Petroleum Sarawak Exploration & Production (PETROS E&P) IMTN Sukuk RM15 Billion - Information Memorandum

Transcription

1. Strictly Private & Confidential PETROLEUM SARAWAK EXPLORATION & PRODUCTION SDN BHD (Registration No. 201801032029 (1294054-A)) INFORMATION MEMORANDUM IN RELATION TO THE PROPOSED ISSUE OF, OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR PURCHASE OF ISLAMIC MEDIUM TERM NOTES (“SUKUK WAKALAH”) PURSUANT TO A MULTI-CURRENCY ISLAMIC MEDIUM TERM NOTES PROGRAMME (“SUKUK WAKALAH PROGRAMME”) OF UP TO RM15.0 BILLION (OR ITS EQUIVALENT IN OTHER CURRENCIES) IN NOMINAL VALUE UNDER THE SHARIAH PRINCIPLE OF WAKALAH BI AL-ISTITHMAR JOINT PRINCIPAL ADVISERS, JOINT LEAD ARRANGERS AND JOINT LEAD MANAGERS Maybank Investment Bank Berhad (Registration No. 197301002412 (15938-H)) RHB Investment Bank Berhad (Registration No. 197401002639 (19663-P)) This Information Memorandum is dated 25 January 2021
2. STRICTLY CONFIDENTIAL – DO NOT FORWARD ATTACHED IS AN ELECTRONIC COPY OF THE INFORMATION MEMORANDUM DATED 25 JANUARY 2021 (“INFORMATION MEMORANDUM”), IN RELATION TO THE PROPOSED ISSUANCE OF ISLAMIC MEDIUM TERM NOTES (“SUKUK WAKALAH”) UNDER A MULTI-CURRENCY ISLAMIC MEDIUM TERM NOTES PROGRAMME OF RM15.0 BILLION (OR ITS EQUIVALENT IN OTHER CURRENCIES) IN NOMINAL VALUE UNDER THE SHARIAH PRINCIPLE OF WAKALAH BI AL-ISTITHMAR (“SUKUK WAKALAH PROGRAMME”) BY PETROLEUM SARAWAK EXPLORATION & PRODUCTION SDN BHD (REGISTRATION NO. 201801032029 (1294054-A)) (THE “ISSUER”) AND GUARANTEED BY PETROLEUM SARAWAK BERHAD (REGISTRATION NO. 201701025772 (1239938-U)) (“PETROS” OR THE “KAFALAH PROVIDER”). BY OPENING AND ACCEPTING THIS ELECTRONIC TRANSMISSION CONTAINING THE INFORMATION MEMORANDUM, THE RECIPIENT AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS BELOW. IF YOU DO NOT AGREE TO ANY OF THE TERMS AND CONDITIONS, PLEASE DELETE THIS ELECTRONIC TRANSMISSION IMMEDIATELY. THE INFORMATION MEMORANDUM IS STRICTLY CONFIDENTIAL AND ANY DISTRIBUTION OF THE INFORMATION MEMORANDUM WITHOUT THE PRIOR CONSENT OF THE ISSUER, THE JOINT PRINCIPAL ADVISERS (“JPA”), THE JOINT LEAD ARRANGERS (“JLA”) AND THE JOINT LEAD MANAGERS (“JLM”) IS UNAUTHORISED. THE PERSON RECEIVING THIS ELECTRONIC TRANSMISSION FROM THE ISSUER, THE JLA, JLM AND ITS/THEIR RESPECTIVE AGENTS IS PROHIBITED FROM DISCLOSING THE INFORMATION MEMORANDUM, ALTERING THE CONTENTS OF THE INFORMATION MEMORANDUM OR FORWARDING A COPY OF THE INFORMATION MEMORANDUM OR ANY PORTION THEREOF BY ELECTRONIC MAIL OR OTHERWISE TO ANY PERSON. THE INFORMATION MEMORANDUM IS NOT A PROSPECTUS AND HAS NOT BEEN REGISTERED NOR WILL IT BE REGISTERED AS A PROSPECTUS UNDER THE CAPITAL MARKETS AND SERVICES ACT, 2007 AS AMENDED FROM TIME TO TIME (“CMSA”). AT ISSUANCE, THE SUKUK WAKALAH MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED DIRECTLY OR INDIRECTLY TO A PERSON TO WHOM AN OFFER OR INVITATION TO SUBSCRIBE TO THE SUKUK WAKALAH AND TO WHOM THE SUKUK WAKALAH ARE ISSUED WOULD FALL WITHIN PART 1 OF SCHEDULE 6 (OR SECTION 229(1)(b)) AND PART 1 OF SCHEDULE 7 (OR SECTION 230(1)(b)), READ TOGETHER WITH SCHEDULE 9 (OR SECTION 257(3)) OF THE CMSA, OR SECTION 2(6) OF THE COMPANIES ACT 2016 (“CA”), SUBJECT TO ANY CHANGE IN THE APPLICABLE LAWS AND SUCH OTHER SELLING RESTRICTIONS AS MAY BE APPLICABLE OUTSIDE MALAYSIA. THEREAFTER, THE SUKUK WAKALAH MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED DIRECTLY OR INDIRECTLY TO A PERSON TO WHOM AN OFFER OR INVITATION TO PURCHASE THE SUKUK WAKALAH WOULD FALL WITHIN PART 1 OF SCHEDULE 6 (OR SECTION 229(1)(b)), READ TOGETHER WITH SCHEDULE 9 (OR SECTION 257(3)) OF THE CMSA, OR SECTION 2(6) OF THE CA, SUBJECT TO ANY CHANGE IN THE APPLICABLE LAWS AND SUCH OTHER SELLING RESTRICTIONS AS MAY BE APPLICABLE OUTSIDE MALAYSIA. FOR THE AVOIDANCE OF DOUBT, THE SUKUK WAKALAH DENOMINATED IN FOREIGN CURRENCY MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED DIRECTLY OR INDIRECTLY TO A RESIDENT (AS DEFINED UNDER THE FINANCIAL SERVICES ACT, 2013 AS AMENDED FROM TIME TO TIME). THIS TRANSMISSION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SUKUK WAKALAH IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE LAWS OF SUCH JURISDICTIONS. TRANSMISSION OVER THE INTERNET MAY BE SUBJECT TO INTERRUPTIONS, TRANSMISSION BLACKOUT, DELAYED TRANSMISSION DUE TO INTERNET TRAFFIC, INCORRECT DATA TRANSMISSION DUE TO THE PUBLIC NATURE OF THE INTERNET, DATA CORRUPTION, INTERCEPTION, UNAUTHORISED AMENDMENT, TAMPERING, VIRUSES OR OTHER TECHNICAL, MECHANICAL OR SYSTEMIC RISKS ASSOCIATED WITH INTERNET TRANSMISSIONS. THE ISSUER, THE JPA, JLA, JLM OR ITS/THEIR RESPECTIVE AGENTS HAVE NOT ACCEPTED AND WILL NOT ACCEPT ANY RESPONSIBILITY AND/OR LIABILITY FOR ANY SUCH INTERRUPTION, TRANSMISSION BLACKOUT, DELAYED TRANSMISSION, INCORRECT DATA TRANSMISSION, DATA CORRUPTION, INTERCEPTION, AMENDMENT, TAMPERING OR VIRUSES OR ANY CONSEQUENCES THEREOF WHICH MAY RESULT IN A DIFFERENCE BETWEEN THE INFORMATION MEMORANDUM DISTRIBUTED TO YOU IN ELECTRONIC FORMAT AND THE HARD COPY VERSION AVAILABLE TO YOU ON REQUEST FROM US. THE FOREGOING IS IN ADDITION TO AND WITHOUT PREJUDICE TO ALL OTHER DISCLAIMERS AND AGREEMENTS WHICH A RECIPIENT OF THE INFORMATION MEMORANDUM SHALL BE DEEMED TO HAVE AGREED TO OR BE BOUND BY AS PROVIDED IN THE INFORMATION MEMORANDUM.
3. IMPORTANT NOTICE RESPONSIBILITY STATEMENT This Information Memorandum in relation to the proposed issuance of Islamic medium term notes (“Sukuk Wakalah”) pursuant to a multi-currency Islamic medium term notes programme of RM15.0 billion (or its equivalent in other currencies) in nominal value under the Shariah principle of Wakalah Bi Al-Istithmar (“Sukuk Wakalah Programme”) has been approved by the directors of Petroleum Sarawak Exploration & Production Sdn Bhd (Registration No. 201801032029 (1294054-A)) (“PSEP” or the “Issuer”) and they collectively and individually accept full responsibility for the accuracy of the information contained in this Information Memorandum. The Issuer, after having made all reasonable enquiries, confirms that this Information Memorandum contains all information with respect to the Issuer, which is material in the context of the issue, offer, sale or invitation to subscribe or purchase the Sukuk Wakalah under the Sukuk Wakalah Programme. The opinions and intentions expressed in this Information Memorandum in relation to the Issuer are honestly held, have been reached after considering all relevant circumstances and are based on reasonable assumptions and there are no other facts in relation to the Issuer or the Sukuk Wakalah Programme which would, in the context of any Sukuk Wakalah issuance, make any statement or information in this Information Memorandum false or misleading or from which there is a material omission and all reasonable enquiries have been made by the Issuer to ascertain such facts and to verify the accuracy of all such statements and information and statements. No representation, warranty or undertaking, expressed or implied, is made such that the information remains unchanged in any respect as of any date or dates after those stated herein, with respect to any matter concerning the Issuer or any statement made in this Information Memorandum. IMPORTANT NOTICE AND GENERAL STATEMENTS OF DISCLAIMER This Information Memorandum is being furnished on a private and confidential basis solely for the purpose of enabling prospective investors to consider the purchase or subscription of the Sukuk Wakalah. The Issuer has authorised Maybank Investment Bank Berhad (Registration No. 197301002412 (15938-H)) and RHB Investment Bank Berhad (Registration No. 197401002639 (19663-P)) as the joint principal advisers (“JPA”), joint lead arrangers (“JLA”) and the joint lead managers (“JLM”) to distribute this Information Memorandum, which is now being provided by the JPA, JLA or JLM to prospective investors on a private and confidential basis for the sole purpose in connection with the issue, offer, sale or invitation to subscribe or purchase the Sukuk Wakalah under the Sukuk Wakalah Programme. At issuance, the Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed directly or indirectly to a person to whom an offer or invitation to subscribe to the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within Part 1 of Schedule 6 (or Section 229(1)(b)) and Part 1 of Schedule 7 (or Section 230(1)(b)), read together with Schedule 9 (or Section 257(3)) of the Capital Markets and Services Act 2007 (as amended from time to time) ("CMSA"), or Section 2(6) of the Companies Act 2016 (“CA”), subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. Thereafter, the Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed directly or indirectly to a person to whom an offer or invitation to purchase the Sukuk Wakalah would fall within Part 1 of Schedule 6 (or Section 229(1)(b)), read together with Schedule 9 (or Section 257(3)) of the CMSA, or Section 2(6) of the CA, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. For the avoidance of doubt, the Sukuk Wakalah denominated in foreign currency may only be offered, sold, transferred or otherwise disposed directly or indirectly to a Resident (as defined under the Financial Services Act, 2013 as amended from time to time). The JPA, JLA or JLM have not independently verified the information or data contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made or assumed and no responsibility or liability is accepted by the JPA, JLA or JLM or their respective affiliates as to the adequacy, legality, effectiveness, genuineness, enforceability, admissibility, reasonableness, authenticity, origin, validity, accuracy or completeness of the information or data contained in this Information Memorandum or that the information or data remains unchanged in any respect after the i
4. relevant dates shown in this Information Memorandum or any other information provided by the Issuer in connection with the Sukuk Wakalah or the distribution of this Information Memorandum . The JPA, JLA or JLM do not accept any responsibility for the contents of this Information Memorandum or for any other statement, made or purported to be made by the JPA, JLA or JLM or on their behalf in connection with the Issuer, its future performance, or the issue and offering or distribution of the Sukuk Wakalah. The JPA, JLA or JLM accordingly disclaim all and any liability whether arising in tort or contract or otherwise which they might otherwise have in respect of this Information Memorandum or any such statement. No person is authorised to give any information or data or to make any representation or warranty other than as contained in this Information Memorandum and, if given or made, any such information, data, representation or warranty must not be relied upon as having been authorised by the Issuer, the JPA, JLA or JLM or any other person. This Information Memorandum has not been and will not be made to comply with the laws of any jurisdiction outside Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant to or under any legislation of (or with or by any regulatory authorities or other relevant bodies of) any Foreign Jurisdiction and it does not constitute an offer of, or an invitation to subscribe for or purchase the Sukuk Wakalah or any other securities of any kind by any party in any Foreign Jurisdiction. This Information Memorandum is not and is not intended to be a prospectus and has not been registered or lodged under the laws of Malaysia or of any Foreign Jurisdiction as a prospectus. Unless otherwise specified in this Information Memorandum, the information contained in this Information Memorandum is correct as at the date hereof. No action has been or will be taken in any country or jurisdiction by the Issuer or the JPA, JLA or JLM that would permit an issue or offering or an invitation to subscribe for or purchase the Sukuk Wakalah, or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this Information Memorandum comes are required by the Issuer and the JPA, JLA or JLM to comply with all applicable laws and regulations in each country or jurisdiction in or from which they purchase, offer, sell or deliver the Sukuk Wakalah or have in their possession or distribute such offering material, in all cases at their own expense. THE DISTRIBUTION OR POSSESSION OF THIS INFORMATION MEMORANDUM IN OR FROM CERTAIN JURISDICTIONS MAY BE RESTRICTED OR PROHIBITED BY LAW. EACH RECIPIENT IS REQUIRED BY THE ISSUER, THE JPA, JLA or JLM TO SEEK APPROPRIATE PROFESSIONAL ADVICE REGARDING, AND TO OBSERVE, ANY SUCH RESTRICTION OR PROHIBITION. NEITHER THE ISSUER NOR THE JPA, JLA or JLM ACCEPTS ANY RESPONSIBILITY OR LIABILITY TO ANY PERSON IN RELATION TO THE DISTRIBUTION OR POSSESSION OF THIS INFORMATION MEMORANDUM IN OR FROM ANY SUCH FOREIGN JURISDICTION. THE ISSUER AND THE JPA, JLA or JLM DO NOT REPRESENT THAT THIS INFORMATION MEMORANDUM MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY SUKUK WAKALAH MAY BE LAWFULLY ISSUED, OFFERED OR SOLD, IN COMPLIANCE WITH ANY APPLICABLE REGISTRATION OR OTHER REQUIREMENTS IN ANY SUCH FOREIGN JURISDICTION, OR PURSUANT TO AN EXEMPTION AVAILABLE THEREUNDER, OR ASSUME ANY RESPONSIBILITY FOR FACILITATING ANY SUCH DISTRIBUTION, OFFERING OR SALE. IN PARTICULAR, NO ACTION HAS BEEN TAKEN BY THE ISSUER AND THE JPA, JLA or JLM WHICH WOULD PERMIT AN OFFERING OF ANY SUKUK WAKALAH OR DISTRIBUTION OF THIS INFORMATION MEMORANDUM IN ANY FOREIGN JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED. By accepting delivery of this Information Memorandum, each recipient agrees to the terms upon which this Information Memorandum is provided to such recipient as set out in this Information Memorandum, and further agrees and confirms that (a) it will keep confidential all of such information and data, (b) it is lawful for the recipient to receive this Information Memorandum and to subscribe for or purchase or in any other way to receive the Sukuk Wakalah under all jurisdictions to which the recipient is subject, (c) it has complied with all applicable laws in connection with such subscription or purchase or acceptance of the Sukuk Wakalah, (d) the Issuer, the JPA, JLA or JLM and their respective affiliates, directors, officers, employees, agents and professional advisers are not and will not be in breach of the laws of any jurisdiction to which the recipient is subject as a result of such ii
5. subscription or purchase or acceptance of the Sukuk Wakalah , and they shall not have any responsibility or liability in the event that such subscription or purchase or acceptance of the Sukuk Wakalah is or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the Sukuk Wakalah can only be offered, sold, transferred or otherwise disposed of directly or indirectly in accordance with the relevant selling restrictions and all applicable laws, (f) it has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing or purchasing the Sukuk Wakalah, and is able and is prepared to bear the economic and financial risks of investing in or holding the Sukuk Wakalah, (g) it is subscribing for or accepting the Sukuk Wakalah for its own account, and (h) it is a person falling within one of the categories of persons specified in:- (i) at the point of issuance of the Sukuk Wakalah, Part 1 of Schedule 6 (or Section 229(1)(b) of the CMSA) and Part 1 of Schedule 7 (or Section 230(1)(b) of the CMSA) read together with Schedule 9 (or Section 257(3) of the CMSA), or Section 2(6) of the CA, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia; and (ii) after the issuance of the Sukuk Wakalah, Part 1 of Schedule 6 (or Section 229(1)(b) of the CMSA) read together with Schedule 9 (or Section 257(3) of the CMSA), or Section 2(6) of the CA, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. For the avoidance of doubt, the Sukuk Wakalah denominated in foreign currency may only be offered, sold, transferred or otherwise disposed directly or indirectly to a Resident (as defined under the Financial Services Act, 2013 as amended from time to time). Each recipient is solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions to which it is subject. For the avoidance of doubt, this Information Memorandum shall not constitute an offer, issue or invitation to subscribe or purchase of the Sukuk Wakalah in relation to any recipient who does not fall within the selling restrictions above. This Information Memorandum or any document delivered under or in relation to the issue, offer and sale of the Sukuk Wakalah is not, and should not be construed as, a recommendation by the Issuer, the JPA, JLA or JLM or any other party to the recipient to subscribe for or purchase the Sukuk Wakalah. This Information Memorandum is not a substitute for, and should not be regarded as, an independent evaluation and analysis and does not purport to be all inclusive. Each recipient should perform and is deemed to have made its own independent investigation and analysis of the Issuer, the Sukuk Wakalah and all other relevant matters, and each recipient should consult its own professional advisers. The information herein is subject to the detailed provisions of the respective documents referred to herein and is qualified in its entirety by reference to such documents. Unless otherwise specified in this Information Memorandum, the information contained in this Information Memorandum is current as at the date hereof. Neither the delivery of this Information Memorandum nor the offering, sale or delivery of any Sukuk Wakalah shall in any circumstance imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Sukuk Wakalah is correct as of any time subsequent to the date indicated in the document containing the same. Neither the JPA, JLA or JLM nor any other advisers to the Sukuk Wakalah Programme undertakes to review the financial condition or affairs of the Issuer or its subsidiaries during the life of the Sukuk Wakalah or to advise any investor in the Sukuk Wakalah of any information coming to their attention. The transaction structure relating to the Sukuk Programme has been approved by Maybank Islamic Berhad and RHB Islamic Bank Berhad as the joint Shariah advisers for the Sukuk Wakalah Programme (“Joint Shariah Advisers”). However, the approval is only an expression of the view of the Joint Shariah Advisers based on their extensive experience in the subject. There can be no assurance as to the Shariah permissibility of the structure of the Sukuk Wakalah and the trading of the Sukuk Wakalah and neither the Issuer, the JPA, JLA or JLM nor any other person makes any representation of the same. Prospective investors should not rely on the approval referred to above in deciding whether to make an investment in the Sukuk Wakalah and should consult their own Shariah advisers as to whether the proposed transaction described in the approval referred to above is in compliance with Shariah. FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE “INVESTMENT CONSIDERATIONS” IN SECTION 3.0 HEREOF. iii
6. ACKNOWLEDGEMENT The Issuer hereby acknowledges that it has authorised the JPA , JLA or JLM to circulate or distribute this Information Memorandum on its behalf in respect of or in connection with the proposed offer or invitation to subscribe for and issue of the Sukuk Wakalah to prospective investors to whom an issue, offer or invitation to subscribe or purchase the Sukuk Wakalah would constitute persons falling within any one or more of the categories specified in (i) at the point of issuance of the Sukuk Wakalah, Part 1 of Schedule 6 (or Section 229(1)(b) of the CMSA) and Part 1 of Schedule 7 (or Section 230(1)(b) of the CMSA) read together with Schedule 9 (or Section 257(3) of the CMSA), or Section 2(6) of the CA, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia; and (ii) after the issuance of the Sukuk Wakalah, Part 1 of Schedule 6 (or Section 229(1)(b) of the CMSA) read together with Schedule 9 (or Section 257(3) of the CMSA), or Section 2(6) of the CA, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. For the avoidance of doubt, the Sukuk Wakalah denominated in foreign currency may only be offered, sold, transferred or otherwise disposed directly or indirectly to a Resident (as defined under the Financial Services Act, 2013 as amended from time to time). STATEMENTS OF DISCLAIMER BY THE SECURITIES COMMISSION MALAYSIA In accordance with the CMSA, a copy of this Information Memorandum will be deposited with the Securities Commission Malaysia (“SC”), which takes no responsibilities for its contents. The issue, offer or invitation to subscribe or purchase the Sukuk Wakalah in this Information Memorandum or otherwise are subject to the fulfilment of various conditions precedent including without limitation, the lodgement of the documents and information relating to the Sukuk Wakalah and the Sukuk Wakalah Programme with the SC in accordance with the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework first issued on 9 March 2015, effective on 15 June 2015 and revised on 12 November 2020 (as may be amended from time to time) (“LOLA Guidelines”). The SC’s Shariah Advisory Council has confirmed that they have no objection to the structure of the Sukuk Wakalah Programme via its letter dated 15 September 2020. The Issuer has on 25 January 2021 lodged the documents and information relating to the Sukuk Wakalah and the Sukuk Wakalah Programme with the SC in accordance with the LOLA Guidelines. Please note that lodgement to the SC shall not be taken to indicate that the SC recommends the subscription or purchase of the Sukuk Wakalah under the Sukuk Wakalah Programme. The SC shall not be liable for any non-disclosure on the part of the Issuer and assumes no responsibility for the correctness of any statements made or opinions or reports expressed in the Information Memorandum. FORWARD-LOOKING STATEMENTS Certain statements in this Information Memorandum are based on historical data, which may not be reflective of future results, and others are forward-looking in nature, which are subject to uncertainties and contingencies. All forward-looking statements are based on estimates and assumptions made by the Issuer. Although the board of directors of the Issuer believes that these forward-looking statements are reasonable, the statements are nevertheless subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in such forward-looking statements. In light of these and other uncertainties, the inclusion of forward-looking statements in this Information Memorandum should not be regarded as a representation or warranty by the Issuer or its/their advisers or the JLA/JLA/JLM that the plans and objectives of the Issuer will be achieved. This Information Memorandum includes certain historical information, estimates, or reports thereon derived from sources mentioned in this Information Memorandum and other parties with respect to the material businesses in which Issuer and its subsidiaries operate and certain other matters. Such iv
7. information , estimates, or reports have been included solely for illustrative purposes only. No representation or warranty is made as to the accuracy or completeness of any information, estimate and report thereon derived from such and other third party sources. CONFIDENTIALITY To the recipient of this Information Memorandum: This Information Memorandum and its contents are strictly confidential and are provided strictly on the basis that the recipient shall ensure the same remains confidential. Accordingly, this Information Memorandum and its contents, and/or any information which is made available to the recipient in connection with any further enquiries, must be held in complete confidence. This Information Memorandum is submitted to selected persons specifically in reference to the Sukuk Wakalah, falling within one of the categories of persons specified in Part 1 of Schedule 6 (or Section 229(1)(b)); and Part 1 of Schedule 7 (or Section 230(1)(b)); read together with Schedule 9 (or Section 257(3)) of the CMSA, or Section 2(6) of the CA at the point of issuance of the Sukuk Wakalah and Part 1 of Schedule 6 (or Section 229(1)(b)), read together with Schedule 9 (or Section 257(3)) of the CMSA, or Section 2(6) of the CA after the issuance of the Sukuk Wakalah. This Information Memorandum may not be reproduced or used, in whole or in part, for any purpose, nor furnished to any person other than those to whom copies have been sent by the JPA, JLA or JLM. Any forwarding, distribution or reproduction of this document in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of applicable laws. If you have received this Information Memorandum contrary to any of the foregoing restrictions, you are not authorised and will not be able to purchase any of the securities described herein. In the event that there is any contravention of this confidentiality undertaking or there is reasonable likelihood that this confidentiality undertaking may be contravened, each of the Issuer and the JPA, JLA or JLM may, at its discretion, apply for any remedy available to the Issuer and the JPA, JLA or JLM whether at law or equity, including without limitation, injunctions. Each of the Issuer and the JPA, JLA or JLM is entitled to fully recover from the contravening party all costs, expenses and losses incurred and/or suffered, in this regard on a full indemnity basis. For the avoidance of doubt, it is hereby deemed that this confidentiality undertaking shall be imposed upon the recipient, the recipient’s professional advisers, directors, employees and any other persons who may receive this Information Memorandum (or any part of it) from the recipient. The recipient must return this Information Memorandum and all copies whether in whole or in part and any other information in connection therewith to the JPA, JLA or JLM promptly upon the JPA, JLA or JLM’s or the Issuer’s request. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. EACH ISSUANCE OF THE SUKUK WAKALAH WILL CARRY DIFFERENT RISKS AND ALL POTENTIAL INVESTORS ARE STRONGLY ENCOURAGED TO EVALUATE EACH ISSUANCE OF THE SUKUK WAKALAH ON ITS OWN MERIT. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL, SHARIAH AND OTHER ADVISERS BEFORE PURCHASING OR ACQUIRING OR SUBSCRIBING FOR THE SUKUK WAKALAH. v
8. TABLE OF CONTENTS IMPORTANT NOTICE .........................................................................................................................................I DEFINITIONS OF KEY TERMS AND ABBREVIATIONS ............................................................................ 1 SECTION 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 EXECUTIVE SUMMARY .................................................................................................... 4 Brief information on the Issuer ........................................................................................................... 4 Brief information on the Kafalah Provider ........................................................................................ 4 Brief summary of the Sukuk Wakalah Programme ......................................................................... 4 Utilisation of proceeds ......................................................................................................................... 5 Regulatory requirements .................................................................................................................... 6 Credit Ratings ....................................................................................................................................... 6 Selling Restrictions .............................................................................................................................. 6 SECTION 2.0 PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK WAKALAH PROGRAMME ..................................................................................................................... 7 SECTION 3.0 INVESTMENT CONSIDERATIONS ................................................................................ 42 3.1 Considerations relating to the Issuer and PETROS Group ......................................................... 42 3.1.1 COVID-19 pandemic.................................................................................................................. 42 3.1.2 Volatility in oil and gas price ..................................................................................................... 43 3.1.3 Market Competition .................................................................................................................... 43 3.1.4 Oil and gas industry subject to extensive governmental regulations and any noncompliance with, and any changes in, the relevant governmental regulations could materially increase PETROS Group’s costs .......................................................................... 43 3.1.5 Adequacy of Takaful/insurance ................................................................................................ 44 3.1.6 Dependence on senior management and skilled personnel................................................ 45 3.1.7 Dependence on successful development and deployment of new technologies ............. 45 3.1.8 Limited operating history and significant capital expenditures required for PETROS Group’s business ....................................................................................................................... 45 3.1.9 Reliance on successful farm-in of the Production Sharing Contracts in the upstream sector ........................................................................................................................................... 46 3.1.10 PETROS’ limited downstream business coverage ............................................................... 46 3.1.11 Settlement of disputes between the Government of Malaysia and the State of Sarawak ..................................................................................................................................................... 46 3.2 Considerations relating to the Sukuk Wakalah Programme and the Sukuk Wakalah ............. 47 3.2.1 Credit Rating of the Sukuk Wakalah ....................................................................................... 47 3.2.2 Shariah Compliance .................................................................................................................. 47 3.2.3 No prior market for the Sukuk Wakalah .................................................................................. 47 3.2.4 Market value of the Sukuk Wakalah may be subject to fluctuations .................................. 48 3.2.5 Rate of return risk ....................................................................................................................... 48 3.2.6 Suitability of investments .......................................................................................................... 48 3.2.7 The Issuer’s ability to meet its obligations under the Sukuk Wakalah ............................... 49 3.2.8 Each issuance carries different risks ....................................................................................... 49 3.2.9 An investment in the Sukuk Wakalah may be subject to inflation risk ............................... 49 3.2.10 Risk inherent to the Kafalah Provider...................................................................................... 49 3.3 General considerations ..................................................................................................................... 50 3.3.1 Change in law and/or regulations ............................................................................................ 50 3.3.2 Political and economic risk ....................................................................................................... 50 3.3.3 Force majeure............................................................................................................................. 50 3.3.4 Forward-looking statements ..................................................................................................... 50 SECTION 4.0 4.1 4.2 4.3 4.4 Corporate history and principal activities........................................................................................ 52 Share capital ....................................................................................................................................... 52 Shareholding structure ...................................................................................................................... 52 Profiles of directors ............................................................................................................................ 52 SECTION 5.0 5.1 BACKGROUND INFORMATION ON THE ISSUER .................................................... 52 BACKGROUND INFORMATION ON THE KAFALAH PROVIDER .......................... 56 Corporate history and principal activities........................................................................................ 56
