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Tadau Energy Sdn Bhd Sukuk RM250 Million - Information Memorandum

IM Insights
By IM Insights
4 years ago
Tadau Energy Sdn Bhd Sukuk RM250 Million - Information Memorandum

Hibah, Shariah, Shariah compliant, Sukuk, Takaful, Provision, Receivables, Reserves

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  1. ELECTRONIC DISCLAIMER STRICTLY PRIVATE AND CONFIDENTIAL NOT FOR DISTRIBUTION TO PERSONS THAT DO NOT FALL WITHIN THE RELEVANT CATEGORIES OF PERSONS SPECIFIED IN SECTION 2 (6) OF THE COMPANIES ACT 2016, AS AMENDED FROM TIME TO TIME (“COMPANIES ACT”) AND PERSONS TO WHOM AN OFFER OR INVITATION TO SUBSCRIBE THE SRI SUKUK TADAU (AS DEFINED HEREIN) MAY BE MADE AND TO WHOM THE SRI SUKUK TADAU ARE ISSUED WOULD NOT FALL WITHIN PART 1 OF SCHEDULE 6 (OR SECTION 229(1)(b)) OF THE CAPITAL MARKETS AND SERVICES ACT 2007, AS AMENDED FROM TIME TO TIME ("CMSA"), OR 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 AT ISSUANCE; THEREAFTER, NOT FOR DISTRIBUTION TO PERSONS THAT DO NOT FALL WITHIN THE RELEVANT CATEGORIES OF PERSONS SPECIFIED IN SECTION 2(6) OF THE COMPANIES ACT OR PERSONS TO WHOM AN OFFER OR INVITATION TO PURCHASE THE SRI SUKUK TADAU THAT WOULD NOT FALL WITHIN 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 AFTER THE ISSUANCE OF THE SRI SUKUK TADAU. IMPORTANT: YOU MUST READ THE FOLLOWING DISCLAIMER BEFORE CONTINUING. Please find attached an electronic copy of the information memorandum dated 16 June 2017 (“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 (“SRI Sukuk Tadau”) pursuant to an Islamic medium term notes programme under the Shariah principles of Istisna’ and Ijarah of up to RM250.0 million in nominal value (“SRI Sukuk Programme”) by Tadau Energy Sdn Bhd (Company No. 1148988-K) (“Issuer”). The following disclaimer applies to the attached Information Memorandum. You are advised to read this disclaimer carefully before accessing, reading or making any other use of the attached Information Memorandum. By accepting this e-mail and accessing the attached Information Memorandum, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access. Confirmation of Your Representation: The Information Memorandum is not a prospectus and has not been registered nor will it be registered as a prospectus under the CMSA. In order to be eligible to view the attached Information Memorandum or make an investment decision in respect of the SRI Sukuk Tadau, you must be a person falling within the relevant category of persons specified in Section 2(6) of the Companies Act, and persons to whom an offer or invitation to subscribe the SRI Sukuk Tadau may be made and to whom the SRI Sukuk Tadau are issued would fall within Part 1 of Schedule 6 (or Section 229(1)(b)) of the CMSA or 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; thereafter, a person falling within the relevant category of persons specified in Section 2(6) of the Companies Act, and persons to whom an offer or invitation to purchase the SRI Sukuk Tadau would fall within 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 (“Selling Restrictions”). By accepting the e-mail and accessing the attached Information Memorandum, you shall be deemed to have represented to us (1) that you are a person falling within the Selling Restrictions; and (2) that you consent to the delivery of the attached Information Memorandum and any amendments or supplements thereto by electronic transmission.
  2. You are reminded that documents transmitted via this medium may be subject to interruptions , transmission blackout, delayed transmission due to internet traffic, data corruption, interception, unauthorised amendment, tampering, viruses or other technical, mechanical or systemic risks associated with internet transmissions. Affin Hwang Investment Bank Berhad (Company No. 14389U) as the Principal Adviser (“PA”), Lead Arranger (“LA”) and the Lead Manager (“LM”) of the SRI Sukuk Programme or any person who controls any of them nor any of their respective directors, officers, employees, representatives or affiliates have not accepted and will not accept any liability and/or responsibility for any such interruptions, transmission blackout, delayed transmission due to internet traffic, data corruption, interception, unauthorised amendment, tampering, viruses or other technical, mechanical or systemic risks associated with internet transmissions or any consequence thereof. RESTRICTIONS: The Information Memorandum is strictly confidential and does not constitute an issue, offer or sale of, or an invitation to subscribe or purchase the SRI Sukuk Tadau or any other securities of any kind by any party in any jurisdiction in which such offer or sale of, or an invitation to subscribe or purchase the SRI Sukuk Tadau would be unlawful prior to qualification under the securities laws of such jurisdictions. The Information Memorandum has not been and will not be made to comply with the laws of any jurisdiction other than Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant to or under any legislation (or with or by any regulatory authorities or other relevant bodies) of any Foreign Jurisdiction and it does not constitute an issue, offer or sale of, or an invitation to subscribe or purchase the SRI Sukuk Tadau or any other securities of any kind by any party in any Foreign Jurisdiction. You are reminded that you have accessed the Information Memorandum on the basis that you are a person into whose possession of the Information Memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver this document, electronically or otherwise, to any other person. If you have gained access to this transmission contrary to the foregoing restrictions, you will be unable to purchase any of the SRI Sukuk Tadau described therein. Actions that You May Not Take: If you receive this document by e-mail, you should not reply by e-mail, and you may not purchase any SRI Sukuk Tadau by doing so. Any reply e-mail communications, including those you generate by using the "Reply" function on your e-mail software, will be ignored or rejected. YOU ARE NOT AUTHORISED AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHED INFORMATION MEMORANDUM, ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH INFORMATION MEMORANDUM IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION, REPRODUCTION OR ALTERATION OF ANY OF THE CONTENTS OF THIS DOCUMENT AND THE ATTACHED INFORMATION MEMORANDUM IN WHOLE OR IN PART IS UNAUTHORISED. BY OPENING AND ACCEPTING THE ATTACHED INFORMATION MEMORANDUM YOU AGREE TO THE FOREGOING. 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 SET OUT IN THE INFORMATION MEMORANDUM.
