Malaysian company issues green sukuk to finance small hydro construction

Telekosang Hydro One Sdn Bhd in Malaysia has issued an 18-year green sukuk to finance the construction of a 24-MW run-of-river hydro plant, according to Climate Bonds.

A sukuk is an Islamic financial certificate that complies with Islamic religious law commonly known as Sharia. The sukuk is valued at MYR470 million (US$115 million).

The project, which was not named, is expected to take 24 months to construct. The issuer signed a 21-year renewable energy power purchase agreement (REPPA) with Sabah Electricity, with a scheduled feed-in tariff commencement date of July 31, 2021.

Climate Bonds says this is the world’s first “mini-hydro” sukuk. Other sukuks have financed hydro but not exclusively, and not for a mini project. (Climate Bonds did not reveal what parameters it uses to define a hydro project as “mini.”) It is also the largest Malaysian bond since December 2017. The deal benefits from an AA3 rating from RAM.

Telekosang’s green sukuk is the world’s first for a mini-hydro project that is aligned with the requirements of Securities Commission Malaysia’s Sustainable and Responsible Investments Sukuk Framework, the ASEAN Green Bond Standards, and the Green Bond Principles.

Hydro already constitutes a significant proportion of Malaysia’s renewable energy mix, but renewables must grow further for the country to meet its NDC climate goals, Climate Bonds says.

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