9. 5 .2 5.3 5.4 5.5 5.6 5.7 Share capital ....................................................................................................................................... 56 Shareholding structure ...................................................................................................................... 56 Profiles of directors ............................................................................................................................ 56 Profiles of the executive committee members ............................................................................... 63 PETROS Group structure ................................................................................................................. 66 Information on PETROS’ subsidiaries ............................................................................................ 67 SECTION 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 OVERVIEW OF BUSINESS OF PETROS GROUP ..................................................... 68 Overview ............................................................................................................................................. 68 Business operations .......................................................................................................................... 69 Health, safety, security and environment matters ......................................................................... 72 PETROS Group’s key strengths ...................................................................................................... 73 PETROS Group’s future plans ......................................................................................................... 74 Risk management .............................................................................................................................. 74 Key financial highlights of PETROS, PETROS Group and the Issuer ....................................... 75 SECTION 7.0 INDUSTRY OVERVIEW ................................................................................................... 77 7.1 Overview of the Malaysian economy .............................................................................................. 77 7.1.1 Developments in the Malaysian Economy in the third quarter of 2020 .............................. 77 7.1.2 Outlook for the Malaysian economy in 2021 .......................................................................... 82 7.2 Industry overview and outlook ......................................................................................................... 83 SECTION 8.0 8.1 8.2 8.3 8.4 8.5 OTHER INFORMATION ................................................................................................... 85 Material litigation ................................................................................................................................ 85 Material contracts............................................................................................................................... 85 Related party transactions ................................................................................................................ 85 Contingent liabilities and material commitments ........................................................................... 85 Conflict-of-interest or potential conflict-of-interest situations ....................................................... 85 8.5.1 Maybank Investment Bank Berhad ......................................................................................... 85 8.5.2 RHB Investment Bank Berhad ................................................................................................. 85 8.5.3 Adnan Sundra & Low ................................................................................................................. 86 8.5.4 Malaysian Trustees Berhad ...................................................................................................... 86 8.5.5 Maybank Islamic Berhad ........................................................................................................... 86 8.5.6 RHB Islamic Bank Berhad ........................................................................................................ 87 APPENDIX I ....................................................................................................................................................... 88 APPENDIX II ...................................................................................................................................................... 89 2
10. DEFINITIONS OF KEY TERMS AND ABBREVIATIONS In this Information Memorandum , the following words or expressions shall have the following meanings except where the context otherwise requires: BNM - Bank Negara Malaysia, a body corporate established under the Central Bank of Malaysia Act 1958 (as repealed by the Central Bank of Malaysia Act 2009) of Jalan Dato’ Onn, 50480 Kuala Lumpur, Malaysia and includes its successors in title. Board - Board of Directors. Bursa Securities - Bursa Malaysia Securities Berhad (Registration No. 200301033577 (635998-W)). CMSA - Capital Markets and Services Act, 2007 (as amended from time to time and includes any re-enactment thereof). Companies Act - Companies Act, 2016 (as amended from time to time and includes any re-enactment thereof). DGO - Distribution of Gas Ordinance 2016 of Sarawak (as amended from time to time and includes any re-enactment thereof) Facility Agent - RHBIB. FSA - Financial Services Act, 2013 (as amended from time to time and includes any re-enactment thereof). FYE - Financial year ended. GDP - Gross Domestic Product. HSSE - Health, safety, security and environment. Joint Lead Arrangers/ JLA - Collectively, Maybank IB and RHBIB. Joint Lead Managers/ JLM - Collectively, Maybank IB and RHBIB. Joint Shariah Advisers - Collectively, Maybank Islamic and RHB Islamic. LNG - Liquefied natural gas. LOLA Guidelines - The Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework first issued on 9 March 2015, effective on 15 June 2015 and revised on 12 November 2020 (as may be amended from time to time). LPD - 15 December 2020. LPG - Liquified petroleum gas. Material Subsidiary - As at the LPD, PETROS Gas. 1
11. Maybank IB - Maybank Investment Bank Berhad (Registration No. 197301002412 (15938-H)). Maybank Islamic - Maybank Islamic Berhad (Registration No. 200701029411 (787435-M)). OMO - Oil Mining Ordinance 1958 of Sarawak (as amended from time to time and includes any re-enactment thereof). PETRONAS - Petroliam Nasional Berhad 197401002911 (20076-K)). PETROS Gas or PSG - Petroleum Sarawak Gas Sdn Bhd (Registration No. 201801032045 (1294070-D)) PETROS Group or Group - Collectively, PETROS and its subsidiaries. PETROS Niaga or PNiaga - Petrosniaga Sdn Bhd (Registration No. 201901011142 (1320470-K)). PETROS or PSB or Kafalah Provider - Petroleum Sarawak Berhad (Registration No. 201701025772 (1239938U)). Production Sharing Contract or PSC - The production sharing contract in respect of exploration and production of oil. PSEP or Issuer - Petroleum Sarawak Exploration & Production Sdn Bhd (Registration No. 201801032029 (1294054-A)). RAM - RAM Rating Services Berhad (Registration No. 200701005589 (763588T)). RHB Islamic - RHB Islamic Bank Berhad (Registration No. 200501003283 (680329-V)). RHBIB - RHB Investment Bank Berhad (Registration No. 197401002639 (19663P)). Ringgit/RM and sen - Ringgit Malaysia and sen respectively, being the lawful currency of Malaysia. SAC - Shariah Advisory Council Sarawak Shell - Sarawak Shell (71978-W)). SC - Securities Commission Malaysia. SGDSB - Sarawak Gas Distribution Sdn Bhd (Registration No. 199401036102 (321785-K)). Sukuk Trustee - Malaysian Trustees Berhad (Registration No. 197501000080 (21666-V)). Sukuk Wakalah - Islamic medium term notes issued or to be issued under the Sukuk Wakalah Programme. Sukuk Wakalah Programme - The multi-currency Islamic medium term notes programme of RM15.0 billion in nominal value (or its equivalent in other currencies) under the Shariah principle of Wakalah Bi Al-Istithmar. Behad 2 (PETRONAS) (Registration (Registration No. No. 192101000022
12. Sukukholders - The holders of the Sukuk Wakalah . USD - United states dollar, being the lawful currency of United States of America. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 3
13. SECTION 1 .0 EXECUTIVE SUMMARY The information set out in this Section 1.0 is an executive summary of the principal features of the transaction. It is qualified in its entirety by, and must be read in conjunction with, the further detailed information appearing elsewhere in this Information Memorandum. 1.1 Brief information on the Issuer The Issuer was incorporated in Malaysia under the Companies Act on 5 September 2018 as a private company limited by shares. The registered office and principal place of business of the Issuer is located at Level 6, CT660, Block C, iCOM Square, Jalan Pending, 93450 Kuching, Sarawak. The principal activities of the Issuer include engaging in export and import of crude petroleum oils, extraction of crude petroleum oils, and production of crude gaseous hydrocarbon (natural gas). The Issuer is a wholly-owned subsidiary of the Kafalah Provider. 1.2 Brief information on the Kafalah Provider The Kafalah Provider was incorporated in Malaysia under the Companies Act on 24 July 2017 as a public company limited by shares. The registered office and principal place of business of the Issuer is located at Level 6, CT660, Block C, iCOM Square, Jalan Pending, 93450 Kuching, Sarawak. The Kafalah Provider is engaged in exploitation of oil and gas, covering upstream, midstream and downstream. The Kafalah Provider is wholly-owned by the State Financial Secretary of Sarawak. Petros Group operates under OMO, DGO and Sarawak State’s rights under the Federal Constitutions. It has been tasked by the Sarawak State to be the vehicle for the implementation of the DGO and to develop and manage the Sarawak State’s petroleum resources under the Sarawak State’s rights as stipulated in OMO and in accordance with the rights enshrined in the Federal Constitution. 1.3 Brief summary of the Sukuk Wakalah Programme Kindly refer to the principal terms and conditions of the Sukuk Wakalah Programme as set out in Section 2.0 herein for terms not defined in this section. The Sukuk Wakalah Programme has a programme limit of RM15.0 billion in nominal value for the issuance of the Sukuk Wakalah. The Sukuk Wakalah shall be issued under the Shariah principle of Wakalah Bi Al-Istithmar, which is a Shariah principle and concept approved by the SAC of the SC. The tenure of the Sukuk Wakalah Programme shall be up to thirty (30) years from the date of the first issuance of the Sukuk Wakalah under the Sukuk Wakalah Programme. The tenure of each Sukuk Wakalah shall be more than one (1) year and up to thirty (30) years from the issue date, provided that the maturity of each tranche of Sukuk Wakalah does not extend beyond the maturity of the Sukuk Wakalah Programme. The first issuance of Sukuk Wakalah under the Sukuk Wakalah Programme shall be made within sixty (60) business days from the date of the lodgment with the SC. 4
14. The Issuer shall have the option to upsize the programme limit of the Sukuk Wakalah Programme at any time and from time to time , provided that the following conditions have been fulfilled: (a) there is no adverse impact on the credit rating of the Sukuk Wakalah Programme; (b) the proposed upsizing shall not unfairly discriminate against or is otherwise prejudicial to the Sukukholders. (c) the compliance with the relevant requirements under the LOLA Guidelines in relation to such upsizing; (d) the relevant regulatory approvals (if applicable) authorisations of the Issuer being obtained; and (e) if applicable, execution of documentation to evidence the upsizing of the Sukuk Programme. and necessary corporate The Sukukholders shall be deemed to have consented to such upsizing of the limit of the Sukuk Wakalah Programme in the trust deed. No consent is required from the Sukuk Trustee, the Facility Agent and any other party under the Sukuk Wakalah Programme when the upsizing of the limit of the Sukuk Wakalah Programme is exercised by the Issuer. The Sukuk Wakalah, pursuant to the relevant Transaction Documents, issued under the Sukuk Wakalah Programme shall constitute direct, unsubordinated, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference, priority amongst themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, subject to those preferred by law and the Transaction Documents. The Sukuk Wakalah may be issued either on a bought deal basis, book-building or direct placement/private placement on a best efforts basis, as the Issuer may select. The Sukuk Wakalah shall be issued in accordance with the PayNet Rules and Procedures and/or any other clearing system as specified in the applicable pricing supplement. The Sukuk Wakalah may be issued at a premium, at par or at a discount. The issue price of the Sukuk Wakalah shall be determined prior to the issuance of the Sukuk Murabahah and shall be calculated in accordance with the PayNet Rules and Procedures. Please refer to Section 2.0 herein for the principal terms and conditions of the Sukuk Wakalah Programme. 1.4 Utilisation of proceeds The proceeds from the issuance of the Sukuk Wakalah shall be utilised for the following Shariah-compliant purposes: (a) to finance the Issuer and/or PETROS Group's capital expenditure, expansion, acquisition, investment and working capital requirements as well as for general corporate purposes; (b) to finance the Issuer and/or PETROS Group’s expenditure or any cost incurred for the Issuer and/or PETROS Group’s oil & gas related businesses (including but not limited to infrastructure for the operations); 5
15. 1 .5 (c) to pay/refinance the Issuer and/or PETROS Group’s existing financings/borrowings and/or future financings including the maturing Sukuk Wakalah under the Sukuk Wakalah Programme; and/or (d) to defray expenses incurred in relation to the Sukuk Wakalah Programme. Regulatory requirements The Issuer has received the endorsement from SAC of the SC under its letter dated 15 September 2020 in relation to the Shariah structure of the Sukuk Wakalah Programme. Further, the lodgement of the documents and information relating to the Sukuk Wakalah Programme in accordance with the LOLA Guidelines have been made on 25 January 2021. 1.6 Credit Ratings RAM has assigned an initial rating of AAA for the Sukuk Wakalah Programme pursuant to its letter dated 14 January 2021. 1.7 Selling Restrictions At the point of issuance of the Sukuk Wakalah The Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase of the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within: (a) Part 1 of Schedule 6 (or Section 229(1)(b)); and Part 1 of Schedule 7 (or Section 230(1)(b)); read together with Schedule 9 (or Section 257(3)) of the CMSA; or (b) Section 2(6) of the Companies Act, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. After the issuance of the Sukuk Wakalah The Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase of the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within: (a) Part 1 of Schedule 6 (or Section 229(1)(b)); read together with Schedule 9 (or Section 257(3)) of the CMSA; or (b) Section 2(6) of the Companies Act, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. In addition to the above, the Sukuk Wakalah denominated in foreign currency may only be offered, sold, transferred or otherwise disposed directly or indirectly to a Resident (as defined under the Financial Services Act, 2013 as amended from time to time). 6
16. SECTION 2 .0 PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK WAKALAH PROGRAMME The principal terms and conditions of the Sukuk Wakalah Programme as per the lodgement made to the SC are set out below. The information set out in this section and the following information relating to the Sukuk Wakalah Programme are qualified in its entirety, and must be read in conjunction with, the further detailed information appearing elsewhere in this Information Memorandum. Words and expressions used and defined in this Section 2.0, in the event of any inconsistency with the definition section of this Information Memorandum, shall only be applicable for this Section 2.0. Details of Facility / Programme 1. Name of facility/programme : A multi-currency Islamic medium term notes (“Sukuk Wakalah”) master programme of up to RM15.0 billion (or its equivalent in other currencies) in nominal value based on the Shariah principle of Wakalah Bi Al-Istithmar (“Sukuk Wakalah Programme”). 2. Issuance type : Programme. 3. Shariah principles (for sukuk) : (i) Wakalah Bi Al-Istithmar. (ii) Murabahah via Tawarruq arrangement 4. Facility description (for ringgit-denominated sukuk, to provide description as cleared by the SC) : Facility description 1) Pursuant to a Wakalah agreement (“Wakalah Agreement”) entered into between the Sukuk Trustee (acting on behalf of the investors (“Sukukholders”)) and Petroleum Sarawak Exploration & Production Sdn Bhd (“Petros E&P”), the Sukuk Trustee (acting on behalf of the Sukukholders) shall appoint Petros E&P to act as its agent (“Wakeel”) to perform services which will include investing the Sukuk Proceeds (as defined below) into the Wakalah Investments (as defined below) and manage it. Petros E&P shall, from time to time, issue Sukuk Wakalah and the Sukukholders shall subscribe to the Sukuk Wakalah by paying the issue proceeds (“Sukuk Proceeds”). 2) Petros E&P, in its capacity as the Wakeel, shall declare a trust over the Trust Assets (as defined in paragraph (f) of “Other terms and conditions”) for the benefit of the Sukukholders. The Sukuk Wakalah shall represent the Sukukholders’ undivided and proportionate beneficial interest in the Trust Assets. The Trust Assets shall comprise of (i) Sukuk Proceeds, (ii) the Wakalah Investments and (iii) the rights, title, interest, entitlement and benefit in, to and under the Transaction Documents (as defined in paragraph (o) of “Other terms and conditions”). The Wakeel shall invest the Sukuk Proceeds received from the Sukukholders into the relevant investment portfolio which shall comprise of: 7
17. (i) Shariah-compliant business operation of any entities within PETROS Group (as defined in paragraph (a) of “Other terms and conditions”), which shall be identified prior to issuance of the Sukuk Wakalah (“Shariah-compliant Business”); and (ii) Commodities (as defined in paragraph (f) of “Other terms and conditions”) purchased and sold under the Shariah principle of Murabahah (“Commodity Murabahah Investment”). The investments described in (i) and (ii) above shall collectively be referred to as the “Wakalah Investments”. Shariah-compliant Business Pursuant to an investment agreement between the Wakeel and Petros E&P, as the investment agent (“Investment Agent”), the Wakeel shall invest part of the Sukuk Proceeds into the Shariah-compliant Business. The Shariah-compliant Business shall be managed by the Investment Agent. The value of the Shariah-compliant Business should be at least 33% of the aggregate value of the Wakalah Investments, subject to the valuation principles set out in the Wakalah Agreement. The value attributable to the Wakalah Investments is the aggregate of the value of the Shariah-compliant Business and the Commodity Murabahah Investment. For the avoidance of doubt, the above ratio of at least 33% of the value of the Wakalah Investments is only applicable at the point of initial investment for each tranche of the respective Sukuk Wakalah and does not need to be maintained throughout the tenure of the Sukuk Wakalah. However, the Wakeel shall ensure that the Shariah-compliant Business shall at all times be a component of the Wakalah Investments. 3) Commodity Murabahah Investment The remaining balance of the Sukuk Proceeds shall be invested into the Commodity Murabahah Investment. The Commodity Murabahah Investment shall be effected as follows: (a) Pursuant to a commodity Murabahah master agreement between Petros E&P as the buyer (“Buyer”), the Wakeel and the Sukuk Trustee (the “Commodity Murabahah Master Agreement”), the Buyer shall issue a purchase order (“Purchase Order”) to the Wakeel and the Sukuk Trustee (both acting on behalf of the Sukukholders) with an irrevocable and unconditional undertaking to purchase the Commodities from the Sukukholders at the Deferred Sale Price (as defined below). 8
18. (b) Pursuant to the Purchase Order, the Wakeel (on behalf of the Sukukholders) (via the Facility Agent as the purchase agent (“Purchase Agent”)) shall appoint a commodity trading participant (“CTP”) for purchase of Commodities on spot basis from the commodity supplier(s) at Bursa Suq Al-Sila’ or such other independent commodity broker acceptable to the Joint Shariah Advisers (“Commodity Supplier”) at a purchase price equivalent to the remaining balance of the Sukuk Proceeds (“Purchase Price”). (c) Upon acquiring the Commodities, the Purchase Agent on behalf of the Wakeel (for the benefit of the Sukukholders) will thereafter sell those Commodities to the Buyer for a price equivalent to the Purchase Price plus the profit margin and shall be payable on deferred payment basis (“Deferred Sale Price”). For the avoidance of doubt, the Deferred Sale Price shall be an amount equal to the aggregate of the Expected Periodic Distribution Amount (as defined below), if any, and the nominal value of the corresponding tranche of the respective Sukuk Wakalah. “Expected Periodic Distribution Amount” means on any relevant periodic distribution date, such amount calculated at the Periodic Distribution Rate (as defined in paragraph (h) of “Other terms and conditions”) on the nominal value of the relevant Sukuk Wakalah based on actual/365 days. (d) The Buyer (via the Facility Agent as the sale agent (“Sale Agent”)) shall appoint the CTP, who will immediately sell the Commodities to Bursa Malaysia Islamic Services Sdn Bhd or such other independent commodity broker acceptable to the Joint Shariah Advisers (“Commodity Buyer”) on spot basis for cash, equivalent to the Purchase Price. 4) Periodic Distribution / one-off distribution In respect of Sukuk Wakalah with Periodic Distributions (as defined below), returns generated from the Wakalah Investments (including part payment of the Deferred Sale price) up to the Expected Periodic Distribution Amount shall be distributed to the Sukukholders periodically in the form of periodic distributions (“Periodic Distributions”) on fixed rate basis or floating rate basis. In respect of Sukuk Wakalah without Periodic Distributions, the expected one-off distribution amount which shall be equal to the difference between the nominal value and the Sukuk Proceeds of the Sukuk Wakalah (“Expected One-off Distribution Amount”) shall be distributed to the Sukukholders on a one-off basis upon the maturity date (“Scheduled Dissolution Date”) 9
19. or upon the declaration that a Dissolution Event (as defined in paragraph entitled “Events of default or enforcement events, where applicable, including recourse available to investors”) has occurred (“Dissolution Declaration Date”). On (i) each periodic distribution date; (ii) the Scheduled Dissolution Date; or (iii) the Dissolution Declaration Date; as the case may be, any returns from the Wakalah Investments in excess of the Expected Periodic Distribution Amount distributable and/or the Dissolution Distribution Amount (as defined in paragraph (k) of “Other terms and conditions”) due and payable under the Sukuk Wakalah (as the case may be) shall be waived by the Sukukholders and retained by Petros E&P as an incentive fee for its services as Wakeel in managing the Wakalah Investment. 5) Petros E&P (as the “Obligor”) shall grant a purchase undertaking (“Purchase Undertaking”) to the Sukuk Trustee (for the benefit of the Sukukholders), whereby on a Scheduled Dissolution Date or the Dissolution Declaration Date, whichever is the earlier, the Obligor shall purchase the Shariah-compliant Business at the Exercise Price (as defined below) by entering into the sale agreement (“Sale Agreement”). The “Exercise Price” for the purchase of the Shariah-compliant Business shall be at the market value or fair value of the Shariah-compliant Business determined based on the valuation principles set out in the Wakalah Agreement, at the relevant Scheduled Dissolution Date or the Dissolution Declaration Date, as the case may be. The Sukuk Trustee (for the benefit of the Sukukholders) shall issue a sale undertaking (“Sale Undertaking”) in favour of Petros E&P under which the Sukuk Trustee shall sell the Shariah-compliant Business to Petros E&P upon early redemption (“Early Redemption Date”) at the Exercise Price and enter into a sale agreement for such sale. 6) Proceeds of the Wakalah Investments being the Exercise Price, the Deferred Sale Price (subject to any Ibra’ if applicable) and any returns generated shall be utilised to redeem the Sukuk Wakalah at the Dissolution Distribution Amount, on the Scheduled Dissolution Date, the Dissolution Declaration Date or the Early Redemption Date, as the case may be. Any excess in respect of proceeds of the Wakalah Investments thereof shall be waived by the Sukukholders and be retained by the Wakeel as incentive fee. Upon full payment of all amounts due and payable under the Sukuk Wakalah, the relevant trust in respect of the Trust Assets will be dissolved and the relevant tranche of the Sukuk Wakalah held by the Sukukholders will be cancelled. 10
20. 7 ) Petroleum Sarawak Berhad (Registration No. 201701025772 (1239938-U)) (“PETROS”) shall provide an unconditional and irrevocable corporate guarantee under the Shariah principle of Al-Kafalah (“Corporate Kafalah”), as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders under which PETROS shall agree to guarantee all payment obligations of the Issuer under or in connection with the Transaction Documents including the obligation to pay the Deferred Sale Price which is due and payable on the relevant Scheduled Dissolution Date and/or the relevant periodic distribution date and/or such other date where the Sukuk Wakalah shall be due for redemption, as the case may be, including any payment obligation in respect of Ta’widh (compensation) and all charges in relation to the Sukuk Wakalah issued and to be issued under the Sukuk Wakalah Programme. Please refer to the attachment for the transaction diagram and explanatory notes for the Sukuk Wakalah transaction pursuant to the Sukuk Wakalah Programme. 5. Currency : Multi-currency (including Ringgit). 6. Expected facility/programme size (for programme to state the option to upsize) : Up to RM15,000,000,000.00 Option to upsize: ☒ Yes, details as follows:☐ No Additional notes on upsizing: The Issuer shall have the option to upsize the limit of the Sukuk Wakalah Programme at any time and from time to time, provided that the following conditions have been fulfilled: (a) there is no adverse impact on the credit rating of the Sukuk Wakalah Programme; (b) the proposed upsizing shall not unfairly discriminate against or is otherwise prejudicial to the Sukukholders. (c) the compliance with the relevant requirements under the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework (first issued by the SC on 9 March 2015 and revised on 12 November 2020) (as amended from time to time) (“LOLA Guidelines”) in relation to such upsizing; (d) the relevant regulatory approvals (if applicable) and necessary corporate authorisations of the Issuer being obtained; and (e) if applicable, execution of documentation to evidence the upsizing of the Sukuk Wakalah Programme, The Sukukholders shall be deemed to have consented to such upsizing of the limit of the Sukuk Wakalah Programme in the 11
21. Trust Deed . No consent is required from the Sukuk Trustee, the Facility Agent and any other party under the Sukuk Wakalah Programme when the upsizing of the limit of the Sukuk Wakalah Programme is exercised by the Issuer. 7. Tenure of facility/programme : Thirty (30) years 8. Availability period of debt/ sukuk programme : The Sukuk Wakalah shall be available for issuance upon completion of documentation and fulfilment of all conditions precedent under the Sukuk Wakalah Programme to the satisfaction of the Joint Lead Arrangers (unless otherwise waived or deferred by the Joint Lead Arrangers) and ending on the expiry date of the Sukuk Wakalah Programme. The first issuance shall be made within sixty (60) business days from the date of the lodgement with the Securities Commission Malaysia (“SC”). 9. Clearing and platform(s) settlement : (i) (ii) 10. Mode(s) of issue : 11. Selling restrictions :    ☐ (i) ☐    ☐   (ii) ☐   ☐   Payments Network Malaysia Sdn. Bhd. (“PayNet”); and/or any other clearing system as specified in the applicable pricing supplement. Private/direct placement Bought deal Book building Tender At issuance Exclusively to persons outside Malaysia Part 1 of Schedule 6 of the CMSA Part 1 of Schedule 7 of the CMSA Read together with Schedule 9 of CMSA Schedule 8 of CMSA Section 2(6) of the Companies Act, 2016 Other After issuance Exclusively to persons outside Malaysia Part 1 of Schedule 6 of the CMSA Read together with Schedule 9 of CMSA Schedule 8 of CMSA Section 2(6) of the Companies Act, 2016 Other Additional notes on selling restrictions: Selling Restrictions at issuance The Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase of the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within Part 1 of Schedule 6 (or Section 229(1)(b)) and Part 1 of Schedule 7 (or 12
22. Section 230 (1)(b)); read together with Schedule 9 (or Section 257(3)) of the Capital Markets and Services Act, 2007 as amended from time to time, (“CMSA”), or Section 2(6) of the Companies Act, 2016 as amended from time to time, (“CA”), subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. Selling Restrictions after issuance The Sukuk Wakalah may only be offered, sold, transferred or otherwise disposed directly or indirectly, to a person to whom an offer for subscription or purchase of, or invitation to subscribe for or purchase of the Sukuk Wakalah and to whom the Sukuk Wakalah are issued would fall within Part 1 of Schedule 6 (or Section 229(1)(b)); read together with Schedule 9 (or Section 257(3)) of the CMSA, or Section 2(6) of the CA, subject to any change in the applicable laws and such other selling restrictions as may be applicable outside Malaysia. In addition to the above, the Sukuk Wakalah denominated in foreign currency may only be offered, sold, transferred or otherwise disposed directly or indirectly to a Resident (as defined under the Financial Services Act, 2013 as amended from time to time). 12. Tradability and transferability : ☒ ☐ ☐ Tradable & transferable MYR15,000,000,000.00 Non-tradable & non-transferable Restricted transferability Additional Notes: The Sukuk Wakalah are tradeable and transferable subject to the selling restrictions as provided in paragraph entitled “Selling Restrictions”. 13. Details of security/collateral pledged, if applicable : ☒ ☐ Unsecured Secured/combination of unsecured and secured 14. Details of applicable : ☐ ☒ Not guaranteed Guaranteed, details as follows: guarantee, if PETROS (as the Kafalah Provider) shall provide a Corporate Kafalah, as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders, under which PETROS shall guarantee all payment obligations of the Issuer under or in connection with the Transaction Documents including the obligation to pay the Deferred Sale Price which is due and payable on the relevant Scheduled Dissolution Date and/or the relevant periodic distribution date and/or such other date where the Sukuk Wakalah shall be due for redemption, as the case may be, including any payment obligation in respect of Ta’widh (compensation) and all charges in relation to the Sukuk Wakalah issued and to be issued under the Sukuk Wakalah Programme. The Corporate Kafalah is enforceable upon a declaration of a Dissolution Event (as defined in paragraph entitled “Events of 13