  3. TADAU ENERGY SDN BHD (Company No. 1148988-K) INFORMATION MEMORANDUM PROPOSED ISSUE OF, OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR PURCHASE OF ISLAMIC MEDIUM TERM NOTES PURSUANT TO AN ISLAMIC MEDIUM TERM NOTES PROGRAMME UNDER THE SHARIAH PRINCIPLES OF ISTISNA’ AND IJARAH OF UP TO RM250.0 MILLION IN NOMINAL VALUE PRINCIPAL ADVISER / LEAD ARRANGER / LEAD MANAGER AFFIN HWANG INVESTMENT BANK BERHAD (Company No. 14389-U) A Participating Organisation of Bursa Malaysia Securities Berhad This Information Memorandum is dated 16 June 2017
  4. TABLE OF CONTENTS Particulars Page RESPONSIBILITY STATEMENT ........................................................................................... I IMPORTANT NOTICE AND GENERAL STATEMENTS OF DISCLAIMER ........................... I ACKNOWLEDGEMENT ...................................................................................................... III STATEMENTS OF DISCLAIMER – SECURITIES COMMISSION MALAYSIA ................... III DOCUMENTS INCORPORATED BY REFERENCE............................................................ IV CONFIDENTIALITY ............................................................................................................. IV DEFINITIONS AND ABBREVIATIONS ................................................................................ 1 SECTION 1 - EXECUTIVE SUMMARY............................................................................... 12 1.1 INTRODUCTION ....................................................................................................... 12 1.2 THE ISSUER ............................................................................................................. 12 1.3 OWNERSHIP STRUCTURE ...................................................................................... 12 1.4 OVERVIEW OF THE PROJECT ................................................................................ 13 1.5 KEY PROJECT DOCUMENTS .................................................................................. 13 1.6 SALIENT FEATURES OF THE SRI SUKUK PROGRAMME...................................... 14 1.7 OVERVIEW OF THE TRANSACTION STRUCTURE ................................................. 17 1.8 LODGEMENT WITH THE SC .................................................................................... 22 SECTION 2 - CORPORATE INFORMATION OF THE ISSUER ......................................... 23 2.1 CORPORATE HISTORY ........................................................................................... 23 2.2 PRINCIPAL ACTIVITIES ............................................................................................ 23 2.3 SHARE CAPITAL AND SHAREHOLDING STRUCTURE .......................................... 23 2.4 PROFILE OF DIRECTORS ........................................................................................ 23 2.5 SENIOR MANAGEMENT ........................................................................................... 24 2.6 FINANCIAL HIGHLIGHTS.......................................................................................... 25 SECTION 3 - CORPORATE INFORMATION OF THE SPONSOR 27 3.1 CORPORATE HISTORY ........................................................................................... 27 3.2 PRINCIPAL ACTIVITIES AND BUSINESS OVERVIEW ............................................ 27 3.3 SHARE CAPITAL AND SHAREHOLDING STRUCTURE .......................................... 27 3.4 SUBSIDIARIES .......................................................................................................... 28 3.5 PROFILE OF DIRECTORS ........................................................................................ 28 3.6 SENIOR MANAGEMENT ........................................................................................... 29 3.7 FINANCIAL HIGHLIGHTS.......................................................................................... 29 SECTION 4 - PROJECT INFORMATION ........................................................................... 30 4.1 DESCRIPTION OF THE SOLAR PV PLANT ............................................................. 30
  5. Particulars Page 4 .2 CONSTRUCTION SCHEDULE OF SOLAR PV PLANTS ........................................... 35 4.3 BASE CASE CASHFLOW PROJECTIONS ............................................................... 35 4.4 PROJECT STRUCTURE AND PROJECT PARTIES ................................................. 37 4.5 SUMMARY OF KEY PROJECT DOCUMENTS ......................................................... 37 4.6 OPERATIONS AND MAINTENANCE ...................................................................... 152 4.7 PROJECT TAKAFUL/INSURANCE ......................................................................... 153 4.8 GENERATION LICENCE ......................................................................................... 155 4.9 ENVIRONMENTAL REQUIREMENTS ..................................................................... 155 SECTION 5 - PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK PROGRAMME 156 SECTION 6 - INVESTMENT CONSIDERATIONS ............................................................ 220 6.1 INVESTMENT CONSIDERATIONS RELATING TO THE SRI SUKUK TADAU........ 220 6.2 INVESTMENT CONSIDERATIONS RELATING TO THE ISSUER .......................... 222 6.3 INVESTMENT CONSIDERATIONS RELATING TO THE PROJECT ....................... 223 6.4 GENERAL INVESTMENT CONSIDERATIONS ....................................................... 237 SECTION 7 - INDUSTRY OVERVIEW .............................................................................. 238 7.1 OUTLOOK AND ECONOMY OF MALAYSIA ........................................................... 238 7.2 OVERVIEW OF THE UTILITIES SECTOR .............................................................. 239 7.3 OVERVIEW AND OUTLOOK OF THE RENEWABLE ENERGY INDUSTRY ........... 240 SECTION 8 - OTHER MATERIAL INFORMATION .......................................................... 242 8.1 MATERIAL CONTRACTS ........................................................................................ 242 8.2 MATERIAL LITIGATION .......................................................................................... 242 8.3 MATERIAL CONTINGENT LIABILITIES .................................................................. 242 8.4 CONFLICT OF INTEREST SITUATIONS AND APPROPRIATE MITIGATING MEASURES ............................................................................................................. 242 APPENDIX 1 - BASE CASE CASHFLOW PROJECTIONS ............................................. 245 APPENDIX 2 - SUMMARY OF SOURCES AND USES OF FUNDS OF THE PROJECT . 246 APPENDIX 3 - ASSUMPTIONS OF BASE CASE CASHFLOW PROJECTIONS ............ 247 APPENDIX 4 - AUDITED FINANCIAL STATEMENT OF THE ISSUER FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 .............................................. 253 APPENDIX 5 - SITE MAP OF THE SOLAR PV PLANTS ................................................. 254
