China company BEWG’s RM400m sukuk fully taken up

by NG MIN SHEN Pic by AFIF ABD HALIM

China-based water treatment company BEWG (M) Sdn Bhd’s (BEWGM) RM400 million sukuk wakalah has received full subscription.

The sukuk wakalah — or Islamic medium-term notes — is the first ringgit-denominated sukuk issued by a China-owned firm to fund water infrastructure development.

It was fully subscribed at the point of launch on July 19 this year, allowing the company to achieve its target funding size.

Proceeds from the issuance will go towards partially financing the refurbishment and upgrading of the water treatment plant in Bukit Sah, Kemaman, for which BEWGM was appointed by the Terengganu state government as design and build contractor in 2015.

BEWGM CEO Datuk Vence Ong Kian Min said the transaction is the company’s firstever debt capital market instrument.

“It is also the first ringgit-denominated sukuk by a Chinese company for water infrastructure funding and the largest ringgit-denominated sukuk issuance by a China-owned company to date,” he told a press conference at the signing ceremony in Kuala Lumpur yesterday.

Ong said the estimated cost of the project stands at RM687 million and is due to be completed in November 2018, three years after works commenced in November 2015.

“The water treatment project will ensure reliable water supply to the Kemaman district and is poised to meet growing demand from industrial areas in Teluk Kalong and Kerteh, which will help promote the state’s long-term economic growth,” he added.

The project was partially funded using the company’s internal funds before the sukuk issuance as it operates on a deferred payment basis.

According to Malaysian Rating Corp Bhd (MARC), which has rated the sukuk as AAIS, the state government will make six annual payments to BEWGM totalling RM686.9 million over a five-year period, commencing within 45 days from the receipt of Certificate of Practical Completion.

MARC stated in April this year that the first deferred payment of RM129.6 million is more than sufficient to meet BEWGM’s first schedule sukuk redemption of RM90 million in 2020.

Aside from increasing BEWGM’s recognition among local investors, the issuance also paves the way for future fundraising exercises in the country.

Meanwhile, the company recently received a formal mandate from the state government of Johor to conduct a detailed study for a multibillion ringgit comprehensive water resources solution that will serve the entire state.

“We received the mandate in the last two weeks to do a study. So, we have about six months to conduct it, after which we will submit a proposal to the state government for evaluation and negotiation. We estimate the cost of the project to be RM2 billion,” Ong said.

He added that the firm is also in talks with a few other states including Sarawak for potential municipal solid waste treatment projects.