23. default or enforcement events , where applicable, including recourse available to investors”), whereby the amount guaranteed under the Corporate Kafalah by PETROS shall be payable on demand. 15. Convertibility of issuance and details of the convertibility : ☒ Non-convertible ☐ Convertible 16. Exchangeability of issuance and details of the exchangeability : ☒ Non-exchangeable ☐ Exchangeable 17. Call option and details, if applicable : ☒ No call option ☐ Call option 18. Put option and details, if applicable : ☒ No put option ☐ Put option 19. Details of covenants : ☐ No positive covenant ☒ Positive covenant, details as follows: The positive covenants shall include but are not limited to the following: (i) Each of the Issuer and the Kafalah Provider shall exercise reasonable diligence in carrying out its businesses and affairs in a proper and efficient manner; (ii) Each of the Issuer and the Kafalah Provider shall maintain in full force and effect all relevant authorisations, consents, rights, licences approval and permits (governmental and otherwise) which are necessary for the operation of its business or for it to enter into or perform its obligations under the Transaction Documents to which it is a party and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which is or may become necessary to enable them to operate its businesses or for it to enter into or perform its obligations under the Transaction Documents to which it is a party; (iii) In the case of Ringgit-denominated Sukuk Wakalah, the Issuer shall maintain a paying agent, or its equivalent, who is based in Malaysia; (iv) The Issuer shall procure that the facility agent shall notify the Sukuk Trustee if the paying agent does not receive payment from the Issuer on the relevant due dates as required under the Transaction Documents and the terms and conditions of the Sukuk Wakalah; (v) The Issuer and the Kafalah Provider shall keep proper books, accounts and records at all times and to provide the Sukuk Trustee and any person appointed by it (e.g. 14
24. auditors ) access to such books and accounts to the extent permitted by law; (vi) The Issuer shall ensure that the provisions of the Information Memorandum do not contain any matter which is inconsistent with the provisions of the Transaction Documents and the terms and conditions of the Sukuk Wakalah; (vii) The Issuer and the Kafalah Provider shall comply with all applicable laws including the provisions of the CMSA and/or the directive, written notices, circulars or guidelines issued by the SC from time to time including any applicable anti money laundering and terrorism financing laws; (viii) The Issuer and the Kafalah Provider shall at all times on demand execute all such further documents and do all such further acts reasonably necessary at any time or times to give effect to the terms and conditions of the Transaction Documents; (ix) Each of the Issuer and the Kafalah Provider shall comply at all times with the provisions in the Transaction Documents to which it is a party and the terms and conditions of the Sukuk Wakalah and it shall immediately notify the Sukuk Trustee in the event that it is unable to fulfill or comply with any of the provisions of the Transaction Documents to which it is a party; (x) Each of the Issuer and the Kafalah Provider shall maintain and/or cause to be maintained adequate takaful/insurance cover in respect of its assets and business and all other takaful/insurance necessary for its assets and business in accordance with common industry practice for business of such nature with reputable takaful/insurance companies and promptly notify the Sukuk Trustee of any event which will or may give rise to any claim or right of action under any takaful/insurance; (xi) The Issuer shall directly or indirectly remain as a wholly owned subsidiary of PETROS; (xii) The Kafalah Provider shall directly or indirectly remain as a wholly owned subsidiary of State Financial of Secretary Sarawak; (xiii) The Issuer shall maintain at all times throughout the tenure of the Sukuk Wakalah Programme, the Sukuk Trustees’ Reimbursement Account with a deposit sum of RM100,000.00; and (xiv) any other positive covenants as advised by the solicitors and mutually agreed between the Issuer and Joint Lead Arrangers. ☐ No negative covenant ☒ Negative covenant, details as follows: 15
25. The negative covenants shall include but are not limited to the following :(i) Each of the Issuer and the Kafalah Provider shall not grant guarantees, indemnities or similar assurances against financial loss in respect of any indebtedness and/or liabilities of its affiliate or any third party other than: in case of the Issuer: (a) guarantees, indemnities or similar assurances (including any performance bonds, warranty bonds and/or completion guarantee) granted in the Issuer’s ordinary course of business; and (b) guarantees, indemnities or similar assurances (including any performance bonds, warranty bonds and/or completion guarantee) granted in respect of the indebtedness and/or liabilities of the subsidiaries of the Issuer and/or any of joint venture of the Issuer, provided that such indebtedness and/or liabilities arise out of businesses relating to the ordinary course of business of the Issuer; in case of the Kafalah Provider: (ii) (a) guarantees, indemnities or similar assurances (including any performance bonds, warranty bonds and/or completion guarantee) granted in the Kafalah Provider’s ordinary course of business; and (b) guarantees, indemnities or similar assurances (including any performance bonds, warranty bonds and/or completion guarantee) granted in respect of the indebtedness and/or liabilities of the subsidiaries of the Kafalah Provider and/or any of joint venture of the Kafalah Provider, provided that such indebtedness and/or liabilities arise out of businesses relating to the ordinary course of business of the Kafalah Provider; Each of the Issuer and the Kafalah Provider shall not create or permit to exist any encumbrance, mortgage, charge whether (fixed or floating), pledge, lien, assignment or otherwise create or permit to exist any security interest over the whole or any part of its assets, undertakings and/or revenues, except for: in case of the Issuer: (a) liens arising in the ordinary course of business of the Issuer by operations of law and not by way of contract; (b) any security interest created or to be created in favour of any financiers providing financing to any subsidiary of the Issuer; and 16
26. (c) any security or arrangement for the purpose of providing security in respect of any joint ventures entered into or to be entered into by the Issuer; in case of the Kafalah Provider: (a) liens arising in the ordinary course of business of the Kafalah Provider by operations of law and not by way of contract; (b) any security interest created or to be created in favour of any financiers providing financing to any subsidiary of the Kafalah Provider; and (c) any security or arrangement for the purpose of providing security in respect of any joint ventures entered into or to be entered into by the Kafalah Provider. In relation to items (b) and (c) above (relating to both the Issuer and the Kafalah Provider), security interest created in relation to borrowing with not more than 10% of PETROS’ total consolidated assets, calculated by reference to the then latest audited consolidated financial statements of PETROS. (iii) Each of the Issuer and the Kafalah Provider shall not enter into a transaction, whether directly or indirectly with interested persons unless: (a) such transaction shall be on terms that are no less favourable to the Issuer or the Kafalah Provider (as the case may be) than those which could have been obtained in a comparable transaction from persons who are not interested persons; and (b) with respect to transactions involving an aggregate payment or value equal to or greater than 5% of PETROS’ total consolidated assets, the Issuer or the Kafalah Provider (as the case may be) obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms, provided that: (1) (2) (3) the Issuer or the Kafalah Provider (as the case may be) certifies to the Sukuk Trustee that the transaction complies with (a); the Issuer or the Kafalah Provider (as the case may be) has received the certification referred to in (b) (where applicable); and the transaction has been approved by the majority of the board of directors or shareholders of the Issuer or the Kafalah Provider (as the case may be) in a general meeting as the case may require; For avoidance of doubt, interested persons shall 17
27. include directors , major shareholders and chief executives of the Issuer or the Kafalah Provider (as the case may be) and shall also have the meaning ascribed to it in the Trust Deeds Guidelines issued by the SC (1st issued on 12 July 2011, revised on 23 July 2020 and effective on 23 August 2020) (“Trust Deeds Guidelines”), and if there is any inconsistency, the meaning as ascribed in the Trust Deeds Guidelines shall prevail. (iv) Each of the Issuer and the Kafalah Provider shall not reduce its paid-up capital whether by varying the amount, structure or value thereof or the rights attached thereto or by converting any of its share capital into stock, or by consolidating, dividing or subdividing all or any of its shares, or by any other manner; (v) Each of the Issuer and the Kafalah Provider shall not permit any amendment, supplement or variation to its Constitution in a manner which may be materially prejudicial to the interests of the Sukukholders; (vi) The Issuer shall not change the utilisation of proceeds from the Sukuk Wakalah where the Transaction Documents and the Information Memorandum set out a specific purpose for which proceeds are to be utilised; (vii) Each of the Issuer and the Kafalah Provider shall not take steps to wind-up or dissolve itself; (viii) The Issuer and the Kafalah Provider shall not enter into or undertake any amalgamation, demerger, merger, consolidation, corporation reconstruction, reorganisation or restructuring which would result in a Material Adverse Effect (a “Corporate Restructuring”); (ix) Each of the Issuer and the Kafalah Provider shall not declare or pay any dividends or make any distribution whether income or capital in its nature to its shareholders if a Dissolution Event has occurred and is continuing or if following such payment, distribution or declaration, a Dissolution Event would occur; (x) Each of the Issuer and the Kafalah Provider shall not carry out its businesses in a way that will adversely affect its ability to perform its obligations under the Transaction Documents to which it is a party; (xi) Each of the Issuer and the Kafalah Provider shall not surrender, transfer, assign, relinquish or otherwise dispose of any of its rights and interest under the Transaction Documents to which it is a party (without the prior written consent from the Sukuk Trustee) except in accordance with the terms of the Transaction Documents; (xii) Each of the Issuer and the Kafalah Provider shall not sell, transfer, lease or otherwise dispose or in any case 18
28. cease to exercise control over , whether by single transaction or number of related transactions, any of its assets, other than any sale, transfer, lease or other disposal of any of its assets (a) in its ordinary course of business; (b) solely for the purpose of facilitating the Shariahcompliant financing facilities; (xiii) The Kafalah Provider shall not in any way permit or allow any change to its direct or indirect shareholdings in the Material Subsidiaries which may have a Material Adverse Effect. (xiv) Any other negative covenants as advised by the solicitors and mutually agreed between the Issuer and Joint Lead Arrangers. ☐ No financial covenant ☒ financial covenant, details as follows: The Issuer and the Kafalah Provider shall ensure and procure the following financial covenants to be maintained for so long as any Sukuk Wakalah is outstanding: (i) the Debt to Equity Ratio (“DE Ratio”) of the PETROS Group (as defined below) shall not exceed the following prescribed limit for the corresponding period: Period Maximum DE Ratio From 5th anniversary (exclusive) up to 8th anniversary (inclusive) 6.00 times From 8th anniversary (exclusive) up to 10th anniversary (inclusive) 3.00 times After 10th anniversary (exclusive) 2.00 times Note – Anniversary shall mean anniversary of the first issuance date under the Sukuk Wakalah Programme. Exclusive or inclusive shall mean if the relevant anniversary date is excluded or included respectively. The DE Ratio is the ratio of indebtedness of the PETROS Group represented by dividing Debt to the Equity where: Debt is defined as: (a) all principal amounts outstanding under the Sukuk Wakalah Programme; and (b) all other indebtedness for financing/borrowed moneys (excluding outstanding under its revolving 19
29. working capital / overdraft facilities), hire purchase obligations, finance lease obligations (excluding finance lease obligations arising from building/office rental leases incurred in relation to its business), net exposure determined on a marked to market basis under any derivative instrument (but excluding forward contracts entered into in the ordinary course of business which are trade in nature) and obligations/ liabilities under call or put options (upon crystallisation of such call or put options) of the PETROS Group. Equity is defined as the consolidated shareholders’ funds of PETROS including, if any, preference equity, subordinated shareholders’ advances/ loans, minority interests of PETROS (if any), irredeemable convertible unsecured loan stocks of PETROS (if any) and retained earnings/ losses. “PETROS Group” shall mean PETROS and its subsidiaries. (ii) the Debt shall not exceed the following prescribed limit (“Debt Limit”) for the corresponding period: Period Debt Limit From first issue date up to 1st anniversary (inclusive) RM5,000,000,000 From 1st anniversary (exclusive) up to 3rd anniversary (inclusive) RM10,000,000,000 From 3rd anniversary (exclusive) up to 5th anniversary (inclusive) RM15,000,000,000 The DE Ratio shall be calculated for each financial year during the tenure of the Sukuk Wakalah Programme based on the latest audited consolidated financial statements of PETROS. The calculation of the DE Ratio shall be duly confirmed by PETROS’ external auditors on an annual basis. The Issuer and/or the Kafalah Provider shall arrange for the external auditor’s confirmation to be forwarded to the Facility Agent, Sukuk Trustee and the Rating Agency. For the avoidance of doubt, any double counting shall be disregarded. Such other financial covenants as may be determined by the rating agency and mutually agreed with the Issuer (if any). ☐ No information covenant ☒ Information covenant, details as follows: The information covenants shall include but are not limited to 20
30. the following : (i) Each of the Issuer and the Kafalah Provider shall give to the Sukuk Trustee any information which the Sukuk Trustee may reasonably require in order to discharge its duties and obligations under the Transaction Documents relating to the affairs of the Issuer and/or the Kafalah Provider to the extent permitted by law; (ii) Each of the Issuer and the Kafalah Provider shall immediately give notice in writing to the Sukuk Trustee if it becomes aware of: (a) any potential Dissolution Events or any Dissolution Events under any outstanding Sukuk Wakalah under the Sukuk Wakalah Programme has occurred and is continuing; (b) the happening of any event that has caused or could cause, one or more of the following:(1) any amount secured or payable under the Sukuk Wakalah to become immediately payable; (2) the Sukuk Wakalah to become immediately enforceable; or (3) any other right or remedy under the terms, provisions or covenants of the Sukuk Wakalah or Transaction Documents to become immediately enforceable; (c) any circumstance that has occurred that would materially and adversely affect the ability of the Issuer and/or the Kafalah Provider to perform any of its obligations under any of the Transaction Documents to which it is a party; (d) any substantial change in the nature of the business of the Issuer and/or the Kafalah Provider; (e) a change in the name of the Issuer or the Kafalah Provider; (f) any change in the withholding tax position or taxing jurisdiction of the Issuer and/or the Kafalah Provider; (g) any change to the board of directors of the Issuer and/or the Kafalah Provider; (h) any change in the utilisation of the proceeds as provided in the Information Memorandum and the Transaction Documents; (i) any cessation of liability of the Kafalah Provider for the payment of the whole or part of the moneys for which it were liable under the Corporate Kafalah; and (j) any other matter that may materially prejudice the 21
31. interests of the Sukukholders ; (iii) Each of the Issuer and the Kafalah Provider shall promptly deliver to the Sukuk Trustee the following: (a) its annual audited financial statements (which shall contain income statement, balance sheet and cash flow statement) audited and duly certified without qualification by a firm of independent certified public accountants as soon as they become available (and in any event within one hundred eighty (180) days from the end of each financial year); (b) its semi-annual unaudited financial statements (which shall contain income statement, balance sheet) prepared in accordance with the approved accounting standards in Malaysia duly certified by one (1) director of the Issuer or the Kafalah Provider (as the case may be) as soon as they become available (in any case within ninety (90) days from the end of each half of the financial year); and (c) promptly, such other information relating to its business and operations and the Sukuk Trustee may from time to time request in writing on order to discharge its duties and obligations as Sukuk Trustee under the Trust Deed; and (d) any other account, report, notice, statement or circular issued to its shareholders which are material and substantial to or necessary for the Sukukholders to make informed investment decisions. The Sukuk Trustee shall at its discretion circulate any of the information above to the Sukukholders and the credit rating agency. (iv) The Issuer and the Kafalah Provider shall deliver to the Sukuk Trustee annually (within one hundred eighty (180) days from the end of each financial year end), a certificate signed by one (1) director or authorised signatory of the Issuer or the Kafalah Provider (as the case may be) confirming (i) the Issuer or the Kafalah Provider (as the case may be) has observed, complied with and performed all of its obligations under the relevant Transaction Documents and the terms and conditions of the Sukuk Wakalah Programme; (ii) the required financial covenant has been maintained in accordance with the terms and conditions of the Sukuk Wakalah Programme; and (iii) that there did not exist or had not existed, from the date of first issuance of the Sukuk Wakalah or from the date of the previous certificate, as the case may be, any Dissolution Event or event which with the giving of notice and/or lapse of time and/or the issue of a certificate would constitute a Dissolution Event, where applicable, and if such is not the case, to specify the same and steps being taken, if 22
32. any , to remedy the same; and (v) 20. Details of designated account(s), if applicable, 21. Credit rating(s) facility/programme, applicable of if Any other information covenants as may be advised by the Solicitors and mutually agreed by the Issuer and the Joint Lead Arrangers. ☒(a) No designated account ☐ Designated account : ☐ Not Rated ☐ Combination of rated and unrated ☒ Rated as follows: Credit rating agency: Credit rating: Final/indicative: Name of Tranche/ Series /Class Partial Rating: Amount rated: 22. Conditions precedent : RAM Rating Services Berhad AAA Indicative Not applicable No RM15,000,000,000.00 Conditions precedent relating to the establishment of the Sukuk Wakalah Programme The availability of the Sukuk Wakalah Programme shall be subject to conditions precedent, including but not limited to those set out below (all in form and substance acceptable to the Joint Lead Arrangers, unless waived by the Joint Lead Arrangers, as the case may be): Main documentation: (i) The relevant Transaction Documents have been executed and, where applicable, stamped or endorsed as exempted from stamp duty and presented for registration with the relevant registries/authorities. The Issuer and the Kafalah Provider: (i) Certified true copy of the Issuer’s board of directors’ resolution authorising, among others: (a) (b) (c) the establishment of the Sukuk Wakalah Programme; the issuance of the relevant Sukuk Wakalah under the Sukuk Wakalah Programme; and the execution of the relevant Transaction Documents to which it is a party; (ii) Certified true copy of the Kafalah Provider’s board of directors’ resolution authorising, amongst others, the provision of the Corporate Kafalah and the execution thereof; (iii) Certified true copies of the Certificate of Incorporation and the Constitution of the Issuer and the Kafalah Provider and other relevant statutory forms of the Issuer and the Kafalah Provider duly certified by the 23
33. company secretary of the Issuer and the Kafalah Provider respectively ; (iv) A list of the authorised signatories of the Issuer and the Kafalah Provider and their respective specimen signatures; (v) Satisfactory reports of company searches on the Issuer and the Kafalah Provider; and (vi) Satisfactory reports of the winding-up search or, in lieu of the winding-up search, the relevant statutory declaration of the Issuer and the Kafalah Provider. General: (i) Evidence that the endorsement from the Shariah Advisor Council of the SC and the acknowledgement in respect of the lodgement of the required information and documents relating to the Sukuk Wakalah Programme with the SC has been obtained; (ii) Confirmation from the Joint Shariah Advisers that the structure and mechanism together with Transaction Documents of the Sukuk Wakalah Programme are in compliance with Shariah; (iii) All necessary approvals and consents required for the establishment of the Sukuk Wakalah Programme (if required) have been obtained and the Issuer is in compliance with all conditions of such approvals and consents. (iv) Evidence that all relevant transaction fees, costs and expenses in relation to the Sukuk Wakalah Programme have been or will be paid in full; (v) Evidence of the completion of satisfactory legal due diligence exercise and the receipt of the legal due diligence report by the Joint Lead Arrangers from the Solicitors; (vi) A legal opinion from the Solicitors addressed to the Joint Lead Arrangers, with respect to, among others, the legality, validity and enforceability of the Transaction Documents and a confirmation from the Solicitors that all conditions precedent (set out herein) have been fulfilled or waived (as the case may be), to the satisfaction of the Joint Lead Arrangers; (vii) The Ringgit-denominated rated Sukuk Wakalah has obtained a rating of AAA from credit rating agency; (viii) Confirmation from the Sukuk Trustee that the Sukuk Trustees’ Reimbursement Account has been opened and established with such financial institution acceptable to the Joint Lead Arrangers and the mandates are in accordance with the terms of the board of directors’ resolution and the provisions of the relevant Transaction Documents and the deposit of 24
34. RM100 ,000.00 has been made; and (ix) Such other conditions precedent as may be advised by the Solicitors and mutually agreed by the Issuer. Conditions Precedent prior to each issuance of Sukuk Wakalah (i) Confirmation from the Issuer that all representations and warranties remain true and correct in all material respects and it is in compliance with all covenants under the Transaction Documents; (ii) No Dissolution Event has occurred or will occur as a result of such subsequent issuance; (iii) Certified true copy of the Issuer’s board of directors’ resolution authorising, the issuance of the relevant tranche of Sukuk Wakalah under the Sukuk Wakalah Programme; and (iv) Such other conditions precedent as advised by the Solicitors and mutually agreed between the Issuer and Joint Lead Arrangers. Conditions precedent relating to each issuance of foreign currency denominated Sukuk Wakalah (i) The Issuer shall have received a rating letter/report(s) from the appointed rating agency acceptable to the Joint Lead Managers, confirming that the foreign currency denominated rated Sukuk have been assigned with such rating acceptable to the Joint Lead Managers; (ii) Evidence that approval from regulators of the relevant jurisdiction(s) in relation to the particular tranche of the foreign currency Sukuk Wakalah has been obtained, including but not limited to approval from BNM, if applicable; (iii) Receipt of satisfactory legal opinion from legal counsel of the relevant jurisdiction in relation to the particular tranche of the foreign currency Sukuk Wakalah; (iv) Confirmation that no Dissolution Event has occurred or shall occur if the relevant issuance is made; (v) Confirmation that the Issuer is in compliance with all Representation and Warranties and Covenants under the Transaction Documents; (vi) Certified true copy of the Issuer’s board of directors’ resolution authorising, among others, the issuance of the relevant tranche of Sukuk Wakalah under the Sukuk Wakalah Programme; and (vii) Such other conditions precedent as advised by the Solicitors and mutually agreed between the Issuer and Joint Lead Arrangers. 25
35. 23 . Representations warranties and : To include but is not limited to the following: (i) Each of the Issuer and the Kafalah Provider is a company duly incorporated and validly existing under the laws of Malaysia and has the power to own its assets and carry on its business as it is being conducted; (ii) Each of the Issuer and the Kafalah Provider has the power to enter into, exercise its rights and perform its obligations under the relevant Transaction Documents; (iii) The execution and delivery of the Transaction Documents, and the performance of any of the transactions contemplated in the Transaction Documents: (a) does not and will not contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which each of the Issuer and the Kafalah Provider or any of its assets is bound; (b) does not and will not cause any limitation on each of the Issuer and the Kafalah Provider or the powers of its board of directors, whether imposed by or contained in the Constitution or in any agreement, instrument, law, ordinance, decree, order, rule, regulation or judgment binding on the Issuer (as applicable), to be exceeded; or (c) does not and will not cause the creation or imposition of any security interest or restrictions of any nature on any of the Issuer’s and/or the Kafalah Provider’s assets save as permitted under the Transaction Documents; (iv) All necessary actions, approval, authorisations, consents (governmental and otherwise) which are required for each of the Issuer and the Kafalah Provider to own its assets, carry on its business and for its performance under the Transaction Documents to which it is a party have been obtained, renewed, fulfilled and remain in full force and effect; (v) No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency are presently in progress, pending or instituted or threatened against the Issuer and/or the Kafalah Provider, which has or would have a Material Adverse Effect; (vi) Each of the Transaction Documents is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Issuer and/or the Kafalah Provider (as the case may be) enforceable in 26
36. accordance with its terms ; (vii) No event which would constitute Dissolution Event has occurred or is continuing or would occur as a result of the issuance of the Sukuk Wakalah; (viii) The audited financial statements of the Issuer and the audited consolidated financial statements of the Kafalah Provider (including the income statements and balance sheets) have been prepared on a basis consistently applied in accordance with the approved accounting standards in Malaysia and in accordance with all procedures required by their respective Constitutions and the laws of Malaysia and audited by qualified auditors and give a true and fair view of the results of their respective operations for that year and the state of its financial affairs at that date, and in particular disclose or reserve against its liabilities (actual or contingent); (ix) (a) No step has been taken by the Issuer and/or the Kafalah Provider, their respective creditors or any of their respective shareholders or any other person on their behalf nor have any legal proceedings or applications been started or threatened under Section 366 of the Companies Act; and (b) No steps have been taken or threatened nor have any legal proceedings been commenced or threatened for the appointment of a receiver, receiver and manager, liquidator (interim or otherwise), judicial manager, nominee, trustee or similar officer in respect of the Issuer and/or the Kafalah Provider, or on all or any part of the business, assets or revenue of the Issuer and/or the Kafalah Provider for the re-organisation, scheme of arrangement, corporate voluntary arrangement or judicial management of the Issuer and/or the Kafalah Provider; (x) No meeting has been convened for the winding-up of the Issuer and/or the Kafalah Provider and no petition, application or the like is outstanding for the judicial management or the winding-up of the Issuer and/or the Kafalah Provider and no judicial management or winding up order has been made against the Issuer and/or the Kafalah Provider, and each of the Issuer and the Kafalah Provider has not entered into or take any step for a voluntary arrangement with its creditors; (xi) No material adverse change in the business condition (financial or otherwise), operations, affairs, performance, properties or prospects of the Issuer and/or the Kafalah Provider which might have a Material Adverse Effect on the Issuer’s and/or the Kafalah Provider’s (as the case may be) ability to comply with its obligations under the Transaction Documents to which it is a party; 27
37. 24 . Events of default or enforcement events, where applicable, including recourse available to investors : (xii) Each of the Issuer and the Kafalah Provider is in compliance and will comply with all applicable laws, regulations, by-laws, orders, codes of practice, directives, guidelines, specifications, notices, circulars and other requirements of all relevant statutory bodies and any relevant federal, local or municipal government department or agencies; (xiii) Each of the Issuer and the Kafalah Provider has maintained and continue to maintain such takaful/insurances in respect of its assets and business against all risks which a prudent company carrying a similar business to that of the Issuer or the Kafalah Provider (as the case may be) would normally insure; (xiv) The Sukuk Wakalah, pursuant to the relevant Transaction Documents, constitute direct, unconditional, unsecured and unsubordinated obligations of the Issuer and shall at all times rank pari passu without, discrimination, priority or preference amongst themselves and at least pari passu with all other unsecured and unsubordinated obligations of the Issuer subject to the provisions of the Transaction Documents and those preferred by law; (xv) The Corporate Kafalah constitutes direct, unconditional, unsecured and unsubordinated obligations of the Kafalah Provider and shall at all times rank pari passu with all other unsecured and unsubordinated obligations of the Kafalah Provider subject to the provisions of the Corporate Kafalah and those preferred by law; (xvi) All information furnished by the Issuer and the Kafalah Provider in connection with the Issuer’s and the Kafalah Provider’s assets, business and operations, the Sukuk Wakalah, the Sukuk Wakalah Programme and the Transaction Documents are not false or misleading or contain any material omission; and (xvii) Any other representations and warranties as advised by the solicitors and mutually agreed between the Issuer and Joint Lead Arrangers. The events of default or dissolution events in relation to Sukuk Wakalah (“Dissolution Events”) include but is not limited to: (i) Non-payment: The Issuer fails to pay any amount due under the Sukuk Wakalah when such payment is due and payable in accordance with the Transaction Documents; (ii) Breach of Obligations: The Issuer or the Kafalah Provider fails to observe or perform any of its undertakings, covenants and/or obligations under the Transaction Documents to which it is a party or there is a breach by the Issuer or the Kafalah Provider of any terms or conditions of the Sukuk Wakalah or provisions of the Transaction Documents (other than an obligation of the type referred to in paragraph (i) above) or any 28