  6. RESPONSIBILITY STATEMENT This information memorandum (“Information Memorandum”) has been approved by the directors of Tadau Energy Sdn Bhd (Company No. 1148988-K) (“Tadau Energy” or the “Issuer”) and they collectively and individually accept full responsibility for the accuracy of the information contained in this Information Memorandum. The Board of Directors (“Board”) of the Issuer, after having made all reasonable enquiries and to the best of their knowledge, information and belief, confirms that all information contained in this Information Memorandum is true and correct in all material respects. The Board of the Issuer further confirms that there is no omission of a material fact, necessary to make the information contained in this Information Memorandum, in light of the circumstances under which it is provided, not misleading, and that the opinions and intentions expressed in the information contained in this Information Memorandum are honestly held. Reasonable enquiries have been made by the Board of the Issuer to ascertain that all material facts have been disclosed and to verify the accuracy of all such information and statements. In this context, the Board of the Issuer accepts full responsibility for such information contained 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 of the SRI Sukuk Tadau. This Information Memorandum may not be reproduced, in whole or in part, or used for any other purpose, or shown, given, copied to or filed, in whole or in part, with any other person including, without limitation, any government or regulatory authority except with the prior consent of Tadau Energy or as required under Malaysian laws, regulations or guidelines. Affin Hwang Investment Bank Berhad (“Affin Hwang IB”) as the Principal Adviser (“PA”), Lead Arranger (“LA”) and Lead Manager (“LM”) has not independently verified the information contained in this Information Memorandum and does not make any representation, warranty or undertaking, neither expressed or implied with respect to the accuracy or completeness of any of the information contained in this Information Memorandum. To the extent permitted by law, the PA, LA or LM has not accepted and will not accept any responsibility for the information and data contained in this Information Memorandum or otherwise in relation to the SRI Sukuk Tadau and to the extent permitted by law, shall not be liable for any consequences of reliance on any of the information or data in this Information Memorandum. The information in this Information Memorandum supersedes all other information and material previously supplied (if any) to the recipients. By taking possession of this Information Memorandum, the recipients are acknowledging and agreeing and are deemed to have acknowledged and agreed that they will not rely on any previous information supplied. 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 Tadau Energy, the PA, LA or LM or any other person. This Information Memorandum has not been and will not be made to comply with the laws of any jurisdiction other than Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant to or under any legislation (or with or by any regulatory authorities or other relevant bodies) of any Foreign Jurisdiction and it does not constitute an issue, offer or sale of, or an invitation to subscribe for or purchase the SRI Sukuk Tadau 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. Unless otherwise specified in this Information Memorandum, the information contained in this Information Memorandum is current as at the date hereof. The distribution or possession of this Information Memorandum in or from certain jurisdictions may be restricted or prohibited by law. Each recipient is required to seek appropriate professional advice i
  7. regarding , and to observe, any such restriction or prohibition. Neither Tadau Energy nor the PA, LA or LM accepts any responsibility or liability to any person in relation to the distribution or possession of this Information Memorandum in or from any Foreign Jurisdiction. 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 subscribe for or purchase the SRI Sukuk Tadau under all jurisdictions to which the recipient is subject, (c) it has complied with all applicable laws in connection with such subscription or purchase of the SRI Sukuk Tadau, (d) Tadau Energy, the PA, LA or LM and their respective directors, officers, employees 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 subscription or purchase of the SRI Sukuk Tadau, and they shall not have any responsibility or liability in the event that such subscription or purchase of the SRI Sukuk Tadau is or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the SRI Sukuk Tadau 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 SRI Sukuk Tadau, and is able and is prepared to bear the economic and financial risks of investing in or holding the SRI Sukuk Tadau, (g) it is subscribing or accepting the SRI Sukuk Tadau for its own account, and (h) it is a person falling within one of the categories of persons to whom an offer or invitation to subscribe the SRI Sukuk Tadau may be made and to whom the SRI Sukuk Tadau are issued would fall within the relevant category of persons specified in Section 2(6) of the Companies Act 2016, as amended from time to time (“Companies Act”), and persons to whom an offer or invitation to subscribe the SRI Sukuk Tadau may be made and to whom the SRI Sukuk Tadau are issued would fall within Part 1 of Schedule 6 (or Section 229(1)(b)) of the Capital Markets and Services Act 2007, as amended from time to time (“CMSA”) or 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; thereafter, a person falling within the relevant category of persons specified in Section 2(6) of the Companies Act, and persons to whom an offer or invitation to purchase the SRI Sukuk Tadau would fall within 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. 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 or invitation to subscribe or purchase the SRI Sukuk Tadau in relation to any recipient who does not fall within the categories of persons specified in item (h) above. This Information Memorandum or any document delivered under or in relation to the proposed issue, offer and sale of the SRI Sukuk Tadau is not, and should not be construed as, a recommendation by Tadau Energy and/or the PA, LA or LM to subscribe for or purchase the SRI Sukuk Tadau. 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. All information and statements herein are subject to the detailed provisions of the respective agreements referred to herein and are qualified in their entirety by reference to such documents. The SRI Sukuk Programme will carry risks and each recipient should perform and is deemed to have made its own independent investigation and analysis of Tadau Energy, the issuance of the SRI Sukuk Tadau and all other relevant matters, and each recipient should consult its own professional advisers. Neither the delivery of this Information Memorandum nor the offering, sale or delivery of any SRI Sukuk Tadau shall in any circumstance imply that the information contained herein is correct at any time subsequent to the date stated hereof or if no dates have been specifically stated, subsequent to the date of this Information Memorandum or that any other information supplied in connection with the SRI Sukuk Tadau is correct as of any time subsequent to the date indicated in the document containing the same. The PA, LA or LM expressly does not undertake to review the financial condition or affairs of Tadau Energy during the tenure of the SRI Sukuk Tadau or to advise any investor of the SRI Sukuk Tadau (“Sukukholder”) of any information coming to their attention unless required by law. The recipient of this Information Memorandum or the potential Sukukholders should review, inter alia, the most recently published documents incorporated by reference into this Information Memorandum when deciding whether or not to purchase any SRI Sukuk Tadau. ii
