OCBC Al-Amin Bank Berhad (OCBC Al-Amin), acting as Edra Solar Sdn Bhd's (Edra Solar) Sukuk Sustainability Framework Adviser and Lead Arranger, created new benchmarks in the Sukuk market by successfully pricing Malaysia's First ASEAN Sustainability Sustainable and Responsible ("SRI") Sukuk of RM245 million on 30 September 2019.

Solar Kuala Ketil.

OCBC Group recognizes the important role a financial institution plays in taking action on climate change and to promote sustainable development. Fundamental to this agenda is a responsible approach towards financing by supporting solutions that contribute to the sustainable development of society.

With this agenda in mind, OCBC Al-Amin partnered with Edra Solar as the Sukuk Sustainability Framework Adviser to deliver for investors a longterm sustainable and viable investment opportunity with Malaysia’s first Solar Socio-Agricultural Sukuk.

Edra Solar, the owner and operator of a 50MWac solar power plant in Kedah, is a subsidiary of China General Nuclear Power Corporation (CGN). CGN as a group boasts a sizeable portfolio of renewable energy projects encompassing wind, solar and biomass power in China, Singapore, France, Australia, South Korea, the US, the UK and Namibia.

As part of Edra Group’s CSR commitment towards the social and economic development of the communities where the Group operates, Edra Solar allocated to the local community 40 acres (more than 15% of the Plant) of the buffer zone surrounding the Plant for farming of pineapple and other crops.

The agriculture project will be managed by Pertubuhan Peladang Kuala Ketil together with local farmers in terms of capital, risks and rewards. Edra Solar will not be deriving any economic benefit from this agriculture project.

Combining the Plant’s design to conform to Malaysia’s renewable energy commitments and the social benefits of the agriculture project, the Project is anticipated to create both positive environmental and social effects that are also consistent with the United Nations Sustainable Development Goals.

OCBC Al-Amin, as the lead arranger and joint bookrunners of the Sukuk, joined by Standard Chartered Saadiq Berhad as lead manager/joint bookrunners, announced the launch of the Sukuk on 10 September, following which a series of meetings was arranged with Sukuk investors. Investors’ feedback was positive and they were very keen from the outset to invest in the first project financing Sukuk for a completed solar plant and in an AA2 rated solar power plant Sukuk, the first in the category.

With the successful roadshow, the book building for all 8 tranches of the Sukuk with tenors ranging between 1-18 years commenced on 30 September 2019. At the inception of the book opening on the morning of 30 September, demand from high quality investors ranging from insurance companies, asset management companies and high net worth investors (representing their maiden investment into the sector) was overwhelming with a bid to cover ratio of more than 11 times. Interest from investors never wavered throughout the day, which allowed the Sukuk to tighten overall yields and yet maintain a final bid to cover ratio of more than 11 times at the close of business day.

OCBC Bank (Malaysia) Berhad Managing Director/Senior Banker, Client Coverage & Head of Investment Banking, Ms Tan Ai Chin said:

“OCBC’s pioneering role in sustainable and responsible financing has allowed us to work with clients to bring high quality and socially responsible Sukuk to investors. It is a testament of our pledge to drive towards a low carbon and self-reliant society.

“The success of Edra Solar’s Sustainability SRI Sukuk is a good example of how focusing on the sustainability agenda, which combines the social and environment factors as pillars to a project, allows project sponsors to derive the most optimal financing for their projects.

“It is also worth highlighting that this is the first Solar Sukuk to undertake a transparent price discovery process via a book building mode of issuance which ultimately allows the Project to achieve an optimal cost of funding and efficient distribution to a wide range of investor base.”