reNIKOLA Solar II, a financing vehicle for Malaysian pure-play renewable energy power producer and developer reNIKOLA, issued the world’s first Climate Bonds Initiative (CBI)-certified Sukuk worth RM390 million (US$83.42 million) on the 29th September this year. ISFI spoke to Khong Ho Ming, the executive director and COO of reNIKOLA, about this landmark issuance.
The proceeds from the one-off issuance, which was based on the Murabahah concept, will be primarily channeled toward refinancing its Kuala Muda and Machang renewable energy plants, Khong shared. The Sukuk will also refinance the parcels of land that the solar plants are situated on.
The energy plants were previously financed through Sukuk issued by BGMC Bras Power and Idiwan Solar, both of which were short-term unrated facilities.
Notably, the two plants were initially slated to be refinanced through Sparks Energy 1’sproposed SRI Sukuk of up to RM220 million (US$47.06 million). MARC Ratings issued an ‘AA-IS’ preliminary rating for the private renewable energy developer–operator’s proposed Sukuk in October 2020 but withdrew the rating in July 2022, citing concerns over legal disputes between project sponsors over the sponsorship structure of the solar power project companies.
According to Khong, the refinancing Sukuk allowed reNIKOLA to amalgamate the financing under the two project companies into a larger issuance size, which appeals to more investors in Malaysia, offering better liquidity.
The Sukuk facility also allows the company to access long-term fixed-rate financing, with the longest-termed tranche in the multi-tranched issuance holding a tenor of 18 years. Khong shared that a bank project financing, in contrast, will typically not accommodate such a long tenor.
“For our two solar plants, they have a power purchase agreement with the national energy utility company for 21 years…
“When we decided to do our second Sukuk to refinance the earlier financing, we had to match the duration of the Sukuk to the cash flow that will be generated from these two solar plants,” Khong explained.
According to the COO, the decision to refinance the projects under a labeled issuance was not driven by a pricing consideration, although he believes that the CBI certification contributed to the facility securing preferential profit rates.
“It is important for issuers like us to set an example in the market,” Khong shared, explaining why reNIKOLA opted for CBI-certification above and beyond issuing standard sustainable Sukuk, which it has done once in 2021.
According to Khong, reNIKOLA will continue to seek Islamic sustainable financing to fund its future projects as project development is a capital-intensive business. The format of bank versus capital market financing will be determined largely by the markets that the projects are situated in.
“There’s a saying that goes ‘if you cannot finance it, you cannot build it’. For us, it is important to tap the capital market for us to have projects going forward.”
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reNIKOLASolar II’s Climate Bonds Initiative-certified Sukuk RM390 million (US$83.42 million)  29th September 2023 |
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| Summary of terms and conditions | |
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Issuer |
reNIKOLA Solar II |
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Size of issue |
RM390 million (US$83.42 million) |
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Mode of issue |
Bookbuilding, bought deal
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Purpose |
Refinancing |
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Tenor |
One year to 18 years
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Issuance price |
100% |
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Profit rate |
3.98-5.25% |
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Payment |
Semi-annual |
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Currency |
Malaysian ringgit |
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Maturity date |
27th September 2041 |
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Lead arranger(s) |
Hong Leong Investment Bank, MIDF Amanah Investment Bank |
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Principal advisor(s) |
Hong Leong Investment Bank, MIDF Amanah Investment Bank |
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Governing law |
Malaysian law |
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Legal advisor(s)/council |
Adnan Sundra & Low |
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Islamic structure |
Murabahah via Tawarruq arrangement |
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Listing |
No |
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Underlying asset |
Shariah compliant assets |
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Rating |
‘AA2/Stable’ by RAM Ratings |
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Shariah advisor(s) |
MIDF Amanah Investment Bank |
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Tradability |
Yes |