  8. 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 Malaysian economy, the material businesses which Tadau Energy operates and certain other matters. Such information, estimates, or reports have been included solely for illustrative purposes. No representation or warranty is made as to the accuracy or completeness of any information, estimate and or report thereon derived from such and other third party sources. This Information Memorandum includes “forward-looking statements” and reflects projections of future events which may or may not prove to be correct. These statements include, among other things, discussions of each of Tadau Energy’s business strategy and expectation concerning its position in the Malaysian economy, future operations, profitability, liquidity, capital resources and financial position. All these statements are based on estimates and assumptions made by Tadau Energy that, although believed to be reasonable, are subject to risks and uncertainties that may cause actual events and the future results of Tadau Energy to be materially different from that expected or indicated by such statements and estimates and no assurance can be given that any of such statements or estimates will be realised. In light of these and other uncertainties, the inclusion of a forward-looking statement in this Information Memorandum should not be regarded as a representation or warranty by Tadau Energy, its advisers or any other person that the future plans and objectives as anticipated by the Issuer will be achieved. Any such statements are not guarantees of performance and involve risks and uncertainties, many of which are beyond the control of the Issuer. All discrepancies (if any) in the tables included in this Information Memorandum between the listed amounts and totals thereof are due to, and certain numbers appearing in this Information Memorandum are shown after, rounding. Dr. Aznan Hasan, as the Shariah adviser (“Shariah Adviser”), has reviewed and confirmed the structure and mechanism of the SRI Sukuk Tadau and their compliance with the applicable Shariah principles. However, the approval is only an expression of the view of the Shariah Adviser based on his extensive experience in the subject. Investors are reminded that, as with any Shariah views, differences in opinion are possible. Investors are advised to obtain their own independent Shariah advice as to whether the structure meets their individual standards of compliance. ACKNOWLEDGEMENT Tadau Energy hereby acknowledges and authorises the PA, LA or LM to circulate or distribute this Information Memorandum on its behalf in respect of or in connection with the proposed issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase of the SRI Sukuk Tadau to prospective investors and that no further evidence of authorisation is required. STATEMENTS OF DISCLAIMER – SECURITIES COMMISSION MALAYSIA This Information Memorandum is not a prospectus and is not intended to be a prospectus and will not be lodged as a prospectus with the Securities Commission Malaysia (“SC”). However, a copy of this Information Memorandum, upon finalisation, has been lodged as an information memorandum for the purposes of Sections 229 and/or 230 of the CMSA with the SC, which takes no responsibility for its contents. The proposed issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase of the SRI Sukuk Tadau in this Information Memorandum or otherwise are subject to the fulfilment of various conditions precedent including without limitation the lodgement of information and documents in relation to the SRI Sukuk Programme to the SC in accordance with the SC’s Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the SC on 9 March 2015 (effective on 15 June 2015) and revised on 16 January 2017 (as may be amended from time to time) (“LOLA Guidelines”). The structure of the SRI Sukuk Programme has been endorsed by the Shariah Advisory Council of the SC. Information and documents in relation to the SRI Sukuk Programme has iii
  9. been lodged with the SC pursuant to the LOLA Guidelines . Each recipient of this Information Memorandum acknowledges and agrees that the lodgement of the SRI Sukuk Programme with the SC shall not be taken to indicate that the SC recommends the subscription or purchase of the SRI Sukuk Tadau. The SC, who takes no responsibility for the contents of this Information Memorandum, shall not be liable for any non-disclosure on the part of Tadau Energy and assumes no responsibility for the correctness of any statements made or opinions or reports expressed in this Information Memorandum. EACH SRI SUKUK TADAU WILL CARRY DIFFERENT RISKS AND ALL INVESTORS SHOULD EVALUATE EACH SUKUK TADAU ISSUE ON ITS OWN MERITS. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. INVESTORS ARE ADVISED TO NOTE THAT THIS SUKUK TADAU IS TRANSFERABLE AND TRADABLE. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL AND OTHER ADVISERS BEFORE SUBSCRIBING OR PURCHASING THE SRI SUKUK TADAU. DOCUMENTS INCORPORATED BY REFERENCE The following documents published or issued from time to time after the date hereof shall be deemed to be incorporated in, and to form part of, this Information Memorandum: (a) the latest audited financial statements and, if published later, the latest interim financial statements (if any) of the Issuer; and (b) all supplements or amendments to this Information Memorandum circulated by the Issuer, if any, save that any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in any such subsequent document which is deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum. The Issuer will provide, without charge, to each person to whom a copy of this Information Memorandum has been properly delivered, upon the request of such person, a copy of any or all of the documents deemed to be incorporated herein by reference unless such documents have been modified or superseded as specified above. Requests for such documents should be directed to the Issuer. CONFIDENTIALITY This Information Memorandum and its contents are strictly confidential and the information herein contained is given to the recipient strictly on the basis that the recipient shall ensure the same remains confidential. Accordingly, this Information Memorandum and its contents, 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 prospective investors specifically in reference to the SRI Sukuk Tadau and 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 PA, LA or LM. In the event that there is any contravention of this confidentiality undertaking or there is reasonable likelihood that this confidentiality undertaking may be contravened, Tadau Energy or the PA, LA or LM may, at its discretion, apply for any remedy available whether at law or in equity, including without limitation, injunctions. Tadau Energy and the PA, LA or LM are entitled to fully recover from the contravening party all costs, expenses and losses incurred and/or suffered, in this regard on a full iv
