OCBC Bank, MFP conclude agreement for RM100m green loan

VAT Manufacturing solar PV installation.

KUALA LUMPUR: OCBC Bank (Malaysia) Bhd (OCBC Bank) and MFP Solar Sdn Bhd have concluded an agreement for the setting up of a RM100mil facility to finance the development of multiple rooftop solar photovoltaic plants.

The Malaysian Rating Corporation (MARC) had earlier performed a green loan assessment on the loan facility and assigned it a "gold" assessment.

In a joint statement issued by OCBC Bank and MARC on Monday, they had closed the externally reviewed multi-tranche green term loan facility for MFP Solar.

Each tranche of the Facility will be a standalone term loan that will exclusively finance the project cost of an eligible rooftop solar photovoltaic plant.

The loan documentation for the facility meets core criteria set out in the Loan Market Association’s Green Loan Principles (GLP) 2020 regarding the use of proceeds, processes for project evaluation and selection, and management of proceeds.

MFP Solar is a 55%-owned subsidiary of Mega First Corporation Bhd while the remaining 45% is held by Pekat Teknologi Sdn Bhd.

A solar pure play, MFP Solar’s business model entails tendering and securing rooftop solar photovoltaic projects under its business model of solar power purchase agreement. MFP Solar is a registered solar PV Investor with the Sustainable Energy Development Authority (SEDA).

Tan Ai Chin, managing director, senior banker client coverage and head of investment banking, OCBC Bank, said:

"This transaction marks a key milestone in the development of the domestic market for sustainable financing, particularly in promoting the importance of green loans.

“As a bank which is fully committed to supporting sustainable development, we actively support businesses which are at the forefront of promoting technologies engineered towards mitigating climate change-associated risks, ” she said.

OCBC Bank, she said, had taken a step further towards validating the green loan structure by procuring the assessment from MARC.

“I am glad that we have achieved the highest gold standard, a testament to our robust structuring capability in sustainable financing," she said.

Commenting on the green loan assessment, MARC’s group chief executive officer, Datuk Jamaludin Nasir said the gold assessment was the highest on MARC’s scale for green financing instruments.

He said MARC considered the positive environmental impacts of rooftop solar projects that will be financed, the facility’s alignment with the green loan principles including its use of external review on a green loan, as well as MFP Solar’s prospective sustainability performance.

“MARC considers the use of proceeds as impactful, as the eligible projects will support national climate change mitigation goals, corporate adoption of clean energy and a sustainable energy supply system, ” he said.

In August 2020, MFP Solar commissioned the inaugural project that was financed under the facility by developing a 1.5 MWp solar plant for VAT Manufacturing Sdn Bhd, a high precision valve manufacturer based in Batu Kawan, Penang.

Paraveen T. Singham, managing director, VAT Manufacturing, said: “This solar power purchase agreement solution is in line with our organisation’s sustainability objectives whilst also lowering our energy costs.

“We are delighted to be working with MFP Solar who provided us with a hassle-free, capex-free turnkey solar solution. Their customisable solution from our contract negotiations with them through to the construction and operations of the system has been seamless.”

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