38. other obligations specified herein ) and in the case of a failure capable of remedy, which is in the opinion of the Sukuk Trustee is not remedied by the Issuer or the Kafalah Provider (as the case may be) within fourteen (14) business days of the occurrence of such breach or after the Issuer /or the Kafalah Provider (as the case may be) is notified by the Sukuk Trustee of such breach, whichever is earlier, or such other period as may be agreed by the Sukuk Trustee, to the satisfaction of the Sukuk Trustee; (iii) Misrepresentation: Any representation or warranty or statement made or given or deemed to be made or given by the Issuer or the Kafalah Provider (as the case may be) under the Sukuk Wakalah Programme and/or in any of the Transaction Documents or any other document or certificate delivered by or on behalf of the Issuer or the Kafalah Provider (as the case may be) under or in connection with any Transaction Documents is or proves to have been incorrect or misleading in any material respect on or as of the date made or deemed to be made or if repeated at any time with reference to the facts and circumstances subsisting at such time, would not be correct or would be misleading; (iv) Winding up: Any step is taken for the winding-up, dissolution or liquidation of the Issuer or the Kafalah Provider, or any of the Material Subsidiaries, or a resolution is passed for the winding-up of the Issuer or the Kafalah Provider or any of the Material Subsidiaries, or a petition for winding-up is presented against the Issuer or the Kafalah Provider or any of the Material Subsidiaries, and the Issuer or the Kafalah Provider or any of the Material Subsidiaries (as the case may be) has not taken any action in good faith to set aside such petition within thirty (30) days from the date of service of such winding-up petition or a windingup order has been made against the Issuer or the Kafalah Provider or the relevant Material Subsidiaries; “Material Subsidiary” means any direct or indirect subsidiary of PETROS (both present and future) which contributes 5% or more of PETROS’ consolidated net assets, calculated by reference to the then latest available annual audited financial statements of PETROS at the relevant time. (v) Judgement Passed: the Issuer or the Kafalah Provider fails to satisfy any judgment passed against it by any court of competent jurisdiction and no action has been taken in good faith to set aside or to appeal against such judgment or no application for stay of execution has been made to any appropriate appellate court within the time prescribed by law or such appeal or application for stay of execution by the Issuer or the Kafalah Provider (as the case may be) has been dismissed by a final court of competent jurisdiction; (vi) Composition: Where a scheme of arrangement or any other corporate rescue mechanism under the 29
39. Companies Act has been instituted by or against the Issuer or the Kafalah Provider ; (vii) Appointment of receiver, legal process: An encumbrancer takes possession of, or a trustee, liquidator, receiver, receiver and manager, judicial manager, custodian, administrator, nominee, supervisor or other officer acting in a similar capacity has been appointed over, the whole or a substantial part of the business or assets of the Issuer or the Kafalah Provider, or distress, legal process, sequestration or any form of execution is levied or enforced or sued out against the Issuer or the Kafalah Provider or any security interest which may for the time being affect any part of the business or assets of the Issuer or the Kafalah Provider or the whole or a substantial part of the Issuer’s or the Kafalah Provider’s assets becomes enforceable; (viii) Inability to pay debts: The Issuer or the Kafalah Provider is deemed unable to pay any of its debts (including Islamic financing) within the meaning of Section 466(1) of the Companies Act or becomes unable to pay any of its debts (including Islamic financing) as they fall due or suspend or threaten to suspend making payments with respect to all or any class of its debts; (ix) Cross default: (a) Any other indebtedness of the Issuer or the Kafalah Provider is not paid when due; or (b) any other indebtedness of the Issuer or the Kafalah Provider becomes due and payable or capable of being declared due and payable prior to its stated maturity; or (c) where the security created for any other indebtedness of the Issuer or the Kafalah Provider becomes enforceable; (x) Revocation of license and approvals: If there should occur any revocation, withholding, invalidation or modification of any licence, authorisation, permits or approvals that impairs or prejudices the ability of the Issuer or the Kafalah Provider to comply with the terms and conditions of the Sukuk Wakalah or the provisions of the Transaction Documents to which it is a party; (xi) Cessation/Change of business: The Issuer or the Kafalah Provider changes or threatens to change the nature or scope of substantial part of its business, or suspends or threatens to suspend or ceases or threatens to cease the operation of substantial part of its business which it now conducts; (xii) Breach of financial covenants: The Issuer or the Kafalah Provider fails to maintain the Financial Covenants; (xiii) Invalidity: At any time any of the provisions of the Transaction Documents is or becomes illegal, void, voidable or unenforceable or if any law is brought into effect which purports to render ineffective or invalid any 30
40. provision of the Transaction Documents or it is or becomes unlawful for the Issuer or the Kafalah Provider to perform any of its obligations under the Transaction Documents to which it is a party or any Transaction Document ceases to be in full force and effect ; (xiv) Assets: Any of the assets, undertakings, rights or revenue of the Issuer or the Kafalah Provider are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any governmental body which may have a Material Adverse Effect; (xv) Material Adverse Event: Any event or events has or have occurred or a situation exists which in the opinion of the Sukuk Trustee may have a Material Adverse Effect; and (xvi) Any other Dissolution Events as advised by the solicitors and mutually agreed between the Issuer and Joint Lead Arrangers. For the purposes of these indicative terms and conditions, “Material Adverse Effect” means the effect of any event or circumstance which will likely materially and adversely affect: (i) the business or condition (financial or otherwise) or results of the operations or prospects of the Issuer and/or PETROS Group; (ii) the ability of the Issuer or the Kafalah Provider to perform any of its obligations under any of the Transaction Documents to which it is a party; and/or (iii) the validity or enforceability of the Transaction Documents. Upon the occurrence of a Dissolution Event, the Sukuk Trustee may at its discretion or shall (upon the instruction of the Sukukholders by way of an extraordinary resolution), declare (by giving written notice to the Issuer) that a Dissolution Event has occurred whereupon the Transaction Documents shall become immediately enforceable and all sums in respect of the Sukuk Wakalah then outstanding shall become immediately due and payable in full in accordance with their respective terms and the Sukuk Trustee may take proceedings against the Issuer and PETROS, as it may think fit, to enforce the immediate payment of the Sukuk Wakalah. The Sukuk Trustee shall exercise its rights under the Transaction Documents, whereby: (i) no further issuance of Sukuk Wakalah under the Sukuk Wakalah Programme may be made; (ii) the Sukuk Trustee shall immediately enforce the Transaction Documents against the Issuer and PETROS; (iii) the Obligor to purchase the Sukukholders’ interest in the Shariah-compliant Business at the Exercise Price and enter into a sale agreement for such purchase; and (iv) the Issuer (in its capacity as Buyer) to pay the outstanding amounts of the Deferred Sale Price (subject 31
41. to the Ibra ’, if applicable), (v) the amount guaranteed under the Corporate Kafalah shall be payable on demand; and (vi) the Sukuk Trustee shall have recourse to all remedies available under the Transaction Documents. and the Sukuk Trustee shall use the aggregate proceeds thereof made up of the Exercise Price, the Deferred Sale Price and any returns generated from the Wakalah Investments to redeem the Sukuk Wakalah in accordance with the terms of the Transaction Documents. Upon full payment of all amounts due and payable under the Sukuk Wakalah, the relevant trust in respect of the Trust Assets will be dissolved and the relevant Sukuk Wakalah held by the Sukukholders will be cancelled. 25. Governing laws : Ringgit denominated Sukuk Wakalah Laws of Malaysia. Foreign currency denominated Sukuk Wakalah English Law or such other governing laws as may be determined by the Issuer prior to each issuance of Sukuk Wakalah under the Sukuk Wakalah Programme. 26. Provisions on buy-back, if applicable : ☐ No provision on buy-back ☒ Provision on buy-back, details as below: The Issuer or its subsidiaries (if any) or agent(s) of the Issuer who is/are acting for the redemption or purchase may at any time purchase the Sukuk Wakalah at any price in the open market or by private treaty. The Sukuk Wakalah which are purchased/redeemed by the Issuer or its subsidiaries (if any) or agent(s) of the Issuer shall be cancelled by the Issuer and cannot be reissued or resold. The Sukuk Wakalah so acquired in the open market or by private treaty by the Issuer’s related corporations (other than its subsidiaries) or any interested person of the Issuer (who shall include directors, major shareholders and chief executive officer) will not be cancelled but will not entitle them to participate in the voting at any meetings of the Sukukholders nor form part of the quorum of any meeting subject to any exceptions in the Trust Deeds Guidelines. 27. Provisions on early redemption, if applicable : ☐ No provision on early redemption ☒ Provision on early redemption, details as below: The Issuer may redeem the Sukuk Wakalah prior to the maturity date subject to Sukukholders’ consent and such other conditions to be set out in the Transaction Documents. Any Sukuk Wakalah which are redeemed by the Issuer are to be cancelled. 32
42. 28 . Voting : Voting by the Sukukholders under the Sukuk Wakalah Programme shall be carried out as follows: Prior to upsizing of the Sukuk Wakalah Programme: All matters (save in relation to the upsizing of the Sukuk Wakalah Programme), which require the Sukukholders’ consent, voting shall be carried out on a collective basis as a single class. The consent from the Sukukholders of all outstanding Sukuk Wakalah shall be obtained in accordance with the terms set out in the Trust Deed for any resolution to be carried for the Sukuk Wakalah Programme. Post upsizing of the Sukuk Wakalah Programme: Post upsizing of the Sukuk Wakalah Programme, all matters which require the Sukukholders’ consent under the Sukuk Wakalah Programme, voting shall be carried out on a “per Series” basis. For any such resolution to be carried for: (i) the Sukuk Wakalah Programme, the consent of the Sukukholders of each and every Series which is outstanding under the Sukuk Wakalah Programme shall have been obtained in accordance with the terms of the Trust Deed; or (ii) a particular Series only, the consent of the Sukukholders of that Series shall have been obtained in accordance with the terms of the Trust Deed, provided that such resolution (a) does not in any way affect any other Series which is outstanding under the Sukuk Wakalah Programme and (b) will not trigger a dissolution event under any other Series which is outstanding under the Sukuk Wakalah Programme. “Series” is defined as Sukuk Wakalah with the same issue date. 29. Permitted applicable 30. Ta`widh 31. Ibra’ investments, if : ☒ No permitted investment ☐ Permitted investment : In the event the Issuer breaches its fiduciary duty as a Wakeel due to its failure to distribute any realised Periodic Distribution and/or the Obligor/Buyer delays the payment of any amounts due and payable to the Sukukholders under the Sale Agreement pursuant to exercise of the Purchase Undertaking or Sale Undertaking and/or the Deferred Sale Price, the Wakeel and/or the Obligor/Buyer shall pay to the Sukuk Trustee (acting on behalf of the Sukukholders) Ta'widh (compensation) on such delay in payments at the rate and in the manner prescribed by the Shariah Advisory Council of the SC from time to time. An Ibra’, where applicable, shall be granted by the Sukukholders. The Sukukholders in subscribing to or purchasing the Sukuk Wakalah consent to grant an Ibra’ on the Deferred Sale Price, upon the occurrence of any of the following events: 33
43. (1) upon the Early Redemption Date (if applicable); (2) upon the Dissolution Declaration Date; or (3) in respect of Sukuk Wakalah issued on floating rate basis, if the Effective Rate is lower than the Ceiling Rate. Ibra’ refers to an act of releasing absolutely or conditionally the Sukukholders’ rights and claims on any obligation against the Issuer which would result in the latter being discharged of its obligations or liabilities towards the former. The release may be either partial or in full. With respect to the Murabahah contract, Ibra’ refers to the release of rights on debts/amount due and payable under the said contract. Ibra’ shall be subject to the requirements stipulated under the LOLA Guidelines. In relation to (2) above, the Ibra’ shall be calculated as follows: (i) in the case of Sukuk Wakalah with Periodic Distribution and issued at a discount: the unearned Expected Periodic Distribution Amount. (ii) in the case of Sukuk Wakalah without Periodic Distribution and issued at a discount: the unearned Expected One-Off Distribution Amount. (iii) in the case of Sukuk Wakalah with Periodic Distribution and issued at par: the unearned Expected Periodic Distribution Amount. (iv) in the case of Sukuk Wakalah with Periodic Distribution and issued at a premium: the unearned Expected Periodic Distribution Amount. The Ibra’ in relation to (i), (ii), (iii) and (iv) above shall be calculated from the Dissolution Declaration Date (as defined in paragraph entitled “Facility description (for ringgitdenominated sukuk, to provide description as cleared by the SC)” up to the respective Scheduled Dissolution Date of the Sukuk Wakalah. In relation to item (1) above (if applicable), Ibra’ shall be mutually agreed to prior to such Early Redemption Date. In relation to item (3) above, the Sukukholders agree to grant Ibra' of an amount equivalent to the difference, if any, between the Periodic Distributions calculated based on the Ceiling Rate and the Periodic Distributions calculated based on the Effective Rate. The Ibra' shall be granted if the Effective Rate is lower than the Ceiling Rate. If the Effective Rate is higher than the Ceiling Rate, the Issuer shall be obliged to make Periodic Distributions at the Ceiling Rate only. For the avoidance of doubt, Ibra’ will be applicable to the Commodity Murabahah Investment portion of the Wakalah 34
44. Investments , being the Deferred Sale Price only, any double counting shall be disregarded and the Ibra’ will be deemed granted upon such redemption of the Sukuk Wakalah. 32. PETROS (as the Kafalah Provider) shall provide a Corporate Kafalah, as a continuing obligation, in favour of the Sukuk Trustee for and on behalf of the Sukukholders, under which PETROS shall guarantee all payment obligations of the Issuer under or in connection with the Transaction Documents including the obligation to pay the Deferred Sale Price which is due and payable on the relevant Scheduled Dissolution Date and/or the relevant periodic distribution date and/or such other date where the Sukuk Wakalah shall be due for redemption, as the case may be, including any payment obligation in respect of Ta’widh (compensation) and all charges in relation to the Sukuk Wakalah issued and to be issued under the Sukuk Wakalah Programme. Kafalah The Corporate Kafalah is enforceable upon a declaration of a Dissolution Event (as defined in paragraph entitled “Events of default or enforcement events, where applicable, including recourse available to investors”), whereby the amount guaranteed under the Corporate Kafalah by PETROS shall be payable on demand. 33. Other terms and conditions : (a) Utilisation of proceeds : Proceeds from the Sukuk Wakalah issuance shall be utilised for the following Shariah compliant purposes: (i) To finance the Issuer and/or PETROS Group’s capital expenditure, expansion, acquisition, investment and working capital requirements as well as for general corporate purposes; (ii) To finance the Issuer and/or PETROS Group’s expenditure or any cost incurred for the Issuer and/or PETROS Group’s oil & gas related businesses (including but not limited to infrastructure for the operations); (iii) To pay/refinance the Issuer and/or PETROS Group’s existing financings/borrowings and/or future financings including the maturing Sukuk Wakalah under the Sukuk Wakalah Programme; and/or (iv) To defray expenses incurred in relation to the Sukuk Wakalah Programme. For avoidance of doubt, “PETROS Group” shall mean PETROS and its subsidiaries. (b) Status : The Sukuk Wakalah, pursuant to the relevant Transaction Documents, issued under the Sukuk Wakalah Programme shall constitute direct, unsubordinated, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference, priority amongst themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations 35
45. of the Issuer , subject to those preferred by law and the Transaction Documents. (c) Form and denomination : Ringgit denominated Sukuk Wakalah Form The Sukuk Wakalah shall be issued in accordance with the: (1) Operational Procedures for Securities Services and Operational Procedures for Ringgit Settlement in the Real Time Electronic Transfer of Funds and Securities System issued by PayNet or its successor-in-title or successor in such capacity (as amended and/or substituted from time to time) (“PayNet Procedures”); and (2) Participation and Operation Rules for Payment and Securities Services issued by PayNet or its successor-intitle or successor in such capacity (as amended and/or substituted from time to time) (“PayNet Rules”). PayNet Procedures and PayNet Rules are collectively referred to as “PayNet Rules and Procedures”. Each Sukuk Wakalah shall be represented by a global certificate (exchangeable for definitive certificates on the occurrence of certain limited events). The global certificate shall be deposited with BNM and shall be in bearer form. Denomination The denomination of the Sukuk Wakalah shall be RM1,000.00 or in multiples of RM1,000.00 thereof or such other denominations to be mutually agreed by the Issuer and the Joint Lead Managers as may be allowed under the PayNet Rules and Procedures at the time of issuance. Foreign currency denominated Sukuk Wakalah The Sukuk Wakalah shall be issued in denominations to be mutually agreed between the Issuer and the JLM prior to each issuance of Sukuk Wakalah in accordance with any procedures or guidelines issued by the relevant authorities at the time of issuance. (d) Tenure of the Programme and/or Sukuk Wakalah : Tenure of the Sukuk Wakalah Programme The tenure of the Sukuk Wakalah Programme shall be up to thirty (30) years from the date of the first issuance of the Sukuk Wakalah under the Sukuk Wakalah Programme. Tenure of the Sukuk Wakalah The tenure of each Sukuk Wakalah shall be more than one (1) year and up to thirty (30) years from the issue date, provided that the maturity of each tranche of Sukuk Wakalah does not extend beyond the maturity of the Sukuk Wakalah 36
46. Programme . (e) Issue Price : The Sukuk Wakalah shall be issued at par, at a premium or at a discount to the nominal value (to be determined prior to each issuance) and the issue price shall be calculated in accordance with the PayNet Rules and Procedures. (f) Identified asset or Trust asset : Identified Asset (i) Shariah-compliant Business; and (ii) Shariah-compliant commodities to be transacted under the Commodity Murabahah Investment which may include but are not limited to crude palm oil or such other acceptable commodities (excluding ribawi items in the category of medium of exchange such as currency, gold and silver) which are provided through the Commodity Supplier (“Commodities”). “Trust Assets” shall comprise of: (i) the Sukuk Proceeds; (ii) the Wakalah Investments (which shall comprise investment in the Shariah-compliant Business and the Commodity Murabahah Investment); and (iii) the rights, title, interest, entitlement and benefit in, to and under the Transaction Documents. The ownership of the identified Shariah-compliant Business allocated for the relevant Wakalah Investments shall be based on pro rata basis which refers to joint ownership over an asset or business on undivided and proportionate basis. Thus, entitling the Sukukholder(s) to the share of income in the identified Shariah-compliant Business based on their proportionate ownership. (g) Purchase and selling price/rental, where applicable – compliance with asset pricing requirements : Purchase Price The Purchase Price shall be determined prior to each issuance of the Sukuk Wakalah and shall be equivalent to such remaining balance of the Sukuk Proceeds raised from the issuance of the relevant Sukuk Wakalah after investment into the Shariah-compliant Business. The Purchase Price shall be in accordance with the asset pricing requirements stipulated under the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the SC on 9 March 2015 and effective on 15 June 2015 which was revised on 12 November 2020 (as amended and/or substituted from time to time) (“LOLA Guidelines”). Deferred Sale Price The Deferred Sale Price shall be determined prior to each issuance of the Sukuk Wakalah and shall comprise the Purchase Price plus a profit margin of the relevant tranche of the Sukuk Wakalah payable on a deferred payment basis and 37
47. will be determined from time to time , prior to each sale of the Commodities to the Buyer. For avoidance of doubt, in the case of Sukuk Wakalah issued on floating rate basis, the profit margin should be calculated based on the Ceiling Rate (as defined in paragraph (h) (Profit / coupon / rental rate)). (h) Profit / coupon / rental rate : The Sukuk Wakalah may be issued with or without Periodic Distributions. For the Sukuk Wakalah with Periodic Distributions, the expected profit rate (“Periodic Distribution Rate”) for such Sukuk Wakalah can be on fixed or floating rate basis to be determined and agreed between the Issuer and the Joint Lead Managers prior to each issuance of the Sukuk Wakalah. The Expected Periodic Distribution Amount on any relevant periodic distribution date is calculated at the Periodic Distribution Rate on the nominal value of the relevant tranche of the Sukuk Wakalah based on the basis of the actual number of days over 365 days in the relevant period. In respect of the Sukuk Wakalah with Periodic Distributions and issued on floating rate basis, the Periodic Distributions shall be calculated based on the Effective Rate (as defined below) which shall not in any event exceed the Ceiling Rate. Ibra’ shall be granted in the event that the Effective Rate is lower than the Ceiling Rate. Not applicable Distributions. for Sukuk Wakalah without Periodic “Effective Rate” means the actual floating rate which shall be the applicable actual floating rate for the relevant periodic distribution period determined in accordance with the basis agreed prior to the issuance of the Sukuk Wakalah and as set out in the Transaction Documents. “Ceiling Rate” means the agreed ceiling rate to be determined and agreed between the Issuer and the Joint Lead Manager prior to the date of issuance of Sukuk Wakalah. (i) Profit / coupon / rental payment frequency : In relation to Sukuk Wakalah with Periodic Distributions Semi-annual intervals or such other periodic intervals to be mutually agreed between the Issuer and the JLM prior to each issuance of Sukuk Wakalah and will be set out in the applicable Pricing Supplement (each a “Periodic Distribution Date”). In relation to Sukuk Wakalah without Periodic Distribution Not applicable. (j) Profit / coupon / rental payment basis : Ringgit denominated Sukuk Wakalah (i) In relation to Sukuk Wakalah with Periodic Distributions 38
48. Actual number of days / 365-days basis. (ii) In relation to Sukuk Wakalah without Periodic Distribution Not applicable. Foreign currency denominated Sukuk Wakalah (i) In relation to Sukuk Wakalah with Periodic Distributions Actual number of days / 365-days basis or such other basis to be mutually agreed between the Issuer and the JLM prior to each issuance of Sukuk Wakalah and will be set out in the applicable pricing supplement. (ii) In relation to Sukuk Wakalah without Periodic Distribution Not applicable. (k) Dissolution Distribution Amount : On the Scheduled Dissolution Date: (a) in the case Distributions of Sukuk Wakalah with Periodic the Dissolution Distribution Amount shall be equivalent to: (b) (i) the nominal value of the Sukuk Wakalah; plus (ii) the accrued but unpaid Expected Periodic Distribution Amount (if any), accrued up to the Scheduled Dissolution Date. in the case of Sukuk Wakalah without Periodic Distributions the Dissolution Distribution Amount shall be equivalent to the nominal value of the Sukuk Wakalah. On the Dissolution Declaration Date: (a) in the case Distributions of Sukuk Wakalah with Periodic the Dissolution Distribution Amount shall be equivalent to: (b) (i) the nominal value of the Sukuk Wakalah; plus (ii) the accrued but unpaid Expected Periodic Distribution Amount (if any), accrued up to the Dissolution Declaration Date. in the case of Sukuk Wakalah without Periodic Distributions the Dissolution Distribution Amount shall be equivalent to the accreted value of the Sukuk Wakalah. 39
49. On the Early Redemption Date : The Dissolution Distribution Amount shall be mutually agreed prior to such Early Redemption Date. (l) Redemption at maturity : Unless previously redeemed, purchased and cancelled, the Sukuk Wakalah shall be redeemed at their respective nominal value on the Scheduled Dissolution Date. (m) Taxation : All payments by the Issuer shall be made without withholding or deductions for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied or on behalf of Malaysia or other applicable jurisdictions, or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law, in which event the payer shall be required to make such additional amount so that the payee would receive the full amount which the payee would have received if no such withholding or deductions are made. (n) Sukuk Trustee’s Reimbursement Account for Sukukholders' Actions The Issuer shall, or the Sukuk Trustee shall, on behalf of the Issuer, set up an account known as “Sukuk Trustee’s Reimbursement Account for Sukukholders’ Actions” (“Sukuk Trustee’s Reimbursement Account”) with a sum of at least RM100,000.00. The Sukuk Trustee’s Reimbursement Account shall be operated by the Sukuk Trustee and the money shall only be used strictly by the Sukuk Trustee in carrying out its duties in relation to the occurrence of events of default or enforcement which are provided in the trust deed. This sum of money in the Sukuk Trustee’s Reimbursement Account shall be maintained at all times throughout the tenure of the Sukuk Wakalah Programme. The moneys in the Sukuk Trustee’s Reimbursement Account may be invested in bank deposits or Islamic accounts, instruments or securities (Shariah-compliant instruments or securities in the case of sukuk) as prescribed in the Transaction Documents, with profit from the investment to be accrued to the Issuer. These moneys shall be returned to the Issuer upon full redemption of the Sukuk Wakalah if no Dissolution Event takes place. (o) Transaction documents : The Transaction Documents shall include, but are not limited to, the following: (i) the Programme Agreement; (ii) the Trust Deed; (iii) the relevant Islamic transaction documents; (iv) the Securities Lodgement Form; 40
50. (v) the Corporate Kafalah; (vi) the pricing supplement; and (vii) any other documents of whatsoever nature executed or to be executed in connection with the Sukuk Wakalah Programme and the Sukuk Wakalah as may be advised by the Solicitors and mutually agreed between the Issuer and the Joint Lead Arrangers. Any reference to the “Transaction Documents” shall mean each or any one or more of them. (p) Costs and expenses : All legal fees, stamp duties (if any) and reasonable expenses incurred in connection with the Sukuk Wakalah Programme, including professional fees and fees payable to the SC, where applicable, shall be for the account of the Issuer. (q) Listing status : The Sukuk Wakalah may be listed on Bursa Malaysia Securities Berhad under an exempt regime or any other stock exchange as may be decided by the Issuer. The applicable pricing supplement (or other relevant documents) will state whether or not the relevant Sukuk Wakalah to be issued under the Sukuk Wakalah Programme are to be listed and, if so, on which applicable stock exchange(s). 41