  10. 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 PA, LA or LM may at any time request any recipient to return this Information Memorandum and all reproductions whether in whole or in part any other information in connection therewith and where such a request is made, the recipient must return this Information Memorandum and all reproductions whether in whole or in part and any other information in connection therewith to the PA, LA or LM as soon as reasonably practicable after the said request from the PA, LA or LM. PRIVACY NOTICE Affin Hwang IB is committed to comply with the Personal Data Protection Act 2010 which came into force on 15 November 2013. Affin Hwang IB is required to issue Privacy Notice to any person for the use and processing of personal information of such person. The Privacy Notice is available at Affin Hwang IB’s website: www.affinhwang.com. In respect of a person which is a body corporate, the consent and authority of their directors, shareholders, authorised signatories and officers are deemed to have been duly obtained to provide the personal data (as defined under the Personal Data Protection Act 2010) as required by Affin Hwang IB. [The remainder of this page is intentionally left blank] v
  11. DEFINITIONS AND ABBREVIATIONS In this Information Memorandum , unless the subject of context otherwise requires, the following words and expressions shall have the following meanings: “2 MWac Project” : the financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of Unit 1, Site Yong East, the meteorological measuring facilities, the SPP Interconnection Facility, the SPP Interconnector, the SPP Works and associated facilities in connection with Unit 1 irrespective of whether construction has been completed or the COD under the PPA 1 has been achieved; “48 MWac Project” : the financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of Unit 2, Site Yong West, Site Bak Bak and Site Yong East, the meteorological measuring facilities, the SPP Interconnection Facility, the SPP Interconnector, the SPP Works and associated facilities in connection with Unit 2 irrespective of whether construction has been completed or the COD under the PPA 2 has been achieved; “AC” : alternate current; “Affin Hwang IB” : Affin Hwang Investment Bank Berhad (Company No. 14389U); “Annual Operating Budget” : an operating plan and a budget of estimated operating costs, estimated income and proposed estimated capital expenditure of the Solar PV Plants for a financial year that has been approved by the Board and submitted to the Facility Agent and the Sukuk Trustee in the manner as set out in item (Information Covenants) of the PTC; “BG Facilities” : bank guarantee facilities procured or to be procured by Tadau Energy for the benefit of Suruhanjaya Tenaga, SESB and/or any other relevant authority in relation to the Project; “Board” : the Board of directors of the Issuer; “CMSA” : the Capital Markets and Services Act 2007, as amended from time to time; “Cost Savings Reserve Account” : the Shariah-compliant account (as described under item (Details of Designated accounts – Cost Savings Reserve Account) of the PTC); “COD” or “Commercial Operation Date” : with respect to either Unit 1 or Unit 2, the date on which all the conditions precedents as set out in the respective PPA shall have been satisfied or waived in writing by SESB; 1
  12. “Companies Act” : the Companies Act 2016, as amended from time to time; “Contract Price” : the all-inclusive price payable by Tadau Energy to the EPC Contractor in accordance with the EPC Contracts; “Contracted Capacities” : collectively, the Unit 1 Contracted Capacity and the Unit 2 Contracted Capacity, and references to “Contracted Capacity” shall mean any one of them, as the context may require; “DA” or “Disbursement Account” : the Shariah-compliant account (as described under item (Details of Designated accounts – Disbursement Account) of the PTC); “DC” : direct current; “Declared Annual Quantity” or “DAQ” : (a) in respect of Unit 1, the annual quantity (in MWh) of solar PV energy to be generated and delivered to the distribution network at the interconnection point from Unit 1 for each contract year which shall not exceed the maximum annual allowable quantity of 3,359,000 kWh; and (b) in respect of Unit 2, the forecasted annual quantity (in MWh) of solar PV energy to be generated and delivered to the grid system at the interconnection point from Unit 2 for each contract year which shall not exceed the maximum annual allowable quantity of 80,627,000 kWh; “Edra Solar” : Edra Solar Sdn Bhd (Company No. 1057995-U); “Electricity Supply Act” : the Electricity Supply Act 1990, as amended from time to time; “Energy Payment” : payment determined in accordance with the respective PPAs to be made by SESB to Tadau Energy for Net Electrical Output generated and delivered from Unit 1 or Unit 2, as the case may be; “EPC Contract 1” : the EPC contract agreement dated 24 January 2017 entered into between Tadau Energy and the EPC Contractor for the design, engineering, procurement, construction, installation, testing and commissioning of Unit 1 and includes any amendments, variations and/or supplementals made or entered into from time to time; “EPC Contract 2” : the EPC contract agreement dated 24 January 2017 entered into between Tadau Energy and the EPC Contractor for the design, engineering, procurement, construction, installation, testing and commissioning of Unit 2 and any includes any amendments, variations and/or supplementals made or entered into from time to time; 2
  13. “EPC Contractor” : “EPC Contracts” : collectively, the EPC Contract 1 and the EPC Contract 2; “EPC” : engineering, procurement, construction and commissioning; “Facility Agent” : Affin Hwang IB; “FE Ratio” or “Finance to Equity Ratio” : the finance to equity ratio of not more than 80: 20; “Financial Model” : the financial model of the Solar PV Plants reviewed by an independent financial model reviewer from a reputable accounting firm evidencing, amongst others, the projected base case FSCR of at least 1.25 times and a FE Ratio of not exceeding 80:20; “FSA Minimum Required Balance” : an amount equivalent to at least the aggregate of the following:- SPIC Energy Malaysia Sdn Bhd (Company No. 1216514-K); (a) the next scheduled Periodic Distribution Amount due shall be deposited six (6) months before the due date; and (b) the scheduled nominal value due (if applicable) shall be deposited six (6) months before the scheduled Reduction Date as per the Reduction Schedule (as described in sub-item (vii) under item (Other Terms and Conditions) of the PTC); “FSA Required Profit Balance” : the Periodic Distribution Amounts payable up to the next immediate Periodic Distribution Date post Scheduled COD of Unit 2 (as defined in sub-item (xvii) under (Other Terms and Conditions) of the PTC); “FSA” or “Finance Service Account” : the Shariah-compliant account (as described under item (Details of Designated accounts – Finance Service Account) of the PTC); “FSCR” or “Finance Service Cover Ratio” : the ratio calculated in the manner set out in item (Financial Covenants) of the PTC; “Generation Licence" : the licence required to be obtained by Tadau Energy pursuant to Section 9 of the Electricity Supply Act to enable Tadau Energy to own and operate the Solar PV Plants and deliver and sell solar photovoltaic energy to SESB; “GST” : goods and services tax; “Guaranteed Completion Dates” : (a) in respect of Unit 1, means 28 May 2017; and (b) in respect of Unit 2, means 6 November 2017, being the dates on which the entire works under the 3
