Posted Date: May 15, 2020

MARC has assigned a "Gold" Impact Assessment to Leader Energy Sdn Bhd's (LESB) proposed ASEAN Green SRI Sukuk Wakalah of up to RM260.0 million. LESB is the holding company of the project entities that are operating two solar photovoltaic (PV) power projects totalling 49 MWac in Kuala Muda, Kedah.

LESB will use the proceeds from the issuance to part finance and/or part reimburse the total development costs of the two solar PV projects. The first project, a net 29MWac solar PV power plant under Leader Solar Energy Sdn Bhd (LSE I), achieved commercial operation in 2018. The second project, a net 20MWac solar PV plant under Leader Solar Energy II Sdn Bhd (LSE II), achieved commercial operation on February 11, 2020. The proceeds will also be used to pre-fund the Finance Service Reserve Account (FSRA) minimum required balance and pay all fees and expenses in relation to the issuance of the ASEAN Green SRI Sukuk Wakalah.

The nominated projects are aligned with the renewable energy category of eligible SRI projects identified by Securities Commission Malaysia's (SC) Sustainable and Responsible Investment (SRI) Sukuk framework. As the sukuk proceeds will be fully allocated to physically completed projects, the issue of post-issuance tracking of underlying project eligibility will not arise. A key underpinning of the Gold assessment is the expected full allocation of the net issuance proceeds for solar projects that support the realisation of long-term integrated visions of sustainable development that are consistent with global sustainability goals, as well as national sustainable development goals and priorities.

MARC is of the opinion that the proposed governance structure of LESB's ASEAN Green SRI Sukuk Wakalah aligns with the ASEAN Green Bond Standards (ASEAN GBS) and SC's SRI Sukuk Framework. Designated accounts will be established into which net proceeds will be credited and managed by the Security Trustee in accordance with the terms and conditions of the ASEAN Green SRI Sukuk Wakalah. The allocations to the nominated projects after the pre-funding of the FSRA will match the balance of the net proceeds from the outstanding sukuk. The issuer has committed to annual reporting of the original amount allocated to the nominated projects, the amounts disbursed and the impact of nominated projects on a designated website.

The assessment is also supported by the project entities' approach to managing the potential effects of both projects on the surrounding environment and local communities. In both projects, the operations and maintenance (O&M) of the plants are undertaken in-house; in the O&M role, the project entities are expected to draw upon ultimate parent HNG Capital Sdn Bhd's (HNG Capital) over two decades of experience as an independent power producer in Southeast Asia. LESB and its project entities are expected to demonstrate alignment with HNG Capital's sustainability framework and its vision of building a balanced portfolio of generation projects in a safe, sustainable and environmentally responsible manner.

The principal methodology used in this assessment is MARC's Impact Bond Assessments (IBA) criteria published in July 2018, accessible from MARC's official website at www.marc.com.my. The Impact Assessment is not a credit rating and is arrived independently of the credit rating process of the sukuk. LESB's pre-issuance external review report can be accessed here.

Milly Leong, +603-2717 2938/ milly@marc.com.my.