51. SECTION 3 .0 INVESTMENT CONSIDERATIONS An investment in the Sukuk Wakalah involves risks and such investment is only suitable for investors who have knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and merits of such an investment. The following is a summary of risk factors associated with an investment in the Sukuk Wakalah. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Sukuk Wakalah, but the inability of the Issuer to pay any amounts on or in connection with any Sukuk Wakalah may occur for other reasons and the Issuer does not represent that the statements below regarding the risks of holding any Sukuk Wakalah are exhaustive. Each investor should consider, among other things, particular considerations including those set out below in connection to the Issuer, the Kafalah Provider, PETROS Group's business and the risks associated with the Sukuk Wakalah. In addition to the information contained in this Information Memorandum, investors are strongly advised to read and carefully consider, in light of their own financial circumstances and investment objectives, the factors discussed below and to conduct their own independent investigation and consult their own financial, legal and other advisers on the risks associated with the investment in the Sukuk Wakalah prior to making an investment in the Sukuk Wakalah. Investors should also note that each tranche of the Sukuk Wakalah under the Sukuk Wakalah Programme will carry different risks and all potential investors are strongly encouraged to evaluate each issuance of the Sukuk Wakalah under the Sukuk Wakalah Programme based on its own merit. 3.1 Considerations relating to the Issuer and PETROS Group 3.1.1 COVID-19 pandemic The COVID-19 pandemic continues to disrupt business globally, including in the oil and gas sector. The strategies to contain the spread of COVID-19, such as limiting people’s movement, have directly contributed to a dampened demand for oil, resulting in plummeting oil prices and production declines. In the face of these challenging conditions, the Organization of the Petroleum Exporting Countries (“OPEC”) and its leading allies including Russia (being OPEC+ group), has recently agreed on a concerted action to cut oil production to stabilise prices. However, the ongoing COVID-19 pandemic which has resulted in a widespread health crisis, is expected to continue to negatively affect global economies and financial markets of many countries, resulting in a global or regional economic downturn. This may further weaken the outlook of global oil consumption and demand, which will in turn put further pressure on the oil and gas companies. In Malaysia, the COVID-19 pandemic continues to sweep across the country since the third wave in September 2020 and the recent post-holiday spike has caused the COVID-19 cases to hit record highs in early January 2021. In response and with the hope to combat the rise in COVID-19 cases, Malaysia has reintroduced the different levels of movement conditional order which restrict interstate travel and the operations of non-essential businesses as well as a months-long state of emergency across the country. If the COVID-19 pandemic continues and conditions worsen, the movement control order restrictions would continue to affect the general level of economic activity in Malaysia. PETROS Group expects its business environment to remain challenging due to further reductions in consumer demand for its products and additional adverse impacts on its operational and commercial activities. These may have a material adverse effect on PETROS Group’s business, financial condition, results of operations and prospects. 42
52. 3 .1.2 Volatility in oil and gas price PETROS Group is primarily in a commodities business and its financial results are affected by international oil and natural gas prices, which have historically fluctuated widely. Price fluctuations could have a material adverse effect to PETROS’s business including its cash flow and earnings. The market prices of crude oil and natural gas are expected to continue to be volatile and are subject to a variety of factors beyond PETROS Group’s control. These factors include global and regional supply and demand for crude oil, gas and related products; competition from other energy sources, including new and emerging sources, domestic and foreign government regulations with respect to oil, gas and the energy industry in general; weather conditions and seasonality; global conflicts or acts of terrorism; political instability; overall domestic and international economic conditions; inflation outlook; actions of commodity market participants; outbreaks of viruses or other communicable diseases; and other factors over which will affect the prices of oil and natural gas. The weighted average prices of crude oil and natural gas have fluctuated significantly in the past, particularly recently, and they may remain volatile. Although PETROS has used a conservative price range for its financial projection assumptions, it is impossible to predict future price movements with certainty. Substantial or extended declines in international crude oil and natural gas prices may have a material adverse effect on PETROS Group’s business, results of operations and financial condition. A significant or sustained decline in liquidity could adversely affect the company’s credit ratings, potentially increase financing costs and reduce access to debt markets. 3.1.3 Market Competition The oil and gas industries are highly competitive and volatile and are subject to various risks and uncertainties. Barrier of entry into the oil and gas industry is high due to its capital intensive nature and the strong technical expertise requirement. Notwithstanding that, competition remains keen among the major players in the oil and gas sector. PETROS Group’s competitors, are much larger, well-established companies including major international energy companies, with substantially greater resources. In many instances, they may have greater financial, human, technical and other resources than PETROS Group, hence, may be in a better position to compete for future business opportunities. As customer needs become more complex and challenging, demanding more customized solutions, innovations and attractive offerings, PETROS Group also faces significant competition in the development of innovative products and solutions, including the development of new technologies for its core upstream, downstream, and gas and new energy businesses. Accordingly, if the competition in the oil and gas industry increases, it could have a material adverse effect on PETROS Group’s business, financial condition and results of operations. Having said that, PETROS Group should not be constrained with opportunities to grow given its role under OMO and DGO of Sarawak. 3.1.4 Oil and gas industry subject to extensive governmental regulations and any noncompliance with, and any changes in, the relevant governmental regulations could materially increase PETROS Group’s costs The oil and gas industry is subject to regulations and directives of national and local governments with respect to matters such as limitations on production volumes and exports, pricing policies and possible nationalization of assets, expropriation and cancellation of rights. PETROS Group’s operations are also affected by extensive and evolving environmental protection and HSSE laws and regulations in Malaysia and in the State of Sarawak. Breach of, or non-compliance with, the relevant laws and regulations may result in the suspension, withdrawal, non-renewal or termination of PETROS Group’s business licenses or permits, or the imposition of penalties, by the relevant authorities. PETROS Group may also be subjected to stricter enforcement or interpretation of existing laws and regulations. The 43
53. suspension , withdrawal, non-renewal or termination of PETROS Group’s business licenses or permits, the imposition of penalties, fines or increased compliance costs could have a material adverse effect on PETROS Group’s business, earnings, cashflow and financial condition. In addition, the HSSE regulatory requirements which are applicable to PETROS Group’s operations may change often and are likely to become more stringent over time. PETROS Group expects to continue to incur, substantial capital, operating, maintenance and remediation costs to comply with the HSSE requirement for the protection of the environment and human health and safety. This include cost of preventing, controlling, eliminating or reducing certain types of emissions to the air and discharges to the sea, remediation of environmental contamination caused by PETROS Group’s activities or accidents at various facilities owned by PETROS. Such additional remediation costs might have material adverse effect on PETROS’ Group ability to realise profits or might give rise to losses. Although PETROS Group has put in place policies and procedures to ensure that it complies with all regulatory requirements, it can give no assurance that it will not be subject to stricter enforcement or interpretation of existing laws and regulations, or that such laws and regulations will not become more stringent in the future. PETROS Group also cannot predict what additional environmental legislation or regulations will be enacted in the future relating to, for example, climate change and extraction methods used for unconventional assets or the potential effects on its financial position and results of operations. 3.1.5 Adequacy of Takaful/insurance PETROS Group is subject to several risks that are common among oil and gas companies. These risks include exploration, development and production risks (fluctuations in production may be affected by reserve levels, operational hazards, work stoppages, natural disasters or weather, accidents, etc.), project risks (relating to management of third party contractors and accidents), equipment risks (relating to the adequacy and condition of PETROS Group’s facilities and equipment), distribution and transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation, such as oil and LNG tankers) and storage risks (relating to the operation and condition of tanks and other storage facilities). More specifically, PETROS Group’s business is subject to the risks of explosions in pipelines (oil and gas), refineries, plants, drilling wells and other facilities; typhoons and other natural or geological disasters; fires, accidents and mechanical failures; suspension of refinery and/or plant operations for scheduled and unscheduled maintenance and repairs; oil spills and leaks; unexpected geological formations or pressures resulting in blow-outs (sudden, violent explosions of oil, natural gas or water from a drilling well, followed by an uncontrolled flow from the well) or cratering (the caving in and collapse of the earth’s structure around a blowout well); mechanical failures and collapsed holes, particularly in horizontal well bores. Partly as a result of these risks and other concerns among certain groups, PETROS Group, like other oil and gas companies, faces risks associated with protests and other mass actions. Although PETROS Group has purchased and maintained Takaful plans/ insurance policies covering some of the risks discussed above, these policies may not cover all liabilities, and insurance may not be available for all risks or on commercially reasonable terms. There can be no assurance that accidents will not occur in the future, that Takaful/ insurance will adequately cover the entire scope or extent of PETROS Group’s losses or that it may not be found directly liable in connection with claims arising from these and other events. PETROS Group’s operations could also be subject to disruptions as a result of protests and other mass actions. The occurrence of any of these events not fully covered by Takaful/ insurance could have a material adverse effect on PETROS Group’s financial condition and results of operations. In addition, the Takaful plans/ insurance policies are subject to periodic renewal and numerous factors outside PETROS Group’s control can affect market conditions, which in turn can affect the availability of insurance coverage as well as increase of Takaful contributions/ premiums significantly for such policies. This in turn may result in PETROS 44
54. Group to incur substantially higher costs for coverage . Furthermore, if the availability of Takaful/ insurance coverage is reduced significantly, PETROS Group’s operations may become exposed to certain risks which are not and/or cannot be covered/ insured. 3.1.6 Dependence on senior management and skilled personnel The performance of PETROS Group is highly dependent upon the abilities and efforts of PETROS Group’s board and supported by its experienced, committed and dynamic senior management and skilled personnel who has in-depth knowledge and experience in the respective industries. PETROS Group’s ability to execute its business operations, projects and competitive strategy in the future hinges largely on the efforts of its senior management and skilled personnel. As such, the loss or departure of any senior management and skilled personnel of PETROS Group may impact its performance. PETROS Group recognises the importance of attracting and retaining these key personnel and have in place human resource incentives which include competitive remuneration packages, human resource training and development programme for employees in all key functions of PETROS Group’s operations as well as succession planning. PETROS Group strives to continue to attract and retain qualified and experienced personnel who are essential towards maintaining the high performance standards as well as to address its succession planning programme. Notwithstanding the above, there can be no assurance that PETROS Group will be able to attract and retain its key personnel. 3.1.7 Dependence on successful development and deployment of new technologies Technology and innovation are essential for PETROS Group to remain competitive and to develop resources. It also expects to rely on new and developing technologies as it grows its business in the oil and gas industry. If PETROS Group does not develop the right technology and products, does not have access to such technology and products or does not deploy these effectively, there could be a material adverse effect on its ability to execute its strategies. PETROS Group operates in environments where advanced technologies are required. In developing new technologies and new products, unknown or unforeseeable technological failures or environmental and health effects could harm PETROS Group’s reputation or expose it to litigation or regulatory actions. The associated costs of new technology are sometimes underestimated, or delays occur. If PETROS Group is unable to develop the right technologies and products in a timely and cost-effective manner, or if it inadvertently develops technologies and products that adversely affect the environment or health of individuals, there could be a material adverse effect on its earnings, cash flows and financial condition. 3.1.8 Limited operating history and significant capital expenditures required for PETROS Group’s business PSEP was established in 2018, accordingly, PSEP has a limited history upon which to evaluate its performance and future prospects. The Issuer operations are subject to the successful conclusion of the farm-in of identified PSCs in offshore of Sarawak and all other business risks associated with new company. Further, the industry PETROS Group’s operated is characterised as capital intensive. The exploration and development of oil and gas reserves, production, liquefaction, processing, refining and chemical manufacturing require substantial capital expenditures. PETROS Group is required to invest significant capital to maintain the amounts of oil and gas that it produces and processes and to maintain or increase its levels of oil and gas reserves. PETROS Group also needs to fund the purchase and maintenance of its plants, machinery and equipment. While PETROS Group has a strong balance sheet and funding capacity currently, it cannot provide the assurance that it will be able to keep up with its competitors in terms of production, downstream and gas business activities. As a relatively new oil and gas company in the country, it may require considerable amount of time to generate sufficient operating cash flow to fund its capital expenditure program, which may in turn limit its ability to make the capital investments required to grow its business. 45
55. 3 .1.9 Reliance on successful farm-in of the Production Sharing Contracts in the upstream sector The Issuer’s upstream business is premised on successful farm-in of the existing PSCs in respect of the exploration and production of oil and gas for offshore Sarawak. The Issuer has been in negotiations with PETRONAS and/or PETRONAS’ subsidiaries and Sarawak Shell to pursue non-operating interest in the PSCs for offshore Sarawak. As at the date of this Information Memorandum, the Issuer has successfully acquired a 20% participating non-operating interest in the PSC with Petronas Carigali Sdn Bhd (“PCSB”) and Sarawak Shell (both having 40% equity interest each) with effect from 1 January 2021. The Issuer has also agreed on the terms for the farm-in of another PSC with PCSB, whereby it acquires a 50% participating non-operating interest in such PSC with effect from 1 January 2021, gaining equal rights and interests with its joint venture partner, PCSB. However, there is no assurance that the Issuer will be able to continue to successfully conclude the farm-in of additional PSCs in the future. In addition, the terms of those farm-in agreements to be concluded in the future remain uncertain. Therefore, there is no guarantee as to the rights and interests which will be conferred on the Issuer upon successful farm-in of the existing PSCs. The Issuer can give no assurance on the revenue projected under the cost oil and gas entitlements and thereafter share the profit oil/gas entitlements in accordance with the terms of existing PSCs. 3.1.10 PETROS’ limited downstream business coverage PETROS’ current right to sell gas via its subsidiary, PSG, is only limited to local customers in Miri and Bintulu, Sarawak. While PETROS has plans to expand and extend its existing gas distribution businesses to other parts of Sarawak and may have an advantage with opportunities to grow given its role under DGO of Sarawak, PETROS is facing competition from the market leader and other incumbent significant market players in the downstream segment. Further, the gas distribution business in Sarawak is still in its infancy stage with very tight margins due to the existing end customer pricing control. As such, there can be no assurance that PETROS will be able to successfully grow its gas distribution business throughout the State of Sarawak. 3.1.11 Settlement of disputes between the Government of Malaysia and the State of Sarawak In 2018 the State of Sarawak amended the Sarawak Sales Tax Ordinance 1998 (“SST”) to apply sales tax at a rate of 5% on certain transactions in petroleum products. Since July 2018, the State of Sarawak has expressed its wish to regulate oil and gas operations in Sarawak, both onshore and offshore, under the amendments to the OMO that were passed in 2018. Pursuant to the amended OMO, the State of Sarawak has sought increased revenue from oil and gas activities in the State of Sarawak. On 17 September 2020, PETRONAS has paid Sarawak RM2.95 billion in sales and service tax (“SST”) on petroleum products to Sarawak, fully settling its 2019 SST obligations. Subsequently, the State of Sarawak and PETRONAS have achieved commercial settlement to resolve their differences over the imposition of SST on petroleum products as well as oil and gas matters through signing of the commercial settlement agreement (“CSA”) on 7 December 2020. The CSA, amongst others, provides Sarawak with greater share of revenues from oil and gas found and produced in the State of Sarawak as well as a more active involvement by the State of Sarawak in the oil and gas industry through management of onshore oil and gas resources by PETROS and investment by PETROS in the upstream ventures in offshore areas. The CSA provides for a consultative framework whereby both State of Sarawak and PETRONAS will be able to jointly discuss and deliberate on matters of importance to the oil and gas industry. 46
56. While the CSA consultative framework enhances the collaborative efforts between the parties on Sarawak ’s petroleum industry and resources, there is no guarantee that PETROS will always be able to negotiate for a better position for the State of Sarawak. 3.2 Considerations relating to the Sukuk Wakalah Programme and the Sukuk Wakalah 3.2.1 Credit Rating of the Sukuk Wakalah RAM has assigned an initial rating of AAA for the Sukuk Wakalah Programme. A rating is not a recommendation to purchase, hold or sell the Sukuk Wakalah and does not comment as to market price or suitability for a particular investor. There is no assurance that a rating will remain in effect for any given period of time or that a rating will not be downgraded, suspended or withdrawn entirely by RAM in the future, if, in its judgment, circumstances in the future so warrant. Further, such a rating is not a guarantee of payment of principal and profit or that there will be no default by the Issuer under the Sukuk Wakalah. In the event that the rating initially assigned to the Sukuk Wakalah is subsequently downgraded, suspended or withdrawn for any reason, no person or entity will be obliged to provide any additional credit enhancement with respect to the Sukuk Wakalah. Any downgrading, suspension or withdrawal of a rating may have an adverse effect on the liquidity and market price of the Sukuk Wakalah. Any downgrading, suspension or withdrawal of a rating will not constitute a dissolution event with respect to the Sukuk Wakalah or an event by itself that warrants the Sukuk Wakalah to be immediately due and payable. The foreign currency-denominated Sukuk Wakalah under the Sukuk Wakalah Programme may or may not be rated. The rating of foreign currency-denominated Sukuk Wakalah under the Sukuk Wakalah Programme (if any) shall be determined prior to the issuance. 3.2.2 Shariah Compliance Each of the Joint Shariah Advisers have issued a Shariah pronouncement in respect of the Sukuk Wakalah Programme confirming amongst others that the related structure and mechanism of the Sukuk Wakalah Programme and its compliance with Shariah principle as at the dates of the respective Shariah Pronouncements. Neither the Issuer nor the JLA or the JLM makes any representation as to the Shariah permissibility of the structure of the Sukuk Wakalah and tradability of the Sukuk and shall not be liable for any consequences of such reliance and/or assumption of any such compliance. As the Shariah pronouncement is only an expression of the view of the Joint Shariah Advisers and not a binding opinion, investors are reminded that differences in opinion is possible, there are no assurances that the structure and mechanism of the Sukuk Wakalah Programme will be deemed to be Shariah-compliant by any other Shariah board or Shariah scholar. Investors are advised to obtain their own independent Shariah advice as to whether the Sukuk Wakalah Programme structure meets their individual standards of compliance with Shariah principle and make their own determination whether to subscribe the Sukuk Wakalah. If the Sukuk Wakalah is deemed not to be Shariah-compliant by potential investors’ standard of Shariah compliance, they may be prohibited from investing in the Sukuk Wakalah by virtue of their own constitutional restraints or otherwise. Notwithstanding the approval of the Joint Shariah Advisers of the Sukuk Wakalah Programme, case law in Malaysia indicates that the courts in Malaysia may still examine the issue of whether it is Shariah compliant and if held to be non-Shariah compliant, the recoverability of the profit element and principal under the Sukuk Wakalah may be affected. No assurance is given that the approval of the Joint Shariah Advisers will not be subject to challenge on grounds that the Sukuk Wakalah is not Shariah compliant. 3.2.3 No prior market for the Sukuk Wakalah The Sukuk Wakalah comprises a new issue of securities for which there currently is no established secondary market. There can be no assurance that such secondary market will develop or, if it does develop, that it will provide the Sukukholders with the liquidity of investments or will continue for the tenure of the Sukuk Wakalah. If a market develops, the 47
57. market value of the Sukuk Wakalah may fluctuate . Any sale of the Sukuk Wakalah by the Sukukholders in any secondary market which may develop, may be at a discount from the original issue price of the Sukuk Wakalah, depending on many factors, including the prevailing profit/interest rates and the market for similar securities. In other words, there can be no assurance regarding the future development of a market for the Sukuk Wakalah, the liquidity or sustainability of any market that may develop, the ability of the Sukukholders to sell their Sukuk Wakalah, or the prices at which such Sukukholders may be able to sell their Sukuk Wakalah. 3.2.4 Market value of the Sukuk Wakalah may be subject to fluctuations Trading prices of the Sukuk Wakalah are subject to fluctuations and may be influenced by numerous factors, including the operating results and/or the financial conditions of the Issuer, political, economic, financial and any other factors that can affect the capital markets or the industry in which the Issuer is operating in. Consequently, any sale of the Sukuk Wakalah by the investors in any secondary market which may develop may be at prices that may be higher or lower than the initial price. Adverse economic developments could have a material adverse effect on the market value of the Sukuk Wakalah. 3.2.5 Rate of return risk The Sukukholders may be exposed to unforeseen losses due to fluctuations in profit/interest rates. Although the principle of the payment of interest is repugnant to Shariah and therefore any obligation to pay interest imposed on the Issuer is waived and rejected, the Sukuk Wakalah are fixed income securities and may therefore see their prices fluctuate due to fluctuations in profit/interest rates. Generally, a rise in profit/interest rates may cause a fall in the prices of the Sukuk Wakalah, resulting in a capital loss for the Sukukholders. Conversely, when rates of profit/interest fall, the prices at which the Sukuk Wakalah are traded may rise and the Sukukholders may enjoy a capital gain but payments received may be reinvested at a lower returns. 3.2.6 Suitability of investments The Sukuk Wakalah may not be a suitable investment for all investors. Each potential investor in the Sukuk Wakalah must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (a) have sufficient knowledge and experience to make a meaningful evaluation of the Sukuk Wakalah, the merits and risks of investing in the Sukuk Wakalah and the information contained in this Information Memorandum; (b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Sukuk Wakalah and the impact the Sukuk Wakalah will have on its overall investment portfolio; (c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Sukuk Wakalah; (d) understand thoroughly the terms of the Sukuk Wakalah and be familiar with the behaviour of any relevant indices and financial markets; and (e) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic and other factors that may affect its investment and its ability to bear the applicable risks. The Sukuk Wakalah are complex financial instruments and such instruments may be purchased as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to the prospective investor’s overall portfolio. The prospective investors should not invest in the Sukuk Wakalah unless they have the expertise (either alone or with the help of a financial adviser) to evaluate how the Sukuk Wakalah will perform under 48
58. changing conditions , the resulting effects on the value of such Sukuk Wakalah and the impact this investment will have on their overall investment portfolio. Additionally, the prospective investors’ investment activities may be subject to legal investment laws and regulations, or review or regulation by certain authorities. The prospective investors should consult their legal advisers to determine whether and to what extent (i) the Sukuk Wakalah are legal investments for them, (ii) the Sukuk Wakalah can be used as collateral for various types of borrowing and (iii) other restrictions apply to their purchase of any Sukuk Wakalah. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Sukuk Murabahah under any applicable risk-based capital or similar rules. Wakalah. 3.2.7 The Issuer’s ability to meet its obligations under the Sukuk Wakalah The ability of the Issuer to meet its obligations under the Sukuk Wakalah will depend upon the Issuer’s income and revenue and in particular the strength of the Issuer’s operation to generate sufficient and positive cashflows. The Sukuk Wakalah will not be the obligations or responsibilities of any other person than the Issuer and shall not be the obligations or responsibilities of and/or guaranteed by any of the JPA, JLA or JLM, the Joint Shariah Advisers, the Sukuk Trustee, the Facility Agent or any subsidiary or affiliate thereof. None of such persons will accept any liability whatsoever to the Sukukholders in respect of any failure by the Issuer to pay any amount due under the Sukuk Wakalah. 3.2.8 Each issuance carries different risks The purchase of the Sukuk Wakalah may involve substantial risks and is suitable only for sophisticated investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and the mitigating factors of an investment in the Sukuk Wakalah. Each issuance of the Sukuk Wakalah will carry different risks and all potential investors are strongly encouraged to evaluate the Sukuk Wakalah based on its own merit before making an investment decision. 3.2.9 An investment in the Sukuk Wakalah may be subject to inflation risk The Sukukholders may suffer erosion on the return of their investments due to inflation. The Sukukholders would have an anticipated rate of return based on expected inflation rates at the time of the purchase of the Sukuk Wakalah. An unexpected increase in inflation could reduce the actual return to the Sukukholders. 3.2.10 Risk inherent to the Kafalah Provider The Sukuk Wakalah is guaranteed by the Kafalah Provider, in favour of the Sukuk Trustee for and on behalf of the Sukukholders under which the Kafalah Provider shall guarantee the payment of all payment obligations of the Issuer under or in connection with the Sukuk Wakalah Programme. The payment under such corporate guarantee will be dependent upon the financial strength of the Kafalah Provider and is subject to the risk inherent to the business and operations of the Kafalah Provider. The prospective investors are requested to conduct their own independent assessment and evaluation of the Kafalah Provider. 49
59. 3 .3 General considerations 3.3.1 Change in law and/or regulations Changes in law and regulations are unpredictable and beyond the Issuer's control and may affect the way PETROS Group conducts its businesses and the products it offers. Such changes may be more restrictive or result in higher costs than current requirements or otherwise materially impacts its businesses, results of operations or financial condition. The issuance of the Sukuk Wakalah is based on Malaysian law, tax rulings and regulations, and administrative practices in effect at the date hereof and having due regard to the expected tax treatment of all relevant statutes under such law and practice. No assurance can be given that Malaysian law, tax rulings and regulations or administrative practice will not change after the issuance of the Sukuk Wakalah or that such changes will not impact the structure of the Sukuk Wakalah Programme and the treatment of the Sukuk Wakalah. 3.3.2 Political and economic risk Adverse developments in the political and economic conditions in Malaysia and other countries in the region could materially affect the business, operations or financial prospects of PETROS Group. Further, the change of the ruling party in Malaysia in March 2020 may cause uncertainties in the relevant policies adopted in relation to the industry in which PETROS Group operates and may materially affect the business and operations of PETROS Group. Other political and economic uncertainties include global economic downturn, risks of war, trade war, expropriation, nationalisation, re-negotiation or nullification of existing contracts, changes in interest rates and methods of taxation, embargo and currency exchange controls. Investors should note that whilst the Issuer strives to continue to take effective measures such as prudent financial management and efficient operating procedures, there can be no assurance that adverse political and economic factors will not materially affect the Issuer or PETROS Group. 3.3.3 Force majeure An event of force majeure is an event which is not within the control of the party affected, which that party is unable to prevent, avoid or remove and shall include war and acts of terrorism, riot and disorders, natural catastrophes and others. Force majeure events do not include economic downtown, non-availability or insufficient or lack of financing on the part of the Issuer. The occurrence of a force majeure event may have a material impact on the Issuer’s business. 3.3.4 Forward-looking statements Certain statements and information in this Information Memorandum are based on historical data which may not necessary be reflective of future results. This Information Memorandum contains forward-looking statements which are subject to uncertainties and contingencies. All statements other than statements of historical facts included in this Information Memorandum, including, without limitation, those regarding the Issuer’s and the Kafalah Provider’s financial position, business strategy, plans and objectives of the management for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Issuer, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Issuer’s present and future business strategies and the environment in which it will operate in the future. Such factors include, inter-alia, general economic and business conditions, 50