  14. respective EPC Contracts have been completed and the respective Solar PV Plants have achieved COD under the respective PPAs or such other date determined in accordance with the respective EPC Contracts ; “Initial Operation Date” : the date on which the Net Electrical Output is first generated and delivered from each of the Solar PV Plants to the distribution network or the grid system, as the case may be; “Kagayaki Energy” : Kagayaki Energy Sdn Bhd (Company No. 1138588-K); “km” : kilometre; “kWh” : kilowatt-hour; “Lead Arranger” : Affin Hwang IB; “Lead Manager” : Affin Hwang IB; “Lease Agreement – (Site Bak Bak)” : the lease agreement dated 28 December 2016 between Tadau Energy as lessee and JS Premier Corporation Sdn Bhd (Company No. 900028-X) as lessor over a portion measuring 35 acres of the land held under Country Lease No. CL. 055028192 measuring approximately 54 acres situated at Kudat, Sabah and includes any amendments, variations and/or supplementals made or entered into from time to time; “Lease Agreement – (Site Yong East)” : the lease agreement dated 16 December 2016 between Tadau Energy as lessee and the registered proprietor of the below mentioned land as lessor over the lands held under (i) Country Lease No. CL. 055322953 measuring approximately 9.72 acres and (ii) Country Lease No. CL. 055025824 measuring approximately 8 acres, both situated at Kudat, Sabah and includes any amendments, variations and/or supplementals made or entered into from time to time; “Lease Agreement – (Site Yong West 1)” : the lease agreement dated 16 December 2016 between Tadau Energy as lessee and the registered proprietor of the below mentioned land as lessor over the land held under Country Lease No. CL. 055022529 measuring approximately 20.143 acres situated at Kudat, Sabah and includes any amendments, variations and/or supplementals made or entered into from time to time; “Lease Agreement – (Site Yong West 2)” : the lease agreement dated 16 December 2016 between Tadau Energy as lessee and the registered proprietor of the below mentioned land as lessor over the lands held under (i) Country Lease No. CL. 055026830 measuring approximately 49.75 acres and (ii) Country Lease No. CL. 055022485 measuring approximately 3.212 acres, both situated at Kudat, Sabah and includes any amendments, variations and/or supplementals made or entered into from time to time; 4
  15. “Lease Agreement – (Site Yong West 3)” : the lease agreement dated 8 March 2017 between Tadau Energy as lessee the registered proprietors of the below mentioned land as lessors over a portion measuring 5 acres held under Country Lease No. CL. 055021764 measuring up to a total area of 23 acres situated at Kudat, and includes any amendments, variations and/or supplementals made or entered into from time to time; “Lease Agreement – (Site Yong West 4)” : the lease agreement dated 8 March 2017 between Tadau Energy as lessee and the registered proprietors of the below mentioned land as lessors over the land held under Country Lease No. CL. 055021782 measuring approximately 14 acres situated at Kudat, Sabah and includes any amendments, variations and/or supplementals made or entered into from time to time; “Lease Agreement – (Site Yong West 5)” : the lease agreement dated 8 March 2017 between Tadau Energy as lessee and the registered proprietor of the below mentioned land as lessor over the land held under Country Lease No. CL. 055024274 measuring approximately 25 acres situated at Kudat, Sabah and includes any amendments, variations and/or supplementals made or entered into from time to time; “Lease Agreements” : collectively:(a) the Lease Agreement – (Site Yong West 1); (b) the Lease Agreement – (Site Yong West 2); (c) the Lease Agreement – (Site Yong West 3); (d) the Lease Agreement – (Site Yong West 4); (e) the Lease Agreement – (Site Yong West 5); (f) the Lease Agreement – (Site Yong East); and (g) the Lease Agreement – (Site Bak Bak); and “Lease Agreement” shall where the context so requires be a reference to any one or more of them; “LOLA Guidelines” : the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the SC on 9 March 2015 (effective on 15 June 2015) and revised on 16 January 2017; “MAAQ” : the Maximum Annual Allowable Quantity (in kWh) computed in accordance with the PPAs; 5
  16. “MRA” or “Maintenance Reserve Account” : the Shariah-compliant account (as described under item (Details of Designated accounts – Maintenance Reserve Account) of the PTC); “MVA” : mega volt amp; “MWac” : megawatt in alternate current; “MWh” : megawatt hour; “MYR” or “RM” : Ringgit, the lawful currency of Malaysia; “Net Electrical Output” : (a) in respect of Unit 1, means the solar PV energy generated and delivered to the distribution network at the interconnection point from Unit 1 by Tadau Energy as measured in kWh by the metering equipment of SESB or otherwise determined in accordance with the PPA 1 during such period; and (b) in respect of Unit 2, means the solar PV energy generated and delivered to the grid system at the interconnection point from Unit 2 by Tadau Energy as measured in kWh by the metering equipment of SESB or otherwise determined in accordance with the PPA 2 during such period; “O&M Contractor” : SPIC Energy Malaysia Sdn Bhd (Company No. 1216514-K); “OA” or “Operating Account” : the Shariah-compliant account (as described under item (Details of Designated accounts – Operating Account) of the PTC); “Operation and Maintenance Agreement 1” or “O&M Agreement 1” : the operation and maintenance agreement to be entered into between Tadau Energy and the O&M Contractor for the operation and maintenance of Unit 1 and includes any amendments, variations and/or supplementals made or entered into from time to time ; “Operation and Maintenance Agreement 2” or “O&M Agreement 2” : the operation and maintenance agreement to be entered into between Tadau Energy and the O&M Contractor for the operation and maintenance of Unit 2 and includes any amendments, variations and/or supplementals made or entered into from time to time; “Operation and Maintenance Agreement” or “O&M Agreements” : collectively, the Operation and Maintenance Agreement 1 and the Operation and Maintenance Agreement 2; “Periodic Distribution Amount” : is the amount of periodic distribution calculated at the periodic distribution rate on the nominal value of the SRI Sukuk Tadau on the basis of actual/365 days; “Periodic Distribution Date” : the date of payment of each Periodic Distribution Amount; 6
