RE segment driving domestic SRI sukuk market

PETALING JAYA: The power industry is among the most active sectors tapping the domestic bond market, with a five-year average annual issuance of about RM8.4bil between 2015 and 2019.

RAM Ratings said outstanding power bonds and sukuk amounted to some RM65bil as at end-January 2020, which is equivalent to about 9% of Malaysia’s total outstanding corporate bonds.

“Mirroring the government’s agenda, the power sukuk market was driven by RE projects in 2019. “While the facility sizes are much smaller than those of conventional power projects, the RE segment has been driving Malaysia’s sustainable and responsible investment (SRI) sukuk market, ” the ratings house said. Notable issuers included Telekosang Hydro One Sdn Bhd, Edra Solar Sdn Bhd and Cypark Ref Sdn Bhd.

The government has upsized project scales to help rein in independent power producers’ financing costs and facilitate their access to the sukuk market, as observed in the large scale solar (LSS) three bidding, whereby the maximum project size has been increased to 100MW from the 30MW under LSS three.

RAM said it has rated numerous prominent firsts in the SRI sukuk market, along with innovative financing structures that have involved the pooling of multiple plants that enable smaller IPPs to successfully tap the market.

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