RAM Ratings has assigned a final AA3/Stable rating to Telekosang Hydro One Sdn Bhd’s (TH1) RM470 mil ASEAN Green SRI Sukuk under the Shariah principle of Wakalah Bi Al-Istithmar (2019/2037) (Senior Sukuk). Concurrently, we have also assigned a final A2/Stable rating to TH1’s RM120 mil ASEAN Green Junior Bonds (2019/2039) (Junior Bonds).
The Senior Sukuk represents the world’s first rated mini-hydro project sukuk that is aligned with the requirements of Securities Commission Malaysia’s Sustainable and Responsible Investment Sukuk Framework, the ASEAN Green Bond Standards, and the globally recognised Green Bond Principles. TH1’s Green Sukuk Framework has been reviewed by RAM Consultancy Services Sdn Bhd.
The Project Companies (comprising TH1 and Telekosang Hydro Two Sdn Bhd (TH2)) have each signed 21-year Renewable Energy Power Purchase Agreements (REPPAs) with Sabah Electricity Sdn Bhd (SESB), in relation to two small hydropower plants with a combined installed capacity of 40 MW in Tenom, Sabah (the Projects). The Scheduled Feed-in Tariff Commencement Date (FiT CD) for the Projects is 31 July 2021, with an expected 24-month construction period.
While TH1 is the issuer of both the Senior Sukuk and the Junior Bonds, the Project Companies will be joint signatories for the relevant financing agreements, thereby ensuring their due performance in supporting TH1’s financing obligations. The total estimated project cost of RM577.85 mil will be funded via the issuance proceeds from the Senior Sukuk (80%), the Junior Bonds (3%) and redeemable preference shares (17%).
In assigning the final ratings, RAM has reviewed all the relevant transaction documents and assumptions applied. We find them to be in line with our expectations when the preliminary ratings had been assigned (published on 31 May 2019). Please refer to our final rating rationale on TH1 for further details on the assigned ratings.