  17. “PMU Kudat” : the existing 132/11kV SESB Kudat electrical substation; “PPA 1” : the power purchase agreement dated 15 December 2016 entered between Tadau Energy and SESB in connection with Unit 1, and includes any amendments, variations and/or supplementals made or entered into from time to time; “PPA 2” : the power purchase agreement dated 15 December 2016 entered between Tadau Energy and SESB in connection with Unit 2, and includes any amendments, variations and/or supplementals made or entered into from time to time; “PPAs” : collectively, PPA 1 and PPA 2; “Principal Adviser” : Affin Hwang IB; “Project” : collectively, the 2 MWac Project and the 48 MWac Project; “Project Costs” : the total costs and expenses relating to the Project incurred or to be incurred by Tadau Energy including: (a) all costs associated with the development, design, engineering, procurement, construction, installation, testing, commissioning, and ownership in respect of the Project; and (b) any other Project related costs, including financing costs up to the next immediate Periodic Distribution Date post Scheduled COD of Unit 2 (as defined in the sub-item (xvii) under item (Other Terms and Conditions) of PTC) and expenses relating to the SRI Sukuk Programme and the BG Facilities, consultancy fees, takaful contributions, contingencies and working capital requirements of the Project; “Project Documents” : as defined in Section 1.5 of this Information Memorandum; “Project Lands” : the parcels of lands leased pursuant to the Lease Agreements where the Solar PV Plants are to be constructed and located, being Site Yong East, Site Yong West, Site Bak Bak respectively, and “Project Land” shall where the context so requires be a reference to any one or more of them; “PTC” : the principal terms and conditions of the SRI Sukuk Programme as set out in Section 5 of this Information Memorandum; “PV” : photovoltaic; “RA” or “Revenue Account” : the Shariah-compliant account (as described under item (Details of Designated accounts – Revenue Account) of the PTC); 7
  18. “RAM” : RAM Rating Services Berhad (Company No. 763588-T); "Renminbi" or “RMB” : the lawful currency of the People’s Republic of China; “Revised Financial Model” : the Financial Model that has been revised and endorsed by the Suruhanjaya Tenaga/SESB with a projected base case FSCR of at least 1.25 times and a FE Ratio not exceeding 80:20 and certified by at least one director of Tadau Energy; “SC” : the Securities Commission Malaysia; “Scheduled COD of Unit 1” : 30 June 2017 or such later date as may be applied according to the PPA 1; “Scheduled COD of Unit 2” : 31 March 2018 or such later date as may be applied according to the PPA 2; “Security Trustee” : means Malaysian Trustees Berhad (Company No. 21666V); “SESB Interconnection Facility” : in respect of Unit 1 and Unit 2, means SESB’s new or “SESB” : “Shariah Adviser” : Dr. Aznan Hasan; “Site Bak Bak” : “Site Yong East” “Site Yong West” existing substation and SESB’s control centre (including the SPP Works after its transfer to SESB), as the case may be, as described in PPA 1 and PPA 2 respectively; Sabah Electricity Sdn Bhd (Company No: 462872-W); the 35 acres of Country Lease No. CL. 055028192 measuring approximately in area of 54 acres; (a) Country Lease No. CL. 055322953, measuring approximately in area of 9.72 acres; and (b) Country Lease No. CL. 055025824, measuring approximately in area of 8 acres; (a) Country Lease No. CL. 055022529 measuring approximately in area of 20.143 acres; (b) Country Lease No. CL. 055026830, measuring approximately in area of 49.75 acres; (c) Country Lease No. CL. 055022485, measuring approximately in area of 3.212 acres; (d) the 5 acres of the Country Lease No. CL. 055021764 measuring up to a total area of 23 acres; (e) Country Lease No. CL. 055021782 measuring up to a total area of 14 acres; and 8
  19. (f) Country Lease No. CL. 055024274 measuring up to a total area of 25 acres; “Solar PV Plant(s)” or “Asset(s)” : collectively, Unit 1 and Unit 2, and references to an “Asset” or a “Solar PV Plant” shall mean any one of them; “Sponsor” : Kagayaki Energy; “Sponsor Equity Contribution” : refers to all shareholder equity contribution and commitment made directly or indirectly by the Sponsor in relation to the Project whether in the form of ordinary share capital, preferred shares, redeemable preference shares or subordinated shareholder loans/financing; “SPP Interconnection Facility” : (a) in respect of Unit 1, means all of the facilities to be designed, constructed, owned, operated and maintained by Tadau Energy as described in the PPA 1 to enable Tadau Energy to deliver solar PV energy from Unit 1 and to ensure that the stability of the distribution network is not affected or impacted by Unit 1; and (b) in respect of Unit 2, means the new 132kV substation and associated facilities to be designed, constructed, owned, operated and maintained by Tadau Energy as described in the PPA 2 to enable Tadau Energy to deliver solar PV energy from Unit 2 and to ensure that the stability of the grid system is not affected or impacted by Unit 2; (a) in respect of Unit 1, means the distribution line(s) or underground cables and associated facilities to be designed, constructed, owned, operated and maintained by Tadau Energy as described in the PPA 1 that interconnects the SPP Interconnection Facility and the SESB Interconnection Facility; (b) in respect of Unit 2, means the transmission line(s) or underground cables and associated facilities to be designed, constructed, owned, operated and maintained by Tadau Energy as described in the PPA 2 that interconnects the SPP Interconnection Facility and the grid system; “SPP Interconnector” : “SPP Works” : in respect of Unit 1 and Unit 2, means the design, engineering, procurement, supply, manufacturing, construction, installation, erection, testing, commissioning, labour, services, facilities, equipment, supplies and materials to be furnished, supplied or performed by Tadau Energy at the SESB Interconnection Facility as described in PPA 1 and PPA 2, respectively; “SRI Sukuk Programme” : the Islamic medium term notes programme under the Shariah principles of Istisna’ and Ijarah of up to RM250.0 million in nominal value; 9
  20. “SRI Sukuk Tadau” : the Islamic medium term notes issued or to be issued pursuant to the SRI Sukuk Programme under the Shariah principles of Istisna’ and Ijarah; “SRI” : means sustainable and responsible investment; “Sukuk Trustee” : Malaysian Trustees Berhad (Company No. 21666-V); “Sukukholders” : the holders of the SRI Sukuk Tadau; “Suruhanjaya Tenaga” : the Energy Commission Malaysia; “Tadau Energy” or the “Issuer” : Tadau Energy Sdn Bhd (Company No. 1148988-K); “Total Loss Event” : has the meaning as described under item (Facility description) of the PTC; “Transaction Solicitors” : the solicitors to the Principal Adviser and Lead Arranger, namely Messrs. Adnan Sundra & Low; “Unit 1” or “Asset 1” : the solar PV energy generating facility to be located at Site Yong East with a capacity of 2 MWac and ancillary equipment and facilities as described in the PPA 1; “Unit 1 Contracted Capacity” : 2 MWac; “Unit 2” or “Asset 2” : the solar PV energy generating facilities to be located at the following sites with an aggregate capacity of 48 MWac and ancillary equipment and facilities as described in the PPA 2: (a) the 1.5 MWac solar PV plant to be located on Site Yong East; (b) the 12.6 MWac solar PV plant to be located on Site Bak Bak; and (c) the 33.9 MWac solar PV plant to be located on Site Yong West; “Unit 2 Contracted Capacity” : 48 MWac; “V” : volt; and “Wp” : watt-peak. All terms, where applicable, include the plural and vice versa; (a) one gender only shall include the other gender; and (b) a person includes any individual, company, unincorporated association, government, state agency, international organisation or other entity. 10
