Sukuk to undertake a transparent price discovery process via a bookbuilding mode of issuance, which ultimately allowed the project to achieve an optimal cost of funding and efficient distribution to a wide range of investor base,” noted OCBC Al-Amin. Issued through eight tranches, bookbuilding for all eight tranches of the Sukuk commenced on the 30th September.
“Demand from high-quality investors ranging from insurance companies, asset management companies, and high net worth individuals representing their maiden investment in the sector was overwhelming. Interest from investors never wavered, which allowed the Sukuk to tighten overall yields and yet maintain a final bid to cover ratio of more than 11 times,” OCBC Al-Amin added.
The Sukuk is rated ‘AA2’ by RAM Ratings, while RAM Consultancy Services — a provider of sustainability services and environmental, social and governance analytics — assigned Tier-1 Environmental Benefit (‘Tier-1 EB’) and Tier-3 Social Benefit (‘Tier-3 SB’) ratings when the issuance was first proposed. It therefore has the distinction of carrying a combination of three different types of ratings from RAM — a credit rating, an environmental benefit rating and a social benefit rating — another market first.
Edra Solar is a subsidiary of Edra Group Holdings, itself a subsidiary of China General Nuclear Power Corporation, which has a portfolio of renewable energy projects on wind, solar and biomass power in China, Singapore, France, Australia, South Korea, the US, the UK and Namibia.
“The success of Edra Solar’s Sustainability SRI Sukuk is a good example of how focusing on the sustainable agenda, which combines the social and environment factors as pillars of a project, allows sponsors to derive the most optimal financing for their projects,” OCBC Al-Amin said.
|Edra Solar’s Sustainability SRI Sukuk|
30th September 2019
|Obligor||Edra Group Holdings|
|Size of issue||RM245 million (US$58.44 million)via eight tranches|
|Mode of issue||Bookbuilding|
|Purpose||To finance activities of Edra Solar’s 260-acre 50MWac solar power plant in Kedah|
|Tenor range||One to 18 years|
|Lead arranger||OCBC Al-Amin Bank|
|Lead manager & joint bookrunner||Standard Chartered Saadiq|
|Rating||‘AA2’ by RAM Ratings‘Tier-1 EB’ and ‘Tier-3 SB’ by RAM Consultancy Services|
|Sukuk sustainability framework advisor||OCBC Al-Amin Bank|