60. competitions , the impact of new laws and regulations affecting the Issuer and the industry, changes in profit/interest rates and changes in foreign exchange rates. No assurance can be given that any of these forward-looking statements can be realised. In light of these uncertainties, the inclusion of such forward looking statement in this Information Memorandum should not be regarded as a representation or warranty by the Issuer or its advisers that such plans and objectives will be achieved. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 51
61. SECTION 4 .0 4.1 BACKGROUND INFORMATION ON THE ISSUER Corporate history and principal activities The Issuer was incorporated in Malaysia under the Companies Act on 5 September 2018 as a private company limited by shares. The registered office and principal place of business of the Issuer is located at Level 6, CT660, Block C, iCOM Square, Jalan Pending, 93450 Kuching, Sarawak. The principal activities of the Issuer include engaging in export and import of crude petroleum oils, extraction of crude petroleum oils, and production of crude gaseous hydrocarbon (natural gas). 4.2 Share capital The total issued and paid-up share capital of the Issuer as at LPD is as follows: No. of Ordinary Shares Amount RM 100,000,000 Issued and fully paid up share capital Cash: 100,000,000 100,000,000.00 Otherwise than cash: Nil 4.3 Shareholding structure The structure of shareholdings and names of the shareholders of the Issuer as at LPD are as follows: No. of Shares Name PETROLEUM SARAWAK BERHAD 4.4 Direct % Indirect % 100,000,000 100 - - Profiles of directors As at LPD, the profiles of the directors of the Issuer are as follows: Name Profile Datuk Ratak @ Sauu Anak Kakok Datuk Ratak @ Sauu Anak Kakok (“Datuk Sauu Kakok”), aged 67, has over 40 years of oil and gas experiences, primarily in upstream. A Malaysian, he holds a Bachelor of Civil Engineering (Hons) from University of Malaya (1977). He is a member of the Society of Petroleum Engineers (“SPE”) and previously served as its Chairman, Sarawak Section from 1996-1997. He served as a Technical Committee Member for the 2013 SPE Enhanced Oil Recovery Conference in Kuala Lumpur and was a member of the 52
62. Name Profile International Petroleum Technology Committee from 2014-2016 . Conference Advisory Datuk Sauu Kakok started his career as a Wellsite Petroleum Engineer with Sarawak Shell in 1977 and progressed to hold various technical, operational, commercial and leadership roles over a period of 32 years with Shell in Malaysia and internationally. Among his senior roles included Head Production Technology and Chief Petroleum Engineer in Sarawak Shell, Regional EP Business Advisor to Shell International Exploration & Production (“EP”) to the Regional Business Director for South America & Caribbean, Senior Regional Advisor to Shell Group Regional Managing Director for Asia Pacific in Shell International, Senior Commercial Manager Global New Business Development in Shell International EP with a primary focus for business development opportunities in India, Central Asia and Canada with China as a target market and led negotiations for swaps involving assets in Australia and Malaysia, and finally as Vice President (“VP”) in Shell EP International (Singapore) for Asia Pacific responsible for Safety, Strategy, Business Planning, Economics, Asset Commercial and External Relations. In 2011, Datuk Sauu Kakok joined Hess Corporation, a leading global independent energy company engaged in exploration and production of oil and natural gas, initially as VP Global New Business Development with a specific focus for South East Asia before taking on the role of VP, Asia Pacific, responsible for the overall management of all Hess’ regional upstream businesses in Malaysia, Thailand and Indonesia, which included Chairmanship of the Board of the incorporated Carigali-Hess Operating Company Joint Venture that operates the major Production Sharing Contract in the Malaysia-Thai Joint Development Area in the Gulf of Thailand, and finally as VP Asia Special Projects to oversee the eventual completion of Hess major greenfield gas development project offshore Malaysia, prior to joining PETROS. In October 2019, Datuk Sauu Kakok was conferred the Panglima Gemilang Bintang Kenyalang, which carries the title Datuk. Bong Siet Fah Bong Siet Fah (“Bong”), aged 58, is a Certified Public Accountant, Chartered Accountant and a member of Malaysian Institute of Certified Public Accountant (“MICPA”) and Malaysian Institute of Accountants (“MIA”). He is also a member of the Malaysian Institute of Taxation and completed the final exam of the Chartered Institute of Taxation, UK. He won two gold medals from the MICPA for Best Overall Performance in Professional Exam I and Best Performance in Law paper II. Bong began his career with KPMG Peat Marwick in 1983 and later with Price Waterhouse in 1987, where he audited local, public listed and multi-national companies in a wide spectrum of industries including the Oil and Gas industry, Banking & Finance, Manufacturing, Construction, Timber & Plantation, Trading & Services, and Statutory Corporations. He had also undertaken many consultancy assignments including lead consultant for a project evaluation study of petroleum products in Sarawak for a major semi-government body in conjunction with its proposed 53
63. Name Profile project to distribute and market petroleum products of an international oil company , mergers & acquisitions, receivers & managers, business advisory and tax appeals. In 1989, Bong joined Sarawak Shell Bhd & Sabah Shell Petroleum Ltd as a Tax Accountant and was later promoted to Tax Advisor in 1994, where he was responsible for the overall tax advisory, strategic tax planning and compliance works. His key achievements included helping the group to achieve substantial tax savings and resolved numerous tax matters and set many precedence in the industry on various tax treatment and claims. He authored an in-house publication titled “Tax Guidance Notes for Malaysian Oil & Gas Industry”. On invitation of the Inland Revenue Board of Malaysia, Bong authored a paper “Review of Petroleum Income Tax Act”. As the Tax Advisor, he played a key role in the Group’s new business negotiations, resolving tax issues and disputes and lobbying for fiscal changes to Ministry of Finance and Inland Revenue Board. In 1997, Bong was appointed as the Finance Director/Executive Director of an established shipping group of companies and was later promoted to its Deputy Managing Director in 2005, where he was responsible for overall strategic planning, business development, investment decision, mergers & acquisitions, corporate finance, treasury management and tax planning for the group. He successfully expanded the business of the group to become one of the leading shipping companies in Malaysia and was subsequently successfully injected into a public listed Company in 2005. In 2016, Bong became a freelance financial & business consultant, specialising in business evaluation & valuation, mergers and acquisitions, and debts restructuring. In 2018, Bong joined PETROS as the Chief Financial Officer and sit on Board of PETROS as Executive Director of PETROS’ subsidiary companies namely Petroleum Sarawak Exploration & Production Sdn Bhd and Petroleum Sarawak Gas Sdn Bhd. Janin Anak Girie Janin Anak Girie (“Janin”), aged 51, obtained his Bachelor of Chemical Engineering from Lamar University, Texas, United States of America in 1990. Janin began his career with Sabah Shell Petroleum Co., Ltd in 1990 as Trainee Operations Supervisor, where he led 30 offshore technicians at peak oil production. In 1993, he joined Shell Sarawak Berhad, Exploration and Production Malaysia as an Integrated Activity Planner for Shell Malaysia Exploration & Production (“SMEP”). He formulated and coordinated SMEP 1+1 Production and activity plan and analysed and optimised barge and rig sequence to maximise asset utilisation and production. Over the years, he held various progressive roles such as Production planner, Operation Plant Analyst, Offshore Installation Manager and Operations Activity Manager, where he was accountable for managing operations to improve plant performance and maximise production with designs that met 54
64. Name Profile operational safety and asset integrity . In 2009, Janin was Head of HSSE Assurance for Shell EP Asia Pacific covering Malaysia, Brunei, Philippines, China, New Zealand and Australia, accountable for providing assurance to the Region that HSSE controls are being managed in accordance with local, regional, business and group policies. He was Manager of Shell Non-Operated Joint Ventures, Shell Malaysia Exploration & Production, Shell Upstream in 2010, accountable for optimising value from Shell’s investment in the Joint Venture in line with the EP business strategy. Later in 2011, Janin joined PCSB as Head of Operation Management, Production International, accountable for Operation and Maintenance functions delivery in PCSB International. In 2013, as Head of Petronas Technical Upstream Global Operational Excellence (“OE”) team, he was responsible for driving the formulation of Upstream OE strategic direction and OE roadmap to achieve World Class E&P Operator targets. In 2015, he was appointed the Chairman of Petronas Carigali Nile Ltd., Petronas’s business in South Sudan. He successfully achieved the turnaround plan during low oil price in 2016 leading to sustainable and improved Petronas business performance in that region. He was also Malaysia’s representative in South Sudan, liaising with various high-profile stakeholders including embassies and United Nations. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 55
65. SECTION 5 .0 5.1 BACKGROUND INFORMATION ON THE KAFALAH PROVIDER Corporate history and principal activities The Kafalah Provider is a state-owned oil and gas exploration, established and wholly-owned by the State Financial Secretary of Sarawak. Incorporated in Malaysia under the Companies Act on 24 July 2017 as a public company limited by share, the Kafalah Provider has the registered office and principal place of business at Level 6, CT660, Block C, iCOM Square, Jalan Pending, 93450 Kuching, Sarawak. The Kafalah Provider is engaged in exploitation of oil and gas, covering upstream, midstream and downstream. 5.2 Share capital The total issued and paid-up share capital of the Kafalah Provider as at LPD is as follows: No. of Ordinary Shares Amount RM 20,000,000 Issued and fully paid up share capital Cash: 20,000,000 20,000,000.00 Otherwise than cash: Nil 5.3 Shareholding structure The structure of shareholdings and names of the shareholders of the Kafalah Provider as at LPD are as follows: No. of Shares Name STATE FINANCIAL SECRETARY OF SARAWAK 5.4 Direct % Indirect % 20,000,000 100 - - Profiles of directors As at LPD, the profiles of the directors of the Kafalah Provider are as follows: Name Profile Tan Sri Datuk Amar (DR.) Tommy Bin Bugo @ Hamid Bin Bugo (Independent, NonExecutive Director and Chairman of the Board Tan Sri Datuk Amar (DR.) Tommy Bin Bugo @ Hamid Bin Bugo (“Tan Sri Hamid”), aged 75, is the Independent, Non-Executive Director and Chairman of the Board of the Issuer. A Sarawakian, Tan Sri Hamid graduated from Canterbury University, New Zealand with a Bachelor and a Master of Arts in Economics. He also holds a Postgraduate Diploma in Teaching (New Zealand) and a Postgraduate Certificate in Business Studies from Harvard 56
66. Name of PETROS ) Profile Institute of Development Studies, U.S.A. He was honoured with a Ph.D. (in Commerce) by Lincoln University, New Zealand. Tan Sri Hamid’s working experience includes Administration Manager, Malaysia LNG Sdn Bhd (a joint venture of PETRONAS, Shell and Mitsubishi), the first General Manager of Land Custody and Development Authority of Sarawak, Permanent Secretary of the Ministry of Resource Planning, Sarawak and State Secretary of Sarawak. As Sarawak State Secretary, Tan Sri represented the Sarawak State Government, serving as Director, in various companies and statutory bodies including Malaysian Airlines System Bhd, Malaysia LNG Sdn Bhd, Employees Provident Fund, University Malaysia Sarawak and Universiti Pertanian Malaysia. In addition to his Chairmanship of the Kafalah Provider, Tan Sri Hamid’s extensive role in corporate governance is garnered from various Boards including Sapura Resources Berhad and X-Fab Silicon Foundries NV, Brussels, as well as previously with Sapura Energy Berhad. He is also active in charitable activities as Chairman of the Sarawak State Library Management Board and Yayasan Kemajuan Insan Sarawak (YAKIN). Tan Sri Hamid was a former council member of the Institute of Integrity Malaysia, member of Excellent People Group for Malaysia Indonesia, and a member of the advisory committee of Malaysian Anti-Corruption Commission. He is also one of the recipients of an Excellent Award from The American Society For Conservation Biology in 2000. Dato Mohammad Medan Bin Abdullah (Non-Independent, Non-Executive Director) Dato Mohammad Medan Abdullah (“Dato Medan”), aged 62, is a Non-Independent, Non-Executive Director of the Kafalah Provider. Dato Medan holds a Bachelor of Laws degree (Hons) (LLB) from the University of Malaya. He also graduated from the Wharton School, Advanced Management Programme, University of Pennsylvania, USA and attended the INSEAD Senior Management Programme. He was a member of Malaysian Institute of Chartered Secretaries and Administrators and International Bar Association, a Member of the Alumni of the Academy of American and International Law, Dallas, USA, a former Member of the Institute of Chartered Secretaries and Administrators (Malaysian Assoc.) and PETRONAS representative at the World Economic Forum – Partnership Against Corruption Initiative (WEF-PACI). Dato Medan’s deep experience spans over 30 years of wellrounded hands on experience throughout the oil and gas industry value chain, from the upstream to midstream, downstream, and marketing & trading, honed throughout his tenure with Malaysia’s national oil company – PETRONAS where he was a pioneer in the globalisation of PETRONAS’ operations in the early 1990s, realising higher efficiency and profitability. His last role in PETRONAS was Group Head of Corporate Affairs/Communication/Branding. Dato Medan started as a trainee Legal Officer in 1982 and rose through the ranks to top management positions. His previous roles included the Executive Assistant to the President/CEO of 57
67. Name Profile PETRONAS , a member of PETRONAS’ Management Committee and Head of the Company’s Group Corporate Affairs Division. He was Managing Director/CEO of the Malaysia LNG Group from 2007 to 2010. Dato Medan has achieved many distinctions throughout his career; delivering beyond expectation in all the positions served; equipped with extensive exposure on the local and international fronts. To date, he has a proven track record in achieving various significant successes in Malaysia and abroad. The most recent of which was to ensure strategic business growth of Gazprom in the Asia- Pacific region (2013 – 2016). Before that, for more than three decades, he contributed tirelessly towards upholding PETRONAS’ overall profitability and growth. Dato Medan was a pioneer in the globalisation of PETRONAS’ operations in the early 1990s, realising higher efficiency and profitability. His last role in PETRONAS was Group Head of Corporate Affairs/Communication/Branding where he championed the re-branding of the company and introduced a new Corporate Positioning: ‘PETRONAS – Reimagining Energy’. Dato Medan is currently the Group Chief Executive Officer of Bintulu Port Holdings Berhad, Group of Companies, a position he holds since 2017 having left Gazprom Marketing & Trading Pte Ltd (Singapore) where he was Managing Director/President for Asia Pacific. In his time leading Bintulu Port Holdings Bhd he has introduced strategies to transform the group to the next level. In addition to his Directorship with the Kafalah Provider, Dato Medan is a Non-Executive Director with Handal Energy Berhad and the Malaysia External Trade Development Corporation (MATRADE), a national trade promotion agency under the Malaysian Ministry of International Trade and Industry. Past directorships include chairmanship at Malaysian Philharmonic Orchestra and Petronas Assets Sdn Bhd, and served on the Boards of Petrofibre Network (M) Sdn Bhd, Petronas Hartabina Sdn Bhd, Petrosains Sdn Bhd, Petronas ICT Sdn Bhd, Petronas LNG Ltd, Petronas Property Holdings Sdn Bhd, Petronas Gas Bhd, Petronas Dagangan Bhd, Prince Court Medical Centre Sdn Bhd Prbf Properties Sdn Bhd, Sanzbury Stead Sdn Bhd, and Malaysian Jet Services Sdn Bhd. Dato Medan was conferred the Darjah Panglima Setia Bintang Sarawak (PSBS), which carries the title Dato on 24 September 2011. The award recognises outstanding individuals for their significant contributions towards the development of Sarawak as a whole. Datu Sharbini Bin Suhaili (Non-Independent, Non-Executive Director) Datu Sharbini bin Suhaili (“Datu Sharbini”), aged 57, is a NonIndependent Non-Executive Director of the Kafalah Provider. A Malaysian from Sarawak, Datu Sharbini holds a Degree in Engineering (Hons) from the University of Leeds, UK and a Masters in Business Administration (MBA) from Henley Management College, UK. Datu Sharbini is the Group Chief Executive Officer of Sarawak Energy Bhd (“Sarawak Energy”) since 2016, a vertically 58
68. Name Profile integrated power utility and energy development group of companies . Under Datu Sharbini’s stewardship, Sarawak Energy increased its renewable hydropower generation capacity through the acquisition of the 2400MW Bakun Hydroelectric Plant (“HEP”) from Malaysia’s Ministry of Finance in 2017; and brought onstream additional thermal capacity with the 624MW Balingian Coal Fired Power Plant. Sarawak Energy is also developing the 1285MW Baleh HEP, scheduled for completion in 2026 and the 842MW Tanjong Kidurong Combined Cycle Gas Turbine (“CCGT”) plant scheduled for 2021 commissioning and delivering on Sarawak’s mission to achieve full electrification by 2025, together with the Ministry of Utilities. Other notable achievements include breaking the historic milestone of RM5 billion in revenue and driving the Sarawak Energy Excellence roadmap. Datu Sharbini joined Sarawak Energy in 2016 after 30 years of local and international experience in the petroleum industry, serving PETRONAS and Royal Dutch Shell in various technical, commercial and corporate capacities including upstream production, asset development, planning, strategy and commercial as well as business development. Before joining PETRONAS in 2010 as its Vice-President, International Production for Upstream Operations overseeing 25 countries, Datu Sharbini was Shell Malaysia’s General Manager for Upstream Operations for Sabah and Non-Operated Ventures. He was the PETRONAS Vice-President for Health, Safety, Security and Environment before joining Sarawak Energy. Datu Sharbini’s 30 years of experience in the petroleum industry and leadership in managing sustainability and reputation challenges in developing Sarawak’s hydropower resources has given him a broad perspective of the energy industry in a changing energy landscape. In addition to his Directorship with the Kafalah Provider, Datu Sharbini is an elected board member and a Fellow of the International Hydropower Association (IHA), a body that represents more than 80 companies to promote sustainable hydropower development globally. Datu Sharbini was conferred the Pingat Darjah Jasa Bakti Sarawak (DJBS-Order of Meritorious Service to Sarawak), which carries the title Datu, in 2018 in recognition of his excellent service to Sarawak. Datu Ir. Hj Zuraimi Bin Haji Sabki (Non-Independent, Non-Executive Director) Datu Ir. Hj Zuraimi bin Haji Sabki (“Datu Zuraimi”), aged 60, is the Non-Independent Non-Executive Director of the Kafalah Provider. A Malaysian, Datu Zuraimi is a Professional Engineer with the Board of Engineers Malaysia (BEM). He holds a B. Sc. (Hon’s) 2nd Class Upper in Chemical Engineering from University Of Birmingham, U.K. (1983), a Masters of Business Administration (MBA) from University of Hull, U.K. and attended the Executive Course Corporate Finance with the London School of Economics (LSE). 59
69. Name Profile Datu Zuraimi is the current Director of the Public Works Department (“JKR”), Sarawak since 2011. Before which, he was Chief Executive Officer/General Manager for Brooke Dockyard and Engineering Works Corporation (Brooke Dockyard), a 100% owned state government statutory body, for 15 years. As Director of JKR, Sarawak, Datu Zuraimi was appointed and tasked specifically to transform and revitalise the department. Among notable achievements include overseeing the biggest portfolio of projects by JKR under the 11th Malaysia Plan under which around 600 projects were commissioned and the setting up of six (6) regional project management offices. JKR is currently responsible for two mega projects underway in Sarawak – the Pan Borneo and Coastal & Second trunk Road. Datu Zuraimi served in Sarawak Shell Berhad in the early years of his career spanning across engineering, project management and Head of Fabrication with the multinational oil major. As Company Site Representative for Lutong Terminal Facilities (1988), he undertook a major project for gas-oil blending facilities including the design and construction of two major tanks for the refining facility. He also pioneered the successful implementation of the PAKSCAN lnstrumentation System which constituted a major cost saving initiative. Datu Zuraimi’s last senior position with Shell Sarawak included Project Leader for the D35 development one of the largest projects undertaken by Sarawak Shell. At age 32, he was responsible for the formulation of an overall offshore plan integrating all the various resources and budget holder with estimated total cost of RM1 billion. From Shell, Datu Zuraimi went on to turnaround Brooke Dockyard and Engineering Works Corporation as Chief Executive Officer / General Manager over a 15-year tenure from 1996 to 2011. Within the first two years of his appointment, Datu Zuraimi implemented a corporate revitalisation programme achieving ISO 9001 certification, increased revenues from RM5 Million to a high of RM300 million in 2009 and gained self-sufficient free cash flow. Brooke Dockyard also achieved the Health, Safety and Environment (HSE) Gold Award from PETRONAS as the best construction contractor during Datu Zuraimi’s tenure. In addition to his Directorship with the Kafalah Provider, Datu Zuraimi is a Board member of Brooke Dockyard & Engineering Works Corporation, the Board of Engineers Malaysia, Sarawak Land Custody and Development Authority, Miri Port Authority, Tanjong Manis Port Authority, Bintulu Development Authority and the Sarawak Rivers Board amongst others. Datu Zuraimi was conferred the Pingat Darjah Jasa Bakti Sarawak (DJBS-Order of Meritorious Service to Sarawak), which carries the title Datu in 2017. The award recognises outstanding civil servants or officers of statutory bodies for excellent service to the State of Sarawak. 60
70. Name Profile Heng Heyok Chiang @ Heng Hock Cheng (Independent, NonExecutive Director) Mr. Heng Heyok Chiang @ Heng Hock Cheng (“Mr. Heng”), aged 71, is the Independent Non-Executive Director of the Kafalah Provider. He holds a Bachelor of Science (Hons) Degree in Chemical Engineering from University of Birmingham, UK in 1972. Mr Heng retired from Shell in October 2006 after 34 years of service spanning Upstream, Downstream and Gas & Power divisions. During his long career with Shell, he had worked in various Shell entities in Malaysia, UK, The Netherlands and China holding positions which include Refinery Process Engineer, Manufacturing Superintendent at Lutong Refinery, Senior Area Engineer with Shell International in the Hague, the Netherlands, Engineering Manager and Technical Director of Sarawak Shell Berhad and Sabah Shell Petroleum Limited, General Manager Sarawak Gas, Managing Director of Shell Gas & Power Malaysia & Shell MDS Plant in Bintulu and Chairman of Shell China, based in Beijing. In addition to his Directorship with the Kafalah Provider, Mr Heng is also Director of DIV Systems Sdn Bhd, a subsidiary of Dialog Group Berhad as of March 2019. He had previously served as Board member of Malaysian Employee Provident Fund (EPF), Malaysia Marine And Heavy Engineering Holdings Bhd, Hengyuan Refining Company Berhad HRC (formerly known as Shell Refining Company Berhad SRC), Otto Marine Limited (Singapore), Petronas Gas Berhad and AET Tankers Holdings. Datin Josephine Anak Hillary Dom @ Jospehine John (Independent, NonExecutive Director) Datin Josephine Anak Hilary Dom @ Josephine John (“Datin Josephine”), aged 65, is the Independent Non-Executive Director of the Kafalah Provider. A Malaysian, Datin Josephine holds a Bachelor of Economics, (2nd class upper), from Universiti Malaya (1976) and is a member of Harvard Business School Alumni of Malaysia. A career taxation and audit specialist, Datin Josephine served 38 years with the Inland Revenue Department / Inland Revenue Board. Her last position before retiring was as the Sarawak State Director of the Inland Revenue Board (IRB) of Malaysia until 2014. She had started as Tax Assessor and held various posts as Unit leader, Section Head, Deputy Director, Branch director and eventually as State Director heading the three different states in Kedah & Perlis and the Federal Territory KL. Datin Josephine retired from Inland Revenue Board Malaysia in December 2014. During the course of her career, Datin Josephine had represented the country in international conferences to present tax papers in Ghana (CATA), Japan (IMF) and Philippines (SGATAR). Datin Josephine was conferred four awards by the Sarawak State Government, the most recent being Pingat Perkhidmatan Cemerlang (PPC) in 2011, Setia Diraja Kedah (SDK) by Kedah Sultan in 2011 and Johan Setia Mahkota (JSM) in 2011 by the Federal government. 61
71. Name Profile Datuk Amar Haji Ahmad Tarmizi Bin Haji Sulaiman (Non-Independent, Non-Executive Director) Datuk Amar Haji Ahmad Tarmizi (“Datuk Amar Tarmizi”), aged 58, is the current State Financial Secretary of Sarawak, a position he has held since 2004. His appointment as Non-Independent Non-Executive Director of the Kafalah Provider is “ex-officio” and by virtue of the office of the State Financial Secretary of Sarawak. He was the Deputy State Financial Secretary of Sarawak before his current post. Datuk Amar holds a Bachelor of Science in Business Administration, Syracuse University, New York and a Masters in Business Administration (MBA) from University of Winsconsin, USA. Datuk Amar’s vast finance experience includes as Chief Executive Officer of Amanah Saham Sarawak from 1993 to 2002. He was Investment Manager, both with Arab-Malaysian Merchant Bank Berhad and later with American International Assurance Co. Ltd. Datuk Amar Tarmizi serves as Member of the Management Board of Sarawak Timber Industry Development Corporation. In addition to his Directorship with the Kafalah Provider, Datuk Amar Tarmizi holds chairmanship of Sacofa Sdn Bhd and Kuching Water Board. He also is a Director of Syarikat SESCO Berhad and Sarawak Oil Palm Berhad as well as member of the Boards of Sarawak Foundation and the Sarawak Land Custody & Development Authority. Assoc. Prof Dr. Muhammad Abdullah Bin Zaidel (Non-Independent, Non-Executive Director) Assoc. Prof Dr. Muhammad Abdullah (“Dr. Muhammad”), 51 years, is a Non-Independent, Non-Executive Director of the Kafalah Provider. He is the current Director of Economic Planning Unit Sarawak since 2019. Prior to heading the Economic Planning Unit, Dr. Muhammad was the Special Administrative Officer (Special Projects) with the Sarawak Chief Minister’s Office. Dr. Muhammad has over two decades of experience in finance; from practice in banking and securities with CIMB Securities Sdn Bhd and KAF Seagroatt & Campbell Securities Sdn Bhd to teaching finance as Senior Finance Lecturer, Faculty of Economics and Business at Universiti Malaysia Sarawak (UNIMAS). In addition to his Directorship with the Kafalah Provider, Dr. Muhammad is also a member of the Boards of Sarawak Economic Development Corporation, the Sarawak Land Custody & Development Authority and the Federal Government’s National Wages Consultative Council. Dr. Muhammad was conferred two awards by the Sarawak State Government – the Darjah Yang Amat Mulia Pegawai Bintang Sarawak (PBS) in 2019 and Darjah Yang Amat Mulia Ahli Bintang Kenyalang in 2011. Dr. Muhammad holds a Doctor of Philosophy (Finance) from Universiti Malaysia Sarawak, a Masters in Business Administration (MBA) and a Bachelor of Business Administration (Finance) from Universiti Teknologi MARA. 62
72. 5 .5 Profiles of the executive committee members As at LPD, the profiles of the executive committee members of the Kafalah Provider are as follows: Name Profile Datuk Ratak @ Sauu Anak Kakok (Group Chief Executive Officer of PETROS) Please refer to Section 4.4 above. Bong Siet Fah (Chief Financial Officer of PETROS) Please refer to Section 4.4 above. James Foo Ee Kiu (Executive Vice President, Upstream PETROS) James Foo Ee Kiu (“James”), aged 55, is the Executive Vice President (EVP) of PETROS Upstream. He has 30 years of oil and gas experience. He has worked for Shell and Woodside including leadership positions in Malaysia, The Netherlands, United Kingdom, Russia and Australia. He holds a Bachelor of Civil Engineering (Hons) from University of Monash (1987), Doctor of Philosophy in offshore engineering from University of Monash (1991) and an Executive MBA from Rotterdam School of Management (2000). James started his career as a Civil/Structural Engineer with Sarawak Shell in 1991 and progressed to hold various technical, operational, HSE (Health, Safety and Environment) and commercial leadership roles. Recognising his contribution to Sarawak Shell successful reengineering in 1997, James was transferred to The Netherlands in the role of Change Advisor for Shell International Technology for its business reengineering program – amalgamating all Shell Group R&D into a new organisation and with new processes and cultural change. Thereafter he assumed role as Business Development Manager for Shell Technology and then for Shell Gas & Power (United Kingdom). He framed and negotiated the “Well Dynamics” technologycommercialisation joint venture between Shell and Halliburton. He also negotiated Gas-to-Liquid opportunities for Shell’s second generation Gas-to-Liquid. James returned to Sarawak in 2003 to assume the role of 1976 PSC Asset Manager as well as the Sarawak Shell Operations Manager (double hatting). He negotiated the relinquishment of the D35 field to PETRONAS (the first for Malaysia) and steered the Baram-8 rig-to-reef project (also the first for Malaysia). As Operations Manager, Sarawak Shell consequtively exceeded production targets; delivered world-class asset reliability as well as excellent HSSE KPIs. In 2007 to 2010, Safety, Security, accountable for The Philippines, 63 James assumed the role of VP HSSE (Health, Environment) for Shell Upstream Asia Pacific; driving HSSE performance across Malaysia, China, Australia, New Zealand, Brunei. The
