Edra Power's Tadau Energy issues Malaysia's first 'green' sukuk

PETALING JAYA: China-owned Edra Power Holdings Sdn Bhd’s unit Tadau Energy Sdn Bhd, which counts prolific investor Tan Sri Chua Ma Yu as its chairman, has successfully issued Malaysia’s first “green” sukuk.

The sukuk, which is believed to be a world’s first, is a RM250 million sustainable responsible investment (SRI) sukuk named Green SRI Sukuk Tadau.

In a joint statement issued by Tadau Energy and Affin Hwang Investment Bank Bhd (Affin Hwang IB) yesterday, the company said its Green Sukuk Framework has been certified by the Center for International Climate and Environmental Research – Oslo, Norway (Cicero).

The Green SRI Sukuk Tadau has a tenure of two to 16 years and has been assigned a long-term rating of ‘AA3’ by RAM Rating Services Bhd.

Tadau Energy is undertaking a large-scale solar project of 50MW in Kudat, Sabah, under two 21-year power purchase agreements entered into with Sabah Electricity Sdn Bhd in December last year.

Proceeds from the Green SRI Sukuk Tadau will be used to finance the project. Tadau Energy’s goal is to conserve the environment by providing an environmentally friendly, clean and sustainable power supply.

Affin Hwang IB is the principal adviser, lead arranger, lead manager and facility agent for the Green SRI Sukuk Tadau issuance.

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

“We believe that there is a significant opportunity arising from strong global interest in green financing where innovative fundraising instruments like green and SRI sukuk is a viable solution to address global needs for green and other forms of sustainable and responsible financing,” he added.

To be eligible for tax deductions under SRI sukuk incentives, issuers utilising the SRI sukuk framework towards green projects must ensure that proceeds raised are used to fund eligible SRI projects in the natural resources, renewable energy and/or energy efficiency sectors. In accordance with international practices, issuers are also encouraged to appoint independent experts to undertake an assessment on the eligibility of the project prior to issuance of the green sukuk.

The framework underlying this first green sukuk is the result of collaboration among the SC, Bank Negara Malaysia and World Bank Group, in an effort to develop an ecosystem to facilitate the growth of green sukuk and to introduce innovative financial instruments to tackle global infrastructure needs and green financing.

“With the successful development of the framework for the first green sukuk, Malaysia is playing a pioneering role in harnessing capital markets, and in particular Islamic finance, for climate friendly investments,” said World Bank Representative to Malaysia Faris Hadad-Zervos.

The landmark issuance is also in line with the rising trend of bonds introduced globally to facilitate and promote responsible investing, reinforcing Malaysia’s position as the marketplace of innovation, expertise and deal flow.

According to Moody’s Investors Service, global green bond issuance remained strong in the second quarter of 2017 with US$32.2 billion (RM137 billion) of total issuance, a new quarterly record. Total green bond volumes of US$61.7 billion for the first six months of the year represent a 66% increase over the first half of 2016, positioning the market to achieve US$120 billion in issuance for the full year.