Islamic finance offering of US$375 mn for Malaysia’s Pengerang complex
Singapore-based petrochemicals, green energy and natural resources conglomerate ChemOne Group, developer of Malaysia’s Pengerang Energy Complex (PEC), located in Johor, has established an Islamic tranche in the overall scheme of Export Credit Agency (ECA) backed project financing for the PEC.
As the project pushes towards financial close, this financing structure will allow Islamic banks to participate alongside traditional commercial banks to finance the project. The Islamic tranche for PEC will be up to US$375 million or more.
The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IsDB) Group, has issued terms to provide credit default insurance cover on the financing facilities by Islamic Banks which has garnered strong interest from the Middle East and South-East Asian region.
Furthermore, the Islamic Corporation for the Development of the Private Sector (ICD), a multilateral development financial institution that is also a part of the IsDB Group has expressed an interest to participate in the PEC Islamic tranche with a direct loan facility without any credit insurance cover. Both ICIED and ICD have found the PEC project to have substantial positive impact on Malaysia’s economy with 100% of the revenues deriving from exports, high employment generation and low carbon footprint.
In August 2023, a large delegation of senior officials from ICIEC and ICD completed a detailed and comprehensive due diligence mission which included a visit to the PEC project site in Pengerang (Johor, Malaysia) and multiple meetings with the PEC’s key stakeholders and Islamic banks in Singapore and Malaysia. Both organisations (ICIEC and ICD) and various Islamic banks are currently in the final stages of processing approvals to the PEC project.
Following PEC’s recent announcement of new engineering-driven improvements that are set to deliver new benchmarks for the industry, the ECAs will be approaching their respective boards in the next two months and PEC is looking to complete its financial closing at the end of 2023. These banks and financial institutions are either renewing or finalising their credit approvals. A large accounts receivables facility has also closed with a leading Japanese bank.
The debt financing of the PEC is anchored by international ECA backed bank funding, amounting to US$3 billion. These international ECAs are in the final stages of their credit approvals, which is expected to be obtained by the end of this year. The Islamic finance backing is in addition to the ECA backed debt, completing the entire senior debt structure of PEC.
PEC is set to be one of the largest integrated condensate splitter and aromatics facilities in the world. The 6.5 million tonnes/year, facility is capable of processing 150,000 barrels per day (bpd) of condensate plus side feed of naphtha, that will in turn produce aromatics of 2.3 million tonnes/year, energy products output of 3.9 million tonnes/year and hydrogen output of 50,000 tonnes/year.The condensate splitter will produce heavy naphtha, a primary feedstock for the aromatics plant whereas the hydrogen produced is planned to be used to support development of downstream renewable fuels facilities in Johor.