73. Name Profile region achieved continuous improvement over the period in Safety performance (global top quartile in the industry), in Environment performance (reduced CO2 footprint from operational-upset flaring), in Security performance (improved security controls in hotspots) and in Health performance (Fitness-to-work and Emergency Response). James was Upstream Asset Manager for Sakhalin Energy (Russia) from 2010 to 2013. He led the maturation of the venture from a “start-up” to a world-benchmarked “safe, reliable and cost effective” asset. The asset reliability improved from 3rd to 1st quartile performance and he accelerated the development of Russian capability pipeline. In 2013 James joined Woodside (Australia) as GM HSE. He led the process safety coaching of Asset and Operations managers, and initiated a Process Safety improvement program. He then assumed the role of GM Operations to drive functional excellence – covering People, Plant and Process – across all Woodside assets (LNG, FPSOs and gas platforms). Following the success in the role, he was appointed GM Corporate GRC (Governance, Risk and Compliance) to replicate the same success for all the Functions in Woodside. Janin Anak Girie (Executive Vice President, Downstream Gas of PETROS) Please refer to Section 4.4 above. Abang Arabi Bin Abang Narudin (Vice President, Portfolio and Planning of PETROS) Abang Arabi Bin Abang Narudin (“Abang Arabi”), aged 57, is the Vice President (VP) Portfolio and Planning of PETROS. He obtained his Bachelor of Science (Geology/Geophysics) degree from University of Wisconsin-Madison, USA in 1985. Abang Arabi has more than 34 years of experience in the Oil & Gas industry. He started his career with Sarawak Shell in 1985 and held leadership roles in various Business & Market Development areas throughout his career where he was responsible for commercial negotiations and managing strategic collaborations with partners for exploration and production, gas and liquefied natural gas businesses. In 2012, Abang Arabi joined PETRONAS as Head of Canada Operations where he was involved in development of Unconventional Shale Gas opportunities and developing them to maturity. Prior to joining PETROS, Abang Arabi was the Head of Business Development Upstream, PETRONAS based in Kuala Lumpur, managing Global Upstream business development, bidding for new exploration blocks, pursuing strategic collaborations with key upstream international oil companies (IOC)/national oil companies (NOC) and upstream growth opportunities domestically, regionally and globally. 64
74. Name Profile Kiddney Anak Enau (GM Regulatory and Compliance of PETROS) Kiddney Anak Enau (“Kiddney”), aged 57, is the GM Regulatory and Compliance of PETROS. He obtained his Bachelor’s in Chemical Engineering from the University of Texas, USA (1986) under a PETRONAS scholarship. Kiddney has more than 31 years of experience in the Oil & Gas industry. He started his exposure in the industry as a Facilities Engineer with Sarawak Shell and over the course of his career with Shell, he has successfully managed and delivered integrated offshore projects and F23Hub Development (offshore Sarawak). As Project Manager, he was accountable for all Project contracts and HSSE management. He conducted technical and commercial bids evaluation and contracts negotiation and was responsible for all HSSE related programme, plan and initiatives. From 2011 to 2017, Kiddney managed and executed the brownfield capital projects for Sakhalin Energy Investment Company Limited (SEIC) in the Russian region, including the Molikpaq Platform (MPQ), which was considered the biggest offshore rig refurbishment project under Shell Joint Venture (JV) worldwide. In 2018, Kiddney was appointed as the first Director of Gas Distribution for the Sarawak State Government’s Ministry of Utilities where he led the progress of the implementation of the DGO. Under his charge, the DGO 2016 Licensing Regulations were approved by the State Cabinet and Public Notice for Licences applications was issued, where over one hundred applications were received and processed. Two Kertas Kerja Majlis Mesyuarat Kerajaaan Negeri Paper on Licence Fee and Consumer Gas Price was finalised toward end of 2018 and presented to the State Cabinet in May 2019. Lai Hoi Kean (General Counsel & Corporate Secretary of PETROS) Lai Hoi Kean (“Lai”), aged 64, is the General Counsel & Corporate Secretary of PETROS. He obtained his Bachelor of Science (Applied Geology) from University of Malaya, Kuala Lumpur (1980), Bachelor of Laws from University of London in England, UK (1990). He completed his Certificate of Legal Practice (CLP) under the Malaysian Qualifying Board in 1991. In 2001, he completed his Post-Graduate Advanced Diploma of Law from University of Staffordshire. He is a qualified and licenced Company Secretary under Companies Act 2016. Lai has more than 38 years of experience in the Oil & Gas industry. He started his career as a Production Geologist with Petronas Carigali Sdn Bhd (PCSB) E&P Operations and in 1995, he moved into the legal field with Petroliam National Berhad, where, as Senior Legal Counsel, he worked on wide spectrum of legal matters relating to E&P business and activities, amongst others, Production Sharing Contracts, Gas Sales and Purchase Agreements, Crude Oil Sales Agreements, Transportation Agreements, Farm-in/Farm-out Agreements, Joint Operating Agreements, Gas Balancing Agreements, Unitisation Agreements, Cross-border Pipeline Agreements, Joint Development Areas, Oil & Gas Assets Acquisitions, Nominating and Lifting Agreements, arbitration/ litigation cases, 65
75. Name Profile etc . In 2003, as Senior Legal Manager for PCSB, he was the legal adviser to the management team and served on various committees in Petronas. He was also the company secretary to more than 10 PCSB companies. In 2006, he joined Genting Berhad as Associate General Counsel/ Head of Commercial where he was responsible for legal matters in the Oil & Gas Division of the group, including commercial evaluation of projects and business development. In 2011, Lai acted as the Legal Consultant for Petronas South Sudan Operations, where he provided key legal advices and guidance on complex commercial transactions and web of agreements following the secession of South Sudan from Sudan. 5.6 PETROS Group structure As at the LPD, the group structure of PETROS Group is as follows: State Financial Secretary 100% Petroleum Sarawak Berhad 100% 100% 100% Petroleum Sarawak Exploration & Production Sdn Bhd Petroleum Sarawak Gas Sdn Bhd Petrosniaga Sdn Bhd 100% Sarawak Gas Distribution Sdn Bhd THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 66
76. 5 .7 Information on PETROS’ subsidiaries As at LPD, PETROS has four subsidiaries, i.e., PSEP, PSG, PNiaga and SGDSB. The principal activities of PETROS’ subsidiaries are as follows: Name of subsidiary Principal activities Petroleum Sarawak Exploration & Production Sdn Bhd Export and import of crude petroleum oils, extraction of crude petroleum oils, and production of crude gaseous hydrocarbon (natural gas). Petroleum Sarawak Gas Sdn Bhd Sale of gas to the user through mains; transportation, distribution and supply of gaseous fuels of all kinds through a system of mains; manufacture of gaseous fuels with a specified calorific value, by purification, blending and other processes from gases of various types including natural gas. Petrosniaga Sdn Bhd (i) To buy and source, store, sell, transfer and transport, supply, distribute and otherwise deal in petroleum products being pump and commercial fuels, lubricants, liquified petroleum gas, kerosene, bitumen. (ii) To buy and source, store, sell, transfer and transport, supply, distribute and otherwise deal in non-fuel products offered through convenience minimarkets forming part or petrol stations facilities being food products, drinks and vehicle and household products and make available ATM, air pumps, carwash and vehicle Servicing, hybrid vehicle charging facilities etc as part of the services offered. (iii) To carry on all businesses of all kinds in connection with marketing and distribution of petroleum products, retail products and related services and to do such things as are incidental and or conducive to attainment thereto in terms of engineering, design, supervision, construction, installations of facilities being storage, plant, machinery and equipment, transmission and metering systems, cashier terminals and all related activities. Sarawak Gas Distribution Sdn Bhd Supply, distribution and transmission of gas. Sole distributor and retailer of domestic gas to industrial, commercial and residential based in Bintulu and Miri. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 67
77. SECTION 6 .0 6.1 OVERVIEW OF BUSINESS OF PETROS GROUP Overview PETROS was incorporated in Malaysia under the Companies Act on 24 July 2017 and is wholly-owned by the State Financial Secretary of Sarawak. The State of Sarawak has gazetted in November 2019 via the Ministers of the State Government (Assignment of Portfolios) Order 2019 of Sarawak for PETROS to spearhead the State of Sarawak’s in carrying out the function of planning and development of the oil and gas sector in Sarawak. PETROS are committed to harness Sarawak oil and gas resources for the sustainable progress of the State. Core to the way PETROS builds its business – Safety is priority #1, ethical business practices and sustainable, responsible growth. The OMO was amended in July 2018 as the State of Sarawak’s principal oil and gas legislation, with PETROS as the State of Sarawak’s implementation vehicle. In respect of the onshore areas, the State of Sarawak through PETROS will have regulatory control over all exploration and mining activities related to petroleum from the determination and licensing of contract areas, award of petroleum contracts and responsibility for the management of all petroleum operations that are contemplated in the petroleum contracts. This is signified by the issuance of oil mining leases to PETROS by the State of Sarawak for two blocks, namely Adong Kecil west in the Miri area and Engkabang area south of Marudi. It is anticipated that PSEP will participate as an equity interest holder in the onshore petroleum contracts awarded by PETROS. In respect of the offshore areas, PETRONAS continues to have regulatory control. The overarching objective of the State of Sarawak through PETROS is to collaborate with PETRONAS to jointly facilitate the proactive management of all petroleum activities within the boundaries of Sarawak and to maximise the value of the petroleum resources contained therein for the mutual benefit of all parties involved. On 7 December 2020, the State of Sarawak and PETRONAS executed the commercial settlement agreement, whereby both parties have agreed to establish a consultative framework to enhance collaboration through a structured and formalised avenue comprising a Joint Coordination Committee and an Annual Strategic Dialogues having representatives from the State of Sarawak, PETROS and PETRONAS as the committee members. The Annual Strategic Dialogue will be cochaired by the Chief Minister of Sarawak and the Chairman of PETRONAS. To this end, PETROS is expected to play a proactive role, jointly with PETRONAS, in the integrated management of Sarawak petroleum resources that includes a common understanding of the resource base, which facilitates the opening up of new areas for petroleum activities and licensing and subsequent management of petroleum operations. PETROS through PSEP shall have the right to participate in all offshore business opportunities. With effect from 1 January 2020, PETROS has implemented DGO as State of Sarawak’s domestic gas aggregator. Pursuant to the agreements entered into with PETRONAS and Petronas Gas Berhad, PETROS has taken full control and authority of the supply, sales and distribution of natural gas in Miri and Bintulu, Sarawak. PETROS conducts its operations directly and through its subsidiaries: • Upstream business – PETROS Group’s upstream business is being carried out by PSEP and includes export and import of crude petroleum oils, extraction of crude petroleum oils, and production of crude gaseous hydrocarbon (natural gas) in both onshore and offshore Sarawak. PSEP’s participation in upstream production is being achieved initially via execution of the farm-in into PSCs that are currently held by PETRONAS, taking the role of a significant non-operating partner. • Gas distribution and transportation business – PSG and its wholly-owned subsidiary, SGDSB, have the sole rights to supply, distribution, transmission and transportation of gas to residential, industrial and commercial customers in Miri and Bintulu, Sarawak. 68
78. • 6.2 Downstream retail business – PNiaga will oversee PETROS Group’s participation in the domestic downstream retail business, such as involvement in the retail station, marketing and distribution of LPG. Business operations Upstream business PETROS is tasked by the State of Sarawak to manage all petroleum operations in onshore Sarawak, which include the determination and licensing of contract areas and the award of petroleum contracts; while PSEP will participate in the petroleum contracts as a contractor and an equity interest holder. PETROS plan to develop a sustainable business to maximise value and long-term economic returns from the State’s oil and gas resources by driving operational excellence, focused exploration and underpinned by commercial and financial discipline. For offshore Sarawak, PETROS Group’s plan is, through PSEP, to farm-in to the existing revenue generating PSCs which are currently being held by PETRONAS and/or its subsidiaries (“PETRONAS Group”). Pursuant to PETROS’ internal investment assessment criteria that requires such PSCs to yield a positive net present value at 8%-10% discount rate, PSEP has identified 5 PSCs to be farmed-in into as shown in the table below titled “Targeted identified PSC Farm-in”. Each PSC is then subject to rigorous due diligence procedure conducted by PETROS Group’s employees, and supported by external industry experts. PSEP places emphasis on independent validation of the relevant oil and gas reserves, including classifications, proposed capital projects and resulting lifecycle production forecasts. PSEP also carries out validation of the relevant operating costs forecast through unit costs benchmarks. Ultimately, PSEP takes into account a risked view of reserves, production and costs as part of its valuation exercise. PSEP’s plan is to farm-in to these PSCs with PETRONAS Group member as the operator and PSEP as a non-operating partner, each party with 50% equity interest. PSEP will be a nonoperating partner but will play an active role in major decision making as an equal partner via the management committee as provided in the joint operating agreement. PSEP has agreed on the main terms for the farm-in of the first PSC (PSC 1) which will be effective as of 1 January 2021. The farm-in effort in respect of the remaining 4 PSCs will be carried out in stages and are targeted to be completed progressively in the next 3 years. By 2023, PSEP is expected to have farmed-in to a total of 5 PSCs with PETRONAS Group. Please see below the estimated timeline on the farm-in effective date in respect of the existing PSCs with PETRONAS Group: Targeted identified PSC Farm-in PSC Farm-in Effective Date % Equity (of Total) PSC 1 1/1/2021 50% PSC 2 1/7/2021 50% PSC 3 1/1/2022 50% PSC 4 1/7/2022 50% PSC 5 1/1/2023 50% The typical economic lifespan of each PSC held by PETRONAS Group is around 15 to 25 years with the earliest maturity of year 2030 for one of the PSC to be farmed-in into. Pursuant to the farm-in of the PSCs with PETRONAS Group, PSEP will be entitled to claim cost recovery for its expenditure under the cost oil and gas entitlements and share the profit oil 69
79. and gas entitlements accordingly . PSEP’s projected Gas and Oil/Condensate annual production for the next 10 years from the PSCs above are set out below: THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 70
80. In addition , PSEP has signed a farm-in agreement with PCSB and Sarawak Shell on 12 December 2020, whereby PSEP acquired 20% equity interest in a PSC for offshore Sarawak (“PSC 6”) with effect from 1 January 2021, while each of PCSB and Sarawak Shell acquired an equity interest of 40%. PSEP’s projected Gas and Oil/Condensate annual production for the next 10 years from PSC 6 are set out below. Gas distribution and transportation With effect from 1 January 2020: (i) PSG acquired Miri Gas Distribution System and Bintulu Gas Distribution System pursuant to the asset sale agreement with Petronas Gas Berhad; and (ii) PSG became the transporter for the transportation of gas to Miri and Bintulu, pursuant to the novation agreement with Petronas Gas Berhad. Subsequently, PSG acquired 100% equity stake in SGDSB from the State Financial Secretary of Sarawak on 13 February 2020. Consequently, PSG, together with its wholly-owned subsidiary, SGDSB, is currently the supplier, transporter and distributor of natural gas in Miri and Bintulu, Sarawak. 71
81. Miri Gas Distribution System and Bintulu Gas Distribution System was commissioned in 1989 and 1997 respectively . Miri Gas Distribution System pipeline span approximately 31km across Miri with a capacity of 30 mmscfd while the Bintulu Gas Distribution System comprise of a 6km pipeline at the heart of Bintulu with capacity 20 mmscfd. Both facilities form an integrated gas distribution supply chain servicing domestic industrial, commercial and residential based in Bintulu and Miri. While PSG is responsible for managing and maintaining the gas pipelines for transportation of gas to customers in Miri and Bintulu, SGDSB owns and operates the piped natural gas grid that delivers affordable, cleaner, and reliable on-demand cooking gas to over 25,000 households and 1,000 commercial businesses in Miri, Sarawak. Downstream retail business PNiaga was set up for the purposes of participation in the downstream retail business. It will embark on the retail station business and LPG business in Sarawak. The Sarawak Economic Development Corporation (“SEDC”) has announced its plan in October 2020 to build 6 multifuel refuelling stations in Sarawak, with the first one at Darul Hana, Kuching and one each in Sri Aman, Sibu, Bintulu and Miri. Such project will be implemented through SEDC’s subsidiary, SEDC Energy Sdn Bhd (“SESB”) and operated under PETROS’ trademarks (whereby PETROS will receive a fee in return). PNiaga launched its LPG distribution business on 2 December 2020. PNiaga’s targeted first actual rollout will be in the beginning of 2021. PNiaga plans to expand its LPG distribution business further into other cities/towns within the State of Sarawak in 2021, with the aim to collaborate and/or enter into a joint venture with the existing industry players to become a major LPG marketing and distribution company in Sarawak. 6.3 Health, safety, security and environment matters Sustainability is PETROS Group’s pledge to adopt ethical and responsible business practices pertaining to environmental, social, governance, health, safety, and security matters while delivering energy and value. The nature of PETROS Group’s business requires it to operate safely and responsibly to manage the impact on the environment and climate change. PETROS Group can drive competitive performance and build a greater reputation by operating fairly, transparently, and ethically. At the same time, PETROS Group will carry its mandate and contribute positively to the Sarawakian communities including on talent development, job opportunities, building industry capabilities, and contributing to economic growth. To further safeguard its stakeholders’ interests, PETROS Group will invest and build capabilities that help shape a more sustainable portfolio that is resilient to the energy transition. PETROS Group will build an ownership mindset and integrate sustainability in everything that it does. It aims to build a profitable business that is future-proof and value-accretive to its stakeholders, including the Sarawakian communities. In the conduct of PETROS Group’s business, PETROS recognises that excellence in HSSE is a critical part of its business goals. To accomplish this, PETROS Group will: • Apply standards and industry best practice on safety and environment procedures in compliance with legal and statutory requirements. • Protect and care for the well-being, safety and security of all its employees, those involved in its operations, its customers and the communities where it operate. • Strive to reduce its emissions and wastes to minimise its impact to the environment. • Conduct HSSE risks assessments and establish controls. 72
82. 6 .4 • Require its leaders and its people to actively and visibly demonstrate responsibility and accountability for health, safety security and environment. • Report hazards and incidents, conduct investigations in a way that focuses on learning, and not blame. • Set clear expectations and implement HSSE management systems that enable continuous improvement. • Conduct assurance controls to measure its HSSE performance. • Provide leadership and resources that will enable its workforce to carry out their activities responsibly and safely. • Communicate regularly with the communities where it operates to develop and maintain mutual understanding of goals and expectations. PETROS Group’s key strengths PETROS as implementation vehicle for OMO and DGO PETROS is wholly-owned by the State Financial Secretary of Sarawak and it has been tasked by the State of Sarawak to (i) implement the DGO as domestic gas aggregator and (ii) develop and manage the State of Sarawak’s petroleum resources under the OMO where the State of Sarawak has large oil & gas resources currently making up a respective 27% and 53% of Malaysia’s known crude oil and natural gas reserves. PETROS will also look to collaborate with the Sarawak Ministry of Utilities and the Energy Commission to develop a DGO framework where PETROS will play a leading and meaningful regulatory role in safety, technical know-how, audit and compliance. PETROS is uniquely positioned to benefit from its strategic position as the regulator which manages all petroleum operations in onshore Sarawak. It has the opportunity to drive an exploration strategy through a deliberate work programme aimed at accelerating monetisations of any discovery of commercial reserves of oil and gas, enhancing its ability to manage its cashflow efficiently. Strong working relationship with PETRONAS Group In the upstream sector, through the CSA executed between the State of Sarawak and PETRONAS, PSEP is strongly positioned to be among the significant players in oil and gas activities for offshore Sarawak, measured in terms of reserves and working interest production. In the downstream sector, PSG concluded agreements with Petronas Gas Berhad pursuant to which it acquired the sole right to transport gas to industrial, commercial and residential customers based in Miri and Bintulu, Sarawak. Highly experienced executive committee team with in-depth industry experience PETROS Group has an experienced executive committee team with in-depth knowledge of the oil and gas industry. PETROS Group is led by Group Chief Executive Officer, Datuk Sauu Kakok who has over 40 years of oil and gas experiences, primarily in upstream sector and supported by a core team of experienced engineers and project managers who have considerable amount of experience working with other significant industry players. 73
83. 6 .5 PETROS Group’s future plans The domestic gas business in Sarawak is still in its infancy with very tight margins due to existing end customer pricing controls. PETROS Group’s plan is to gradually move to a more competitive pricing environment in this sector, which may take 3-5 years. PETROS Group anticipates that the next wave of major greenfield offshore gas projects will require investments in facilities to process sour gas contaminants. This will form a significant proportion of the overall upstream gas supply required to meet demands of existing onshore customers and the future additional demands from Sarawak State downstream petrochemical investments. Alongside its role as an implementation vehicle for OMO and DGO, PETROS plans to participate as a contractor and/or operator in the medium term through PSEP in contracts for onshore blocks and in projects where it makes economic sense. In its efforts to spearhead the planning and development of the oil and gas sector in Sarawak, and through PSG’s acquisition of Miri Gas Distribution System and Bintulu Gas Distribution System, PETROS intends to expand its pipeline gas distribution to more customers in Miri, Bintulu and other parts of Sarawak within the next 5 years. Additionally, PETROS Group is also looking to expand their existing customer base profile to include new industrial entrants and fuel conversion of current users of diesel and other forms of energy. PETROS Group is in a position to adopt a managed growth scenario for the domestic gas business that fully considers the risks and financial exposures. In any event, even by adopting a more aggressive approach, the scale of the call on capital will remain significantly smaller than that of upstream. On the downstream retail sector, PNiaga is pursuing the marketing and distribution of LPG business for the whole of Sarawak with the aim to becoming a significant player in the business. PNiaga intends to achieve improved price uniformity across the state, especially in the interiors. 6.6 Risk management As an integrated oil and gas company, PETROS Group is exposed to various risks that are particular to its core business of upstream and downstream operations and its operating environment. These risks, which arise in the normal course of PETROS’ business, comprise credit risk, liquidity risk and market risk relating to interest rates, foreign currency exchange rates, equity prices and commodity prices. The Board Audit and Risk Committee (“BARC”), chaired by Mr. Heng Heyok Chiang @ Heng Hock Cheng with Datin Josephine Anak Hillary Dom @ Jospehine John as a committee member, both of whom are Independent Non-Executive Director, was formed to assist the Board of PETROS in discharging its roles and responsibilities in matters of audit and risk management, in particular, to oversee PETROS Group’s Financial reporting, Risk Management & Internal Control Procedures and the work of its internal and external auditors. The BARC also assists the Board of PETROS in reviewing conflict of interest situations and related party transactions. The Group is in the process of implementing an enterprise risk management (“ERM”) system for purposes of managing significant risks affecting the achievement of its business objectives which includes identifying, evaluating, managing and monitoring these risks. The ERM system will be used by all business units across PETROS Group, and risk data, once provided from different parts of the organisation, will be presented through dynamic reports and interactive dashboards to the right level for direction and decision-making on-the-go. The aim is to build a way of working where risks management becomes a day-to-day responsibility to minimize unidentified and unmanaged risks. 74
84. 6 .7 Key financial highlights of PETROS, PETROS Group and the Issuer The summarised key financial figures of PETROS Group and PETROS as disclosed in the audited financial statements FYE 31 December 2018 and 31 December 2019 are set out below: Statements of Income Revenue Other income (Loss)/Profit before tax (Loss)/Profit net of tax Total comprehensive income attributable to owner of PETROS Statements Financial Position Total assets Total equity Total liabilities FYE 31 December 2019 PETROS PETROS Group (RM) (RM) FYE 31 December 2018 PETROS PETROS Group (RM) (RM) 16,500,910 (9,646,002) (9,646,002) 5,948,040 15,748,956 3,024,841 3,024,841 1,143,352 (6,112,397) (6,112,397) 894,960 1,143,352 (4,446,594) (4,446,594) (9,646,002) 3,024,841 (6,112,397) (4,446,594) 548,880,730 539,241,601 9,639,129 561,983,300 553,578,247 8,405,053 49,432,292 48,887,603 544,689 51,098,095 50,553,406 544,689 of The summarised key financial figures of PETROS Group and PETROS as disclosed in the unaudited financial statements for financial period ended 30 September 2020 are set out below: For Financial Period Ended 30 September 2020 PETROS Group PETROS (RM) (RM) Statements of Income Revenue Other income (Loss)/Profit before tax (Loss)/Profit net of tax Total comprehensive income attributable to owner of PETROS Statements of Financial Position Total assets Total equity Total liabilities 75 67,812,113 11,837,419 (11,454,845) (11,454,845) 69,014,261 8,192,276 (8,916,225) (8,916,225) (11,454,845) (8,916,225) 624,799,235 582,243,407 42,555,828 562,858,541 544,662,022 18,196,519
85. PETROS Group was established in 2017 to spearhead the State of Sarawak ’s in carrying out the function of planning and development of the oil and gas sector in Sarawak. Given the progress of discussions and negotiations with PETRONAS on the farm-in of PSCs and PSG only acquired the downstream business in 2020, the main income of PETROS Group was interest income earned from its cash equity contribution of RM500.0 million by its shareholder in 2019. For the financial period ended 30 September 2020, PETROS Group has recorded a total revenue of RM67.8 million attributed to its downstream gas distribution business. The Group recorded a loss before tax amounting to RM11.45 million mainly due to non-recurring expenses spent on gas market study and regulatory framework and systems implementation costs for which the benefits are expected to be realised in the longer term.. The key financial figures of the Issuer as disclosed in its audited financial statements for the financial period from 5 September 2018 to 31 December 2019 and its unaudited financial statements for the financial period from 1 January 2020 to 30 September 2020 are set out below: Statements of Income Other income Loss before tax Loss net of tax Total comprehensive income attributable to owner of the Issuer Statements of Financial Position Total assets Total equity Total liabilities 1 January 2020 to 30 September 2020 (RM) 5 September 2018 to 31 December 2019 (RM) 1,746,414 (6,245,369) (6,245,369) 689,380 (12,705,849) (12,705,849) (6,245,369) (12,705,849) 85,947,155 81,048,782 4,898,373 89,822,725 87,294,151 2,528,574 THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 76
86. SECTION 7 .0 INDUSTRY OVERVIEW 7.1 Overview of the Malaysian economy 7.1.1 Developments in the Malaysian Economy in the third quarter of 2020 Growth recovery in 3Q 2020 In line with the reopening of the economy from earlier COVID-19 containment measures and improving external demand conditions, the Malaysian economy recorded a smaller contraction of 2.7% in the third quarter. This recovery is seen across most economic sectors, particularly the manufacturing sector, which turned positive on account of strong electrical and electronics (E&E) production activity. On the expenditure side, domestic demand contracted at a slower pace, while net exports rebounded. On a quarter-on-quarter seasonally adjusted basis, the economy turned around to register an expansion of 18.2% (2Q 2020: -16.5%). Growth improved across most economic sectors, driven mainly by the manufacturing sector Improvements in growth were recorded across most economic sectors, as the country transitioned from the Conditional Movement Control Order (CMCO) into the Recovery Movement Control Order (RMCO). Activity in the services sector recovered substantially, with growth recording a smaller contraction of 4.0% (2Q 2020: -16.2%). The wholesale and retail trade subsector showed a marked improvement, with accelerated sales in the motor vehicles segment following the Sales and Services Tax (SST) exemptions, as well as better performance of the retail trade segment, supported by higher demand for necessities. The recovery, however, was weighed down by subdued spending on non-essential retail goods, such as durable goods and recreational activities. In addition, tourism activity remained weak due to continued closure of international borders, affecting key sub-sectors such as food and beverage and accommodation, as well as transport and storage. Nevertheless, relaxation on movement restrictions enabled resumption of domestic travel activity, and facilitated an incipient restoration of activity in these sub-sectors. Meanwhile, the finance and insurance sub-sector registered positive growth, supported by higher capital market activity, particularly from domestic retail participants, as well as higher net interest and fee income. In addition, growth in the information and communication sub-sector continued to improve amid higher demand for data communication services, particularly driven by the rise of remote working arrangements. Growth in the manufacturing sector rebounded to 3.3% (2Q 2020: -18.3%), supported by a broad-based improvement across all the major manufacturing clusters. In the Electrical & Electronics (E&E) cluster, growth rebounded strongly as production increased to fulfil order backlogs from the previous quarter as well as to cater for front-loading activities amid concerns of rising trade tensions. Growth in the consumer-related cluster also turned positive as Government measures, such as the exemption of export duties and car sales tax, supported the production of refined palm oil and passenger motor vehicles respectively. Meanwhile, the turnaround in the primary-related cluster was driven mainly by strong demand for rubber and pharmaceutical products. Although manufacturing activity in the construction related cluster continued to record negative growth, the contraction eased as construction activities resumed after the Movement Control Order (MCO) period. 77
