Solar energy firm Tadau raises RM250m via Malaysia’s first green sukuk

This article first appeared in The Edge Financial Daily, on July 28, 2017.
Solar energy firm Tadau raises RM250m via Malaysia’s first green sukuk
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KUALA LUMPUR: Solar energy firm Tadau Energy Sdn Bhd said it successfully issued RM250 million worth of sustainable responsible investment (SRI) sukuk yesterday, making it the first green sukuk issued in Malaysia.

In a joint press statement, Tadau and Affin Hwang Investment Bank Bhd said the proceeds raised will be used to finance a 50MWac solar project in Kudat, Sabah, which was secured under two 21-year power purchase agreements (PPAs) entered into with Sabah Electricity Sdn Bhd (SESB) last December.

Affin Hwang Investment is the principal adviser, lead arranger, lead manager and facility agent for Tadau’s SRI sukuk issuance. It said Tadau’s green sukuk framework has been certified by the Center for International Climate and Environmental Research in Oslo, Norway.

The SRI sukuk framework was first launched by the Securities Commission Malaysia (SC) in 2014.

In a joint media statement, the SC, World Bank Group and Malaysia’s Islamic Finance Marketplace said issuers using the SRI sukuk framework for green projects must ensure that proceeds raised are used to fund eligible SRI projects in natural resources, renewable energy and/or energy efficiency sectors in order to be eligible for tax deductions under SRI sukuk incentives.

They said the framework underlying the first green sukuk is the result of a collaboration among the three organisations to develop an ecosystem to facilitate the growth of green sukuk and green financing.

“The launch of Malaysia’s first green sukuk marks another significant milestone in product innovation that strengthens Malaysia’s position as a leading Islamic financial marketplace as well as its value proposition as a centre for sustainable finance,” said SC chairman Tan Sri Ranjit Ajit Singh.

Meanwhile, RAM Rating Services Bhd — which assigned a rating of AA3/Stable on the green SRI sukuk with a tenure of two to 16 years — said the scheduled commercial operations dates (CODs) of the two photovoltaic plants under the project are June 30, 2017 and March 31, 2018.

Construction works for Unit 1, a 2MW plant under the first PPA, has been completed and the unit is currently undergoing the requisite tests prior to COD pursuant to the first PPA, it said.

The rating agency also added that Tadau’s AA3/Stable rating reflects its sturdy project fundamentals, underscored by its long-term PPAs, which require SESB to accept and buy energy generated by the plants, up to a specified limit.

Meanwhile, Tadau’s debt-servicing ability remains strong, it said, based on its sensitised cash flow analysis. Tadau has also engaged reputable manufacturers to supply key plant components, it said, such as JA Solar Holdings Co Ltd for monocrystalline silicon PV modules and Huawei Technologies Co Ltd for string inverters.