Proposed Issuance of Sukuk Wakalah by Southern Power Generation Sdn Bhd of Rm4.0 Billion in Nominal Value

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1. TENAGA NASIONAL BERHAD PROPOSED ISSUANCE OF SUKUK BASED ON THE SHARIAH PRINCIPLE OF WAKALAH BI ALISTITHMAR OF UP TO RM4 .0 BILLION IN NOMINAL VALUE BY SOUTHERN POWER GENERATION SDN BHD (“SPG” OR THE “ISSUER”) All terms and references defined in Appendix I shall have the same meaning in this announcement unless otherwise specifically defined herein. 1. INTRODUCTION Tenaga Nasional Berhad (“TNB”) wishes to announce that SPG, a fifty-one percent (51%) owned subsidiary of TNB, proposes to issue Sukuk based on the shariah principle of Wakalah Bi Al-Istithmar (“Sukuk Wakalah”) of up to RM4.0 billion in nominal value. 2. DETAILS OF THE SUKUK WAKALAH The Sukuk Wakalah will be issued in one lump sum and will have a tenure of up to twenty (20) years from the date of issuance. The other salient terms and conditions of the Sukuk Wakalah are set out in Appendix I. 3. UTILISATION OF PROCEEDS BY THE ISSUER The proceeds of the Sukuk Wakalah shall be utilised to fund up to eighty per cent (80%) of the Total Project Costs, which shall be Shariah-compliant, including payment and/or reimbursement to the Sponsors on the issue date of the Sukuk Wakalah in respect of the Total Project Costs incurred prior to the Financial Close (except for the amount paid for the subscription of the ordinary shares in SPG before Financial Close) based on documentary evidence. 4. FINANCIAL EFFECTS OF THE SUKUK WAKALAH (i) Issued share capital and substantial shareholders’ shareholdings The Sukuk Wakalah will not have any effect on the issued share capital of TNB and/or the substantial shareholders’ shareholdings in TNB. (ii) Earnings and earnings per share (“EPS”), net assets per share and gearing The effects of the issuance of the Sukuk Wakalah on the consolidated earnings and consolidated EPS of TNB are not expected to be material. However, the actual effects will depend on, amongst others, the effective borrowing cost of such issuance which cannot be determined at this stage. The issuance of the Sukuk Wakalah will not have any material effect on TNB’s consolidated net assets per share of TNB. The issuance of the Sukuk Wakalah will increase TNB’s consolidated gearing, the quantum of which is dependent on the amount issued. For illustrative purposes, based on TNB’s consolidated balance sheet ended 31 May 2017 and assuming that the maximum amount of RM4.0 billion nominal value of the Sukuk Wakalah is issued, TNB’s consolidated gearing would increase from 39.8% to 42.3%. 5. LODGEMENT WITH THE SECURITIES COMMISSION MALAYSIA The lodgement with the Securities Commission Malaysia (“SC”) in relation to the Sukuk Wakalah has been made on 14 September 2017 under the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the SC on 9 March 2015, effective 15 June 2015 and revised on 16 January 2017.
2. 6 . INTEREST OF DIRECTORS AND/OR MAJOR SHAREHOLDERS AND PERSONS CONNECTED WITH THEM Insofar as the Board of Directors of TNB are able to ascertain, none of the Directors, major shareholders and/or persons connected to the Directors and/or major shareholders of TNB, has any interest, direct or indirect, in the Sukuk Wakalah. 7. ADVISERS CIMB Investment Bank Berhad (“CIMB”) is the Sole Principal Adviser for the Sukuk Wakalah. CIMB and Maybank Investment Bank Berhad are the Joint Lead Arrangers and Joint Lead Managers for the Sukuk Wakalah. CIMB Islamic Bank Berhad and Maybank Islamic Berhad are the Joint Shariah Advisers for the Sukuk Wakalah. This announcement is dated 14 September 2017.