87. Contraction in the mining sector eased considerably (-6.8%; 2Q 2020: -20.0%) as oil and natural gas production improved amid gradual recovery in external demand. The improvement is also supported by a smaller decline in the other mining segment as production resumed after the MCO period. Activity in the construction sector improved, contracting by a smaller rate of 12.4% (2Q 2020: -44.5%). Activity resumed across all sub-sectors supported by on-going large transportation projects in the civil engineering sub-sector and affordable housing projects in the residential sub-sector. The agriculture sector recorded a contraction of 0.7% (2Q 2020: 1.0%), mainly due to the slower growth in the oil palm sub-sector amid labour shortages, which affected harvesting activities during the quarter. This more than offset the recovery in the aquaculture, livestock and other agriculture sub-sectors as demand gradually recovered. Recovery in domestic and external demand Domestic demand recorded a smaller decline of 3.3% in the third quarter of 2020 (2Q 2020: 18.7%), driven by improvements in both consumption and investment activity. Household spending was mainly supported by gradual recovery in income conditions, while investment activity benefitted from the ease of containment measures. Net exports rebounded to record a positive growth of 21.9% (2Q 2020: -38.6%), driven by a larger improvement in exports vis-àvis imports. Private consumption recovered significantly from the trough in the second quarter to record a smaller contraction of 2.1% (2Q 2020: -18.5%). Household spending improved with further loosening of movement restrictions, while broad income conditions gradually recovered amid resumption of economic activities. The improvement in spending was reflected in the uptrend across most retail and financing data during the quarter. Private consumption activity was also supported by stimulus measures such as the EPF i-Lestari withdrawals, wage subsidies and sales tax reduction for cars. Public consumption registered a higher growth of 6.9% (2Q 2020: 2.3%), benefitting from increased Government spending on supplies and services and faster expansion in emoluments. Smaller decline in investment activity Gross fixed capital formation (GFCF) registered a smaller contraction of 11.6% (2Q 2020: 28.9%), supported by improvements in both public and private sector investment. By type of asset, investment in structures registered a much smaller contraction of 12.9% (2Q 2020: 41.2%), while investment in machinery & equipment (M&E) remained relatively weak (-8.3%; 2Q 2020: -11.1%). In particular, structures investment benefitted from the resumption of construction activity following the gradual lifting of movement restrictions. Private investment declined by 9.3%, an improvement from the trough in the second quarter of 2020 (-26.4%), mainly supported by the resumption of construction activity as the economy gradually reopens. Furthermore, growth was also underpinned by capital spending in the E&E and healthcare related sectors, supported by rising demand amid the new normal. Similarly, public investment registered a smaller decline of 18.6% (2Q 2020: -38.7%). This mainly reflects the improvement in capital spending by general government. 78
88. Headline inflation was less negative amid the increase in fuel prices Headline inflation , as measured by the annual percentage change in the Consumer Price Index (CPI), recorded a smaller negative at -1.4% during the quarter (2Q 2020: -2.6%). This mainly reflected the higher domestic retail fuel prices (average RON95 petrol price per litre in 3Q 2020: RM 1.68; 2Q 2020: RM 1.37) in line with the recovery in global oil prices. Notwithstanding this, headline inflation remained negative as retail fuel prices continued to be significantly below their levels in the corresponding quarter last year. Broad-based downward pressures on prices were contained during the quarter, as reflected by the limited share of CPI items recording price declines (3Q 2020 Average: 15%; 20102019 Average: 21%; April and May 2020 Average: 24%). Core inflation moderated slightly to 1.0% (2Q 2020: 1.2%) due mainly to lower rental and accommodation inflation. The decline, however, was partially offset by the higher inflation for some other categories such as food away from home and personal grooming services. Gradual recovery in labour market conditions Labour market conditions gradually improved, in line with the recovery in economic activity during the quarter. Employment growth registered a smaller contraction of 0.4% (2Q 2020: 1.3%), supported by positive rehiring activity as demand conditions normalised. Lower job losses were recorded during the quarter (33,309 persons; 2Q 2020: 34,806), as the placement rate of employees into new jobs increased to 22 persons per 100 people retrenched (2Q 2020: 9)1. As a result, the unemployment rate declined to 4.7% (2Q 2020: 5.1% of the labour force). While still remaining negative, private sector wage growth recorded a smaller decline (-2.6%; 2Q 2020: -5.6%). Wages for the private services sector registered a smaller contraction of 2.5% (2Q 2020: -6.4%). This improvement was driven by tourism-related services subsectors, such as wholesale and retail trade; food and beverage and accommodation; transport and storage; as well as health; education; and arts and entertainment. In the manufacturing sector, wages recorded a lower contraction of 2.7% (2Q 2020: -4.0%), attributable to the E&E, primary-related, and construction-related clusters. Despite an improvement in manufacturing sector growth and positive manufacturing IPI performance during the quarter, employers remained cautious in raising wages due to continued economic uncertainties. Improvement in trade activity amid higher external demand and domestic manufacturing activity During the quarter, gross exports turned around to register a positive growth of 4.4% (2Q 2020: -15.1%), due primarily to the recovery in manufactured exports. Gross imports registered a smaller contraction of 6.3% (2Q 2020: -15.1%) due to a smaller decline in intermediate imports and a turnaround in consumption imports. The trade balance2 increased to RM60.4 billion (2Q 2020: RM27.6 billion), the largest quarterly surplus ever recorded. 1 Job losses are proxied by the number of people who apply for the EIS benefits following loss of employment, while the placement rate refers to the number of people placed in new jobs under the EIS programme for every 100 persons retrenched. Thus, the placement rate is indicative of the pace of hiring, relative to retrenchment activity. 2 The goods and trade surpluses differ because goods for processing, storage and distribution (with no change in ownership) are excluded from the goods account. This is as per the 6th Edition of the Balance of Payments and International Investment Position Manual by the IMF. 79
89. Malaysia ’s export performance was supported by higher demand from key trade partners. Manufactured exports turned positive (6.8%; 2Q 2020: -12.6%), driven by higher E&E exports and a smaller decline in non-E&E exports. The rebound in E&E exports (16.0%; 2Q 2020: 9.5%) reflected higher exports to major trade partners, including PR China, the US and Singapore. It also reflected robust demand for work from home equipment, servers and medical devices. To some extent, E&E exports was also supported by firms fulfilling backlog orders following the easing of restrictions in June. Non-E&E exports declined at a slower pace (-0.7%; 2Q 2020: -15.1%) mainly attributable to higher exports of rubber products, optical & scientific equipment and iron & steel products. Commodities exports registered a smaller contraction (-7.2%; 2Q 2020: -26.4%) due to broad-based improvement in export volumes. Intermediate imports also registered a smaller decline during the quarter (-13.6%; 2Q 2020: 23.4%) due to higher imports of industrial supplies and fuel & lubricants amid the recovery in manufacturing activity. Consumption imports grew by 4.6% (2Q 2020: -9.5%), driven primarily by higher imports of consumer durable goods. Meanwhile, capital imports declined by 12.6% (2Q 2020: 14.9%) due mainly to lower imports of machinery and transport equipment. Higher current account surplus The current account of the balance of payments registered a surplus of RM26.1 billion or 7.1% of GDP during the quarter (2Q 2020: RM7.6 billion or 2.5% of GDP), due to a higher goods surplus and a positive secondary income balance. The goods surplus increased to RM41.5 billion (2Q 2020: RM25.9 billion), as exports increased at a faster pace compared to imports. In the services account, the deficit widened to RM13.3 billion (2Q 2020: -RM12.5 billion) due mainly to higher payment for transportation services. This was in line with higher trade activity during the quarter. The travel account continued to be in deficit (-RM3.5 billion; 2Q 2020: -RM3.1 billion) as international travel restrictions remained. The primary income account registered a higher deficit of RM9.2 billion (2Q 2020: -RM4.0 billion). This mainly reflected the lower investment income receipts from Malaysian investments abroad. The secondary income account posted a surplus of RM7.1 billion (2Q 2020: -RM1.9 billion). The surplus was due to transfers received as part of a settlement related to a wholly-owned subsidiary of the Minister of Finance (Incorporated). This more than offset the higher outward remittances by foreign workers amid the pick-up in economic activity during the quarter. Financial account registered a net outflow The financial account recorded a net outflow of RM35.2 billion (2Q 2020: -RM19.8 billion), reflecting outflows from all accounts, particularly portfolio investment and other investment accounts. The direct investment account registered a higher net outflow of RM3.1 billion (2Q 2020: RM1.2 billion), due mainly to a small net foreign direct investment (FDI) outflow amid lower direct investment abroad (DIA) outflows. Net FDI outflows amounted to RM0.8 billion (2Q 2020: +RM2.2 billion), the first FDI outflows recorded since 4Q 2009, driven by the outflows from debt instruments (3Q 2020: -RM9.4 billion; 2Q 2020: +RM1.1 billion). This reflected intercompany loan extensions and scheduled loan repayments, which are common for multinational corporations’ operations, as well as trade credits granted by manufacturing firms, in line with strong exports, especially in the E&E sector. The outflows from debt instruments were however partly offset by higher retained earnings (3Q 2020: +RM4.8 billion; 2Q 2020: RM2.2 billion), particularly by FDI firms in the manufacturing sector and continued equity 80
90. capital injections into Malaysia (3Q 2020: RM3.8 billion; 2Q 2020: RM3.4 billion). DIA recorded outflows of RM2.2 billion in the third quarter (2Q 2020: -RM3.5 billion). These investments were channelled mainly into the financial services sub-sector and manufacturing sector. The portfolio investment account registered a significant net outflow of RM23.1 billion (2Q 2020: +RM22.2 billion), following larger residents’ portfolio investments abroad of RM20.7 billion (2Q 2020: -RM2.0 billion) and a small non-resident (NR) portfolio investment outflow of RM2.4 billion (2Q 2020: +RM24.3 billion). Residents’ portfolio investments abroad were driven by institutional investors’ acquisitions of equity and debt securities abroad. NR portfolio investment outflows reflected the continued liquidation of domestic equity securities (-RM6.9 billion; 2Q 2020: -RM8.9 billion), which were partly offset by inflows into debt securities (+RM4.5 billion; 2Q 2020: +RM33.1 billion). The other investment account registered a smaller net outflow of RM8.5 billion (2Q 2020: RM41.3 billion). The outflows were due mainly to a net repayment of interbank borrowings. Net errors and omissions amounted to +RM7.7 billion during the quarter, or +1.7% of total trade. Lower external debt Malaysia’s external debt amounted to RM953.3 billion, or 66.5% of GDP as at end-September 2020 (end-June 2020: RM1,003 billion or 69.3% of GDP). The decline was due mainly to a net repayment of interbank borrowings and valuation effects following the stronger ringgit against selected major and regional foreign currencies in the third quarter of 2020. This was partly offset by an increase in NR holdings of MGS. The country’s external debt remained manageable, given its currency and maturity profiles. Ringgit denominated external debt amounted to RM315.4 billion and accounted for 33.1% of total external debt (end-June 2020: 30.4%). It is largely in the form of NR holdings of domestic debt securities and ringgit deposits in resident banking institutions. These liabilities were not subject to valuation changes that may arise from fluctuations in the ringgit exchange rate. Foreign currency (FCY) external debt accounted for the remaining RM638 billion, or 66.9% of total external debt. 50.9% of FCY-denominated external debt were by the corporate sector, and are mainly subject to prudential and hedging requirements. 27.1% of total FCYdenominated external debt were long-term bonds and notes issued offshore, mainly by nonfinancial corporations and channelled primarily to finance asset acquisitions abroad. Intercompany loans accounted for 15.0% of FCY-denominated external debt, were typically on flexible and concessionary terms, such as no fixed repayment schedule or low interest rate. Interbank borrowings and FCY deposits in the domestic banking system accounted for 35.2% of FCY-denominated external debt. The lower interbank borrowings observed during the quarter was largely driven by maturing back to-back intragroup/branch borrowing and lending transactions by banks in the Labuan International Business and Financial Centre. Some domestic banks also benefitted from higher domestic FCY deposits, thus reducing the need for interbank funding from non-residents. Around 80.5% of interbank borrowings were in the form of intragroup borrowings, which are generally more stable, thereby limiting rollover risks faced by banks. Meanwhile, foreign-currency risk, measured in terms of the net open position of FCY-denominated exposures 3 , remained low at 4.6% of banks’ total capital (end-June 2020: 4.9%). 3 Refers to the aggregated sum of the net short or long foreign currency positions for all currencies across banks. 81
91. From a maturity perspective , 61.2% of the total external debt was skewed towards mediumto long-term tenure (end-June 2020: 58.7%), suggesting low rollover risk. Short-term external debt accounted for the remaining 38.8% of external debt. Of which, 44.8% were intragroup borrowings among banks and corporations, which were generally stable and on concessionary terms. About another 13% were accounted by trade credits, largely backed by export earnings and are self liquidating. As at 30 October 2020, international reserves stood at USD104.6 billion, sufficient to finance 8.4 months of retained imports, and is 1.2 times the short-term external debt. (Source: Bank Negara Malaysia’s Economic and Financial Developments in the Malaysian Economy in the Third Quarter of 2020) 7.1.2 Outlook for the Malaysian economy in 2021 The Malaysian economy in on track for a recovery after a trough in the second quarter of 2020 In the third quarter, the Malaysian economy improved markedly following the gradual lifting of nationwide containment measures, as well as support from better external demand conditions. The recent resurgence of COVID-19 cases and targeted containment measures in most states could affect the momentum of the recovery in the final quarter of the year. However, as most economic sectors have been allowed to continue to operate, subject to sectoral standard operating procedures (SOPs), the impact is unlikely to be as severe as the containment measures during previous periods. Going into 2021, growth is expected to improve further, benefitting from the recovery in global demand and spill overs onto the domestic sectors, continued policy support including the recent KITA PRIHATIN and 2021 Budget measures, as well as higher production from existing and new facilities. However, the pace of recovery will be uneven across sectors with some industries expected to remain below pre-pandemic levels, and a slower improvement in the labour market. The balance of risks is tilted to the downside, emanating mainly from ongoing uncertainties surrounding COVID-19 globally and domestically. However, the economy could benefit from a larger-than-expected positive impact from various policy measures, and better-than-expected recovery in global economy. Headline inflation in 2021 is projected to average higher The annual average headline inflation is expected to be negative in 2020. For the remainder of the year, annual headline inflation will primarily reflect the downward contribution from lower retail fuel prices, due to lower global oil prices, and the tiered electricity tariff rebate that remains in place until the end of 2020. In 2021, headline inflation is expected to average higher, mainly due to higher projected global oil prices and the lapse in the effect from the tiered electricity tariff rebate. Underlying inflation is expected to be subdued amid spare capacity in the economy. The outlook for inflation is subject to uncertainty, with the trajectory mainly depending on global oil and commodity price developments. (Source: Bank Negara Malaysia’s Economic and Financial Developments in the Malaysian Economy in the Third Quarter of 2020) 82
92. 7 .2 Industry overview and outlook Review of 2020, outlook for 2021 While 2020 began on relatively solid footing, the COVID-19 pandemic upended all expectations, especially for 1H2020. Indeed, global growth recovered considerably in 3Q20, with the rebound mainly supported by exceptional fiscal and monetary stimulus, as well as the easing of lockdown measures by the end of 2Q20. Additionally, savings mainly in OECD economies during the lockdown built a solid base for reviving consumption, as well as lifting global trade and investment. More recently, rising infections and growing uncertainties have left the global economic recovery more fragile, with global GDP now forecast to show a decline of 4.2% in 2020. Next year, global GDP is forecast to grow by 4.4%. This rebound will be mainly driven by emerging and developing economies, especially in Asia. The actual growth trajectory will very much depend on uncertainties related to COVID-19 developments, policies of the incoming US administration and Brexit negotiations, as well as ongoing trade negotiations. Recent news about the possibility of vaccination programs in most major economies provides upside to the current forecast, which assumes that a vaccination will gradually be globally available by 2H21. Earlier availability would allow a faster-than-anticipated move towards normalisation. The COVID-19 pandemic and accompanying lockdown measures have had an unprecedented impact on world oil demand, with the latest data Graph 1: Real GDP growth for selected countries in 2020-2021 (%) pointing to a historic contraction of 9.8 mb/d in 2020. Oil demand in the OECD is estimated to fall by 5.5 mb/d in 2020, while non-OECD oil demand is anticipated to drop by 4.3 mb/d, despite a notable recovery in China in 3Q20, and more lately in India. For 2021, global oil demand is estimated to rebound by 5.9 mb/d, with OECD increasing by 2.6 mb/d, led by OECD Americans contributing 1.6 mb/d. In the non-OECD, oil demand growth is projected to be around 3.3 mb/d, with growth focused in China and India. The solid economic recovery coupled with the low baseline of 2020 will support oil demand growth next year. Transportation and industrial sectors are projected to lead oil demand growth in 2021. However, uncertainties remain high, mainly surrounding the development of the COVID-19 pandemic and rollout of vaccines, as well as the structural impact of COVID-19 on consumer behaviours, predominantly in transportation sector. On the supply side, nonOPEC growth in 2020 has been lower than initial expectations as the COVID-19 outbreak led to a drastic fall in demand and prices. In an effort to address the unprecedented turmoil in the market, OPEC members and non-OPEC participating in the Declaration of Cooperation (DoC) removed some 9.5 mb/d of excess supply Graph 2: World oil demand and non-OPEC supply growth in 2020-2021 (mb/d) from the market, with an estimated 2.6 mb/d contributed by nonOPEC partners in the DoC. The US and Canada contributed a further reduction of 3.6 mb/d through shut-in wells. 83
93. As a result , non-OPEC supply is now expected to show a decline of 2.5 mb/d this year. In 2021, non-OPEC supply is projected to see a mild recovery of 0.8 mb/d, y-o-y, on the back of a gradual increase in drilling and completion activities in North America, as well as an rise of 0.7 mb/d from non-OPEC producers in the DoC. US tight crude output is expected to remain flat, although total liquids will grow by 0.3 mb/d. Canada, Norway, and Brazil are also expected to see growth in 2021, amid considerable uncertainties on the overall forecast, as the industry responds to conditions related to the pandemic. Following the drastic impact of the COVID-19 pandemic on the global economy and world oil demand in 2020, OPEC and the Non-OPEC countries participating in the DoC acted swiftly and decisively earlier in the year to adjust oil production to avoid a severe oil market imbalance. The recent OPEC and Non-OPEC Ministerial Meeting on 3 December reconfirmed the existing commitment under the DoC decision from 12 April 2020, then amended in June and September 2020, to gradually return 2 mb/d, given consideration to market conditions. Beginning in January 2021, DoC participating countries decided to voluntarily adjust production by 0.5 mb/d from 7.7 mb/d to 7.2 mb/d. Furthermore, DoC participating counties agreed to hold monthly OPEC and Non-OPEC ministerial meetings starting January 2021 to assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 mb/d. (Source: OPEC Monthly Oil Market Report – December 2020) THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 84
94. SECTION 8 .0 8.1 OTHER INFORMATION Material litigation The Issuer, the Kafalah Provider and the Material Subsidiary are not and have not been involved in any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer, the Kafalah Provider or the Material Subsidiary is aware) as at the LPD. 8.2 Material contracts As at the LPD, the Issuer, the Kafalah Provider and the Material Subsidiary have not entered into any material contracts which are outside the ordinary course of their businesses. 8.3 Related party transactions As at the LPD, the Kafalah Provider has entered into related party transactions with its subsidiaries (including the Issuer and the Material Subsidiary), whereby management services fees are receivable) which are on arm length’s basis. 8.4 Contingent liabilities and material commitments The Issuer, the Kafalah Provider and the Material Subsidiary has not incurred any contingent liabilities or material commitments as at the LPD. 8.5 Conflict-of-interest or potential conflict-of-interest situations 8.5.1 Maybank Investment Bank Berhad After making enquiries as were reasonable in the circumstances, Maybank Investment Bank Berhad is not aware of any circumstances that would give rise to a conflict-ofinterest or potential conflict-of-interest situation, arising from its roles as the Joint Principal Adviser, the Joint Lead Arranger, and the Joint Lead Manager in relation to the Sukuk Wakalah Programme. 8.5.2 RHB Investment Bank Berhad As at the date hereof and after making enquiries as were reasonable in the circumstances, RHB Investment Bank Berhad is not aware of any circumstances that would give rise to a conflict-of-interest or potential conflict-of-interest situation in its capacity as the Joint Principal Adviser, Joint Lead Arranger, Joint Lead Manager and Facility Agent in relation to the Sukuk Wakalah Programme. However, should there be any conflict-of-interest and/or potential conflict-of-interest that may arise from the above, the following measures are in place / will be taken: (i) RHB Investment Bank Berhad is a licensed bank and its appointment as the Joint Principal Adviser, Joint Lead Arranger, Joint Lead Manager and Facility Agent in relation to the Sukuk Wakalah Programme is in the ordinary course of its business; (ii) The conduct of RHB Investment Bank Berhad is regulated strictly by the FSA, the CMSA and by its own internal controls and checks; 85
95. (iii) A due diligence review pursuant to the Sukuk Wakalah Programme has been or will be undertaken together with other independent professional advisers; and (iv) The roles of RHB Investment Bank Berhad as the Joint Principal Adviser, Joint Lead Arranger, Joint Lead Manager and Facility Agent in relation to the Sukuk Wakalah Programme are governed by the relevant agreements and documentations for the Sukuk Wakalah Programme which sets out such roles of RHB IB. Further notwithstanding the above, the board of directors of the Issuer has confirmed the above said arrangement and is agreeable to proceed with the establishment of the Sukuk Wakalah Programme in accordance with the present arrangement and terms of the Sukuk Wakalah Programme. 8.5.3 Adnan Sundra & Low As at the date of this Information Memorandum and after making enquiries as were reasonable in the circumstances, Adnan Sundra & Low has confirmed that it is not aware of any circumstances that would give rise to a conflict-of-interest situation or potential conflict-of-interest situation in its capacity as the solicitors acting for the Joint Principal Advisers and Joint Lead Arrangers in relation to the Sukuk Wakalah Programme. 8.5.4 Malaysian Trustees Berhad As at the date hereof and after making enquiries as were reasonable in the circumstances, Malaysian Trustees Berhad (“Malaysian Trustees”) is not aware of any circumstances that would give rise to a conflict-of-interest or potential conflict-of-interest situation in its capacity as the Sukuk Trustee in relation to the Sukuk Wakalah Programme. However, should there be any conflict-of-interest and/or potential conflict-of-interest that may arise from the above, the following measures are in place / will be taken: (i) Malaysian Trustees is a trustee company and registered bond trustee with the SC and its appointment as the Sukuk Trustee in relation to the Sukuk Wakalah Programme is in the ordinary course of its business; (ii) The roles of Malaysian Trustees as Sukuk Trustee in relation to the Sukuk Wakalah Programme are governed by the relevant agreements and documentations for the Sukuk Wakalah Programme which sets out such roles of Malaysian Trustees; and (iii) Malaysian Trustees has acted as bond trustee in transactions in the Malaysian corporate bonds market and is committed to upholding its professional integrity and responsibilities in relation to the Sukuk Wakalah Programme. Further notwithstanding the above, the board of directors of the Issuer has confirmed the above said arrangement and is agreeable to proceed with the establishment of the Sukuk Wakalah Programme in accordance with the present arrangement and terms of the Sukuk Wakalah Programme. 8.5.5 Maybank Islamic Berhad After making enquiries as were reasonable in the circumstances, Maybank Islamic Berhad is not aware of any circumstances that would give rise to a conflict-of-interest or potential conflict-of-interest situation, arising from its role as the Joint Shariah Advisers in relation to the Sukuk Wakalah Programme. 86
96. 8 .5.6 RHB Islamic Bank Berhad As at the date hereof and after making enquiries as were reasonable in the circumstances, RHB Islamic is not aware of any circumstances that would give rise to a conflict-of-interest or potential conflict-of-interest situation in its capacity as the Joint Shariah Advisers in relation to the Sukuk Wakalah Programme. However, should there be any conflict-of-interest and/or potential conflict-of-interest that may arise from the above, the following measures are in place / will be taken: (i) RHB Islamic is a licensed Islamic bank and its appointment as the Joint Shariah Advisers in relation to the Sukuk Wakalah Programme is in the ordinary course of its business; (ii) The conduct of RHB Islamic is regulated by BNM and governed under, inter alia, the Islamic Financial Services Act 2013 and by its own internal controls and checks; and (iii) The roles of RHB Islamic as Joint Shariah Advisers in relation to the Sukuk Wakalah Programme are governed by the relevant agreements and documentations for the Sukuk Wakalah Programme which sets out such roles of RHB Islamic. Further notwithstanding the above, the board of directors of the Issuer has confirmed the above said arrangement and is agreeable to proceed with the establishment of the Sukuk Wakalah Programme in accordance with the present arrangement and terms of the Sukuk Wakalah Programme. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 87
97. APPENDIX I AUDITED FINANCIAL STATEMENTS OF THE ISSUER FOR THE FINANCIAL PERIOD FROM 5 SEPTEMBER 2018 TO 31 DECEMBER 2019 88
142. APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE KAFALAH PROVIDER FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 89
205. ISSUER Petroleum Sarawak Exploration & Production Sdn Bhd (Registration no. 201801032029 (1294054-A)) Level 6, CT660, Block C, iCOM Square, Jalan Pending, 93450 Kuching, Sarawak KAFALAH PROVIDER Petroleum Sarawak Berhad (Registration No. 201701025772 (1239938-U)) Level 6, CT660, Block C, iCOM Square, Jalan Pending, 93450 Kuching, Sarawak JOINT PRINCIPAL ADVISERS / JOINT LEAD ARRANGERS / JOINT LEAD MANAGERS Maybank Investment Bank Berhad (Registration No. 197301002412 (15938-H)) 32nd Floor, Menara Maybank 100 Jalan Tun Perak 50050 Kuala Lumpur RHB Investment Bank Berhad (Registration No. 197401002639 (19663-P)) Level 11, Tower Three RHB Centre Jalan Tun Razak 50400 Kuala Lumpur JOINT SHARIAH ADVISERS Maybank Islamic Berhad (Registration No. 200701029411) (787435-M)) 15th Floor, Tower A, Dataran Maybank 1 Jalan Maaorf 59000 Kuala Lumpur RHB Islamic Bank Berhad (Registration No. 200501003283 (680329-V)) Level 11, Menara Yayasan Tun Razak 200 Jalan Bukit Bintang 55100 Kuala Lumpur SUKUK TRUSTEE FACILITY AGENT RATING AGENCY Malaysian Trustees Berhad (Registration No. 197501000080 (21666-V)) Level 10, Tower One RHB Centre Jalan Tun Razak 50400 Kuala Lumpur RHB Investment Bank Berhad (Registration No. 197401002639 (19663-P)) Level 11, Tower Three RHB Centre Jalan Tun Razak 50400 Kuala Lumpur RAM Rating Services Berhad Suite 20.01, Level 20 The Gardens South Tower Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur SOLICITORS TO THE JOINT PRINCIPAL ADVISERS AND JOINT LEAD ARRANGERS Adnan Sundra & Low Level 25, Menara Etiqa No. 3, Jalan Bangsar Utama 1 59000 Kuala Lumpur