Launch Partners

Wednesday, February 21, 2024

Launch Partners

Malakoff Corporation enters into agreement to develop hydropower plants to be funded by SRI Sukuk

Malakoff Corporation has entered into an agreement with Rising Promenade, RP Hydro (Kelantan) (RPHK) and Rising O&M Engineering to develop three small hydropower plants with a combined installed capacity of 84 megawatts on the 21st March 2023. The projects will be funded largely through the issuance of an ASEAN Green SRI Sukuk Wakalah facility.

“Approximately 80% of the estimated total project cost shall be funded from the proceeds of the issuance of the ASEAN Green SRI Sukuk Wakalah and the balance of at least 20% thereof shall be funded by the shareholder’s funds partly via Tuah Utama’s subscription of preference shares in RPHK,” a statement from Malakoff read.

On the 7th February 2023, RPHK lodged an ASEAN Green SRI Sukuk Wakalah program of up to RM975 million (US$220.34 million) with Securities Commission Malaysia (SC). CIMB Investment Bank is the principal advisor for the yet-to-be issued Sukuk program.

The plants are all located in Kuala Krai, Kelantan and are scheduled to be completed on the 15th December 2025, with an estimated construction period of 36 months.

On the 21st February, RAM Ratings assigned a preliminary rating of ‘AA3’ to the proposed Sukuk, notably considering an issuance size of RM960 million (US$216.95 million), RM15 million (US3.39 million) shy of the proposed program’s size.

Back in June 2021, RPHK entered into three separate renewable energy power purchase agreements with Tenaga Nasional, Malaysia’s largest electricity utility, corresponding to the three plants for the sale and purchase of renewable energy for a period of 21 years, commencing from the feed-in-tariff commencement date.

“The plants enjoy priority of dispatch from Tenaga Nasional, which counterbalances the absence of fixed availability-based revenue,” the rating agency noted.

The equity portion of the financing will see Malakoff purchase 70% of ordinary shares in RPHK through its wholly-owned subsidiary, Tuah Utama. It will also subscribe up to 250 million preference shares in RPHK through Tuah Utama as well as purchase 70% of the ordinary shares in Rising O&M Engineering Services from Rising Promenade through its other wholly-owned subsidiary, Malakoff Technical Solutions.

Notably, the SC lodgment is set to expire on the 20th June this year, suggesting that the Sukuk would have to be issued prior to that.

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