Tenaga 'to raise up to $3.6b in sukuk'

The planned bond issue by Malaysia's national utility would be the largest sukuk globally this year, a major boost for the sukuk market after issuance fell in the first quarter to its lowest point in four years.
The planned bond issue by Malaysia's national utility would be the largest sukuk globally this year, a major boost for the sukuk market after issuance fell in the first quarter to its lowest point in four years.PHOTO: BLOOMBERG

KUALA LUMPUR - Malaysia's Tenaga Nasional plans to raise as much as RM10 billion (S$3.6 billion) in an Islamic bond issue, sources familiar with the matter said yesterday - a move that comes after it agreed to buy debt-laden 1MDB's majority stake in a power plant project.

The bond by Malaysia's national utility would be the largest sukuk globally this year, a major boost for the sukuk market after issuance fell in the first quarter to its lowest point in four years.

Plans for the issue are still preliminary, two sources said. Tenaga, in which state pension fund Khazanah is the biggest shareholder, is looking at a single issue bond rather than a series and has approached several banks to court proposals, said one of the sources.

The sources declined to be identified as discussions about the bond proposal are confidential. A spokesman for Tenaga declined to comment.

This month, Tenaga agreed to buy 1MDB's 70 per cent stake in 3B, a 2,000MW coal-fired plant project for a yet to be determined sum - a sale that will help the troubled state investment fund pare down debt of more than US$11 billion (S$14.6 billion).

Tenaga CEO Azman Mohd has defended the deal, saying the firm would not pay a premium and it was not bailing out 1MDB.

Tenaga's shares initially slid as much as 7 per cent late last week on news of the planned purchase but have since regained lost ground. They were little changed in trade yesterday.

1MDB, whose board of advisers is chaired by Malaysian Prime Minister Najib Razak, won the rights to build 3B last year, beating out Tenaga and other bidders. But the state fund's liquidity problems put its ability to build the plant in question. Japan's Mitsui & Co owns the remaining 30 per cent of the project.

It is the first power asset to be disposed of by 1MDB, as the fund looks to unwind its businesses and repay the huge debt that has weighed on Malaysia's currency and the country's credit rating.

1MDB has shelved its plans for a US$3 billion initial public offering of its power assets, sources told Reuters earlier this month.

Tenaga's planned issuance will be the largest in the world this year, surpassing a US$2 billion sukuk by the Indonesian government last month and a US$1.25 billion sukuk by Malaysian state oil firm Petronas in March.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 24, 2015, with the headline 'Tenaga 'to raise up to $3.6b in sukuk''. Print Edition | Subscribe