3. APPENDIX I Salient terms of the Sukuk Wakalah Issuer Southern Power Generation Sdn Bhd (“SPG” or the “Issuer”). Facility description An Islamic medium term notes issuance of up to RM4.0 billion in nominal value under the Shariah principle of Wakalah Bi Al-Istithmar ("Sukuk Wakalah”) which is one of the Shariah principles and concepts approved by the Shariah Advisory Council of the Securities Commission Malaysia . One-time issue or programme One-time issue. Shariah principles Wakalah Bi Al-Istithmar. Murabahah (via Tawarruq). Expected facility size Up to RM4,000,000,000.00. Tenure Up to twenty (20) years from the date of issuance of the Sukuk Wakalah. Periodic distribution rate The periodic distribution rate which shall be fixed rate shall be determined prior to the issuance of each tranche of the Sukuk Wakalah. Details of security The Sukuk Wakalah shall be secured by the following security, including, but not limited to: (1) A first ranking National Land Code charge over the lease of the land on which the Project is situated (“Charge”) or, the first ranking assignment of SPG’s rights, interests, titles and benefits over the lease agreement of the land on which the Project is situated (in the event the Charge cannot be created pending the application to the land office to change the categories of land use or pending the issuance of separate issue document of title); (2) A debenture incorporating a first ranking fixed and floating charge on all of the assets of SPG, both present and future excluding the distribution account , the junior facility repayment account and the sukuk trustee’s reimbursement account; (3) A first ranking assignment of all of SPG’s rights, interests, titles and benefits under the Project Documents and proceeds therefrom (including the PPA and revenues thereunder) but excluding the IPP Licence (as defined in the PPA); (4) A first ranking assignment of SPG's rights, interests, titles and benefits in all performance and/ or maintenance bonds in relation to the Project; (5) A first ranking assignment of SPG's rights, interests, titles and benefits in all insurance policies/ Takaful contracts of SPG that are required in respect of the Project, as advised by the Takaful/ insurance consultant; (6) A first ranking assignment and charge of SPG’s rights, interests, titles and benefits in all designated accounts of the Sukuk Wakalah and the credit balances therein and a first ranking charge over the permitted investments; and (7) Any other security as may be required by the credit rating agency in respect of the Sukuk Wakalah to achieve the credit rating as stated herein or as advised by the Solicitors acting for the Joint Lead Arrangers (“JLAs”) and to be mutually agreed between SPG and the JLAs.
4. Credit Rating The Sukuk Wakalah has been assigned an indicative rating of AA-IS by Malaysian Rating Corporation Berhad . Mode of issue The Sukuk Wakalah may be issued via book building, book running, bought deal, direct placement and/or private placement. Governing laws Laws of Malaysia. Definitions Financial Close means the date upon which all the conditions precedent for the Sukuk Wakalah have been fulfilled or waived, as the case may be. Junior Facility means a Ringgit-denominated subordinated mezzanine loan facility. PPA means the power purchase agreement dated 5 September 2016 entered into between the Issuer and TNB, as supplemented by the supplemental agreement dated 29 May 2017 (as may be amended or supplemented from time to time). Project means the financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of the Facility (as defined in the PPA), the Fuel Facilities (as defined in the PPA), the Project Site (as defined in the PPA), the Interconnection Facilities (as defined in the PPA) and associated facilities at Pasir Gudang, Johor, Malaysia and any Modification (as defined in the PPA) thereto. Project Documents (a) The PPA and any side letter entered into pursuant thereto; (b) The gas sales agreement dated 1 September 2016 entered into between Petroliam Nasional Berhad (“Petronas”) and the Issuer (as may be amended or supplemented from time to time); (c) The engineering procurement and construction contract dated 24 October 2016 entered into between the Issuer and CTCI Corporation, CTCI Overseas Corporation Limited, CTCI Engineering & Construction Sdn Bhd, General Electric Energy Products France SNC and GE Power Solutions (Malaysia) Sdn Bhd (collectively the “EPC Contractor”) and supplemented by the Supplemental Agreement No.1 dated 2 June 2017 (as may be amended or supplemented from time to time) (“EPC Contract”) and associated bonds and guarantees from or on behalf of the EPC Contractor; (d) The Operation & Maintenance Agreement (as defined in the EPC Contract); (e) The Long Term Service Agreement (as defined in the EPC Contract); (f) The lease agreement(s) in relation to the Project, as may be applicable; (g) The Takaful/ insurances relating to the Project which are issued in favour of or for the benefit of SPG; (h) The permits and licenses relating to the Project which are issued in favour of or for the benefit of SPG; (i) Any agreement, document and/or side letter that supplements, amends, or varies any of the above; and
5. (j) Any other agreement, document and/ or side letter that is material to the Project as may be reasonably determined by the JLAs and agreed with SPG. Scheduled COD means 1 July 2020 or such later date as may be applied according to the PPA. Sponsors means TNB and SIPP Energy Sdn Bhd. Total Project Costs means the total cost and expenses relating to the Project as budgeted for at Financial Close, including but not limited to: (i) finance all costs associated with the Project Site (as defined in the PPA), development, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance in respect of the Project; (ii) pay all financing costs in relation to the Project, including all interest payments and fees payable under the Junior Facility prior to the Scheduled COD and any fees in relation to Permitted Indebtedness (as detailed in the terms and conditions of the Sukuk Wakalah); and (iii) finance any other Project related costs, including consultancy fees, Takaful contributions/insurance premium and contingencies. [The rest of this page has been intentionally left blank]