This article first appeared in The Edge Malaysia Weekly on December 30, 2024 - January 12, 2025

TWO months after Johor Plantations Group Bhd’s (KL:JPG) debut on the Main Market of Bursa Malaysia in July, it issued the first sustainability-linked sukuk wakalah by a plantation company, with a total nominal value of RM1.35 billion from its RM3 billion sukuk wakalah programme (a combination of the Islamic medium-term notes programme and the Islamic commercial papers programme).

The sukuk features a one-way upward adjustment to its profit rates linked to Johor Plantations’ achievement of pre-determined sustainability performance targets. The targets include 50% carbon intensity reduction (Scope 1 and 2) against its 2012 baseline based on the Roundtable on Sustainable Palm Oil (RSPO) greenhouse gas calculation, 100% traceability to fresh fruit bunch (FFB) suppliers by 2025 and annual water consumption of 1.2 cubic metres per tonne of FFB and below.

According to CIMB Investment Bank (joint lead arranger, joint lead manager and bookrunner), the total order book for the deal reached RM3.92 billion with a bid-to-cover ratio of 3.01 times by noon on the day of its launch on Sept 12, 2024, and touched a peak of RM4.46 billion. The final order book stood at RM4.25 billion, representing a bid-to-cover ratio of 3.27 times.

The overwhelming demand allowed the transaction to be priced at a final price of 32 basis points over seven-year MGS (Malaysian Government Securities), 30bps over 10-year MGS and 30bps over 15-year MGS or 4%, 4.04% and 4.19% for the respective tranches, and for a total final issue size of RM1.3 billion.

The transaction marked a first, not only as a sustainability-linked sukuk from the plantation sector but also the first rated Sustainable and Responsible Investment (SRI)-linked sukuk under the SRI-linked Sukuk Framework 2024 issued by the Securities Commission Malaysia.

Johor Plantations’ Sustainability Finance Framework was assigned a Gold assessment — the highest impact assessment rating — by MARC Ratings.

The sukuk is also rated AA1 by RAM Rating Services.

According to Johor Plantations’ listing prospectus, the sukuk programme was intended to raise funds for its capital expenditure, working capital requirements, investments, general corporate purposes and/or refinancing the group’s borrowings.

Johor Plantations is an upstream oil palm plantation company operating mainly in Johor. It owns, manages and cultivates oil palm and harvests FFB produced on the estates that it owns or rents. According to its listing prospectus, it was working on a total oil palm planted area of 55,904ha.

Note that its estates are RSPO-certified.

Johor Plantations was listed on Bursa’s Main Market on July 9, 2024 and its ultimate holding company is Johor Corporation, with a 65% interest post-listing.

Yinson Holdings Bhd (KL:YINSON) closed its single-largest term loan financing to the tune of US$1.3 billion (RM6.2 billion) for its Agogo floating, production, storage and offloading (FPSO) vessel to be deployed in Angola.

The term loan has been dubbed the first of its kind in the industry and features a commercial multi-tranche structure, consisting of three tranches with staggered maturities extending up to 10 years post-delivery of the FPSO Agogo.

The interest margin ranges from 3% to 5% plus the secured overnight financing rate, which is a benchmark interest rate for dollar-denominated loans.

Financing was provided by a consortium of 13 lenders, led by Standard Chartered Bank (Singapore) Ltd, which acted as the global coordinating bank, along with Malaysian banks including Maybank Investment Bank Bhd (Maybank IB) as lead arranger, international banks and institutional investors.

The facilities will be used over the course of the construction of the FPSO, which is estimated to begin operation in the fourth quarter of 2025.

“The structure increases the efficiency of the financing by achieving a higher weighted average life compared with traditional financing structures while substantially reducing refinancing risks,” Maybank IB said.

The vessel had secured a 15-year contract valued around US$5.7 billion from Azule Energy in February 2023. Azule Energy is a 50:50 joint venture between BP plc and Eni SpA, the largest independent equity producer of oil and gas in Angola.

Once completed, the Agogo FPSO will have a production capacity of 120,000 barrels of oil per day and is poised to be the world’s first FPSO to feature carbon capture technology.

“The Agogo FPSO will be operating in Angola, a country unfamiliar to most Asean financiers, with the country risk being offloaded to the charter guarantee provider through the structure of the project,” Maybank IB pointed out.

It was reported that the FPSO Agogo is estimated to cost US$1.8 billion, of which US$500 million will be funded by Eni via upfront payments.

Prior to closing the term loan facility on April 30 this year, Yinson had secured US$300 million (RM1.39 billion from private-equity firm RRJ Capital) to finance the equity portion of the deal.

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