  21. Unless otherwise indicated , any reference in this Information Memorandum to any legislation (whether primary legislation or regulations or other subsidiary legislation made pursuant to primary legislation), rules, statute or statutory provision shall be construed as a reference to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under any such modification or re-enactment. [The remainder of this page is intentionally left blank] 11
  22. SECTION 1 - EXECUTIVE SUMMARY This summary below aims to provide an overview of the information contained in this Information Memorandum and must be read in conjunction with the detailed information and statements appearing elsewhere in this Information Memorandum . Each investor should read this entire Information Memorandum carefully. 1.1 INTRODUCTION The Issuer proposes to issue SRI Sukuk Tadau of up to RM250.0 million in nominal value based on the Shariah principles of Istisna’ and Ijarah under the SRI Sukuk Programme. 1.2 THE ISSUER The Issuer was incorporated in Malaysia on 18 June 2015 as a private company limited by shares under the name of Tadau Energy Sdn Bhd. Its registered address is Lot 4, 3rd Floor, Block A, Damai Plaza, Phase IV, Jalan Damai, 88300 Kota Kinabalu, Sabah. As at 15 May 2017, the Issuer has a paid-up capital of RM5,000,000.00 comprising 5,000,000 ordinary shares. 1.3 OWNERSHIP STRUCTURE The Shareholders of the Issuer are Kagayaki Energy and Edra Solar, with an 80% and 20% stake in the Issuer, respectively. The corporate structure of the Issuer as at 15 May 2017 is as follows: 12
  23. 1 .4 OVERVIEW OF THE PROJECT The Project undertaken by Tadau Energy involves the financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of the Solar PV Plants to be located at Kudat, Sabah, Malaysia and associated facilities which includes the SPP Interconnection Facility, SPP Interconnector and SESB Interconnection Facility and SPP Works. On 15 December 2016, Tadau Energy and SESB had entered into the PPA 1 and the PPA 2 whereby Tadau Energy shall deliver and sell to SESB the Net Electrical Output generated by the Solar PV Plants for a tenure of twenty one (21) years from the COD of Unit 1 and Unit 2, respectively, with an aggregate capacity of 50MWac. The Solar PV Plants consist of Unit 1 with a capacity of 2 MWac and Unit 2 with a capacity of 48 MWac. Unit 1 will be connected to the 11kV distribution network at PMU Kudat. The 11KV interconnection point is situated approximately 1km away from the site at PMU Kudat. The output of Unit 2 will be generated by three (3) solar PV plants each located at Site Yong East, Site Bak Bak and Site Yong West and will be connected to the 132kV transmission network at PMU Kudat. The 132KV interconnection point at PMU Kudat is situated approximately 1km away from Site Yong East. Tadau Energy has entered into two (2) EPC Contracts with the EPC Contractor for the design, engineering, procurement, construction, installation, testing and commissioning of the Solar PV Plants, SPP Interconnection Facility, SPP Interconnector, SESB Interconnection Facility and SPP Works on a turnkey basis for all-inclusive, non-escalating lump sum, fixed contract price and otherwise in accordance with the EPC Contracts on an agreed completion date for the Solar PV Plants. For details, please refer to Section 4.5 of this Information Memorandum. Up to RM312.5 million of the total estimated Project Cost will be financed using a mixture of debt and equity based on a project financing structure with a Finance to Equity Ratio of 80:20. For details, please refer to Appendix 2 of this Information Memorandum. 1.5 KEY PROJECT DOCUMENTS The key Project Documents are as follows: Project Documents Contracting Counterparties Date of agreement PPA 1 Tadau Energy and SESB 15 December 2016 PPA 2 Tadau Energy and SESB 15 December 2016 EPC Contract 1 Tadau Energy and the EPC Contractor 24 January 2017 EPC Contract 2 Tadau Energy and the EPC Contractor 24 January 2017 13
  24. Operation and Maintenance Agreement 1 Tadau Energy and the O &M Contractor To be entered into prior to the issuance of the SRI Sukuk Tadau Operation and Maintenance Agreement 2 Tadau Energy and the O&M Contractor To be entered into prior to the issuance of the SRI Sukuk Tadau Lease Agreement – (Site Bak Bak) Tadau Energy and JS Premier Corporation Sdn Bhd 28 December 2016 Lease Agreement – (Site Yong East) Tadau Energy and one (1) registered proprietor 16 December 2016 Lease Agreement – (Site Yong West 1) Tadau Energy and one (1) registered proprietor 16 December 2016 Lease Agreement – (Site Yong West 2) Tadau Energy and one (1) registered proprietor 16 December 2016 Lease Agreement – (Site Yong West 3) Tadau Energy and two (2) registered proprietors 8 March 2017 Lease Agreement – (Site Yong West 4) Tadau Energy and two (2) registered proprietors 8 March 2017 Lease Agreement – (Site Yong West 5) Tadau Energy and one (1) registered proprietor 8 March 2017 For details, please refer to Section 4.5 of this Information Memorandum. 1.6 SALIENT FEATURES OF THE SRI SUKUK PROGRAMME The information set out in this subsection and the following information relating to the transaction structure of the SRI Sukuk Tadau are qualified by, and must be read in conjunction with, the further detailed information appearing elsewhere in this Information Memorandum. In this section, in the event of any inconsistency of defined terms as set out in the “Definitions” and the following section, the terms as defined in the following section shall prevail. The SRI Sukuk Programme shall comprise issuance(s) of SRI Sukuk Tadau of up to RM250.0 million in nominal value, under the Shariah principles of Istisna’ and Ijarah. The SRI Sukuk Tadau is a rated instrument and shall constitute direct, unconditional, secured and unsubordinated obligations of the Issuer. A summary of the salient features of the SRI Sukuk Programme is as follows: 1.6.1 Programme Size The size of the SRI Sukuk Programme is up to RM250.0 million in nominal value and the limit of the SRI Sukuk Programme shall be reduced according to a reduction schedule (“Reduction Schedule”) as set out below: 14
  25. Reduction Date (Anniversary year from the date of first issue) Reduction/ Redemption Amount (RM) Issue date 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1.6.2 14,000,000 9,000,000 15,000,000 18,000,000 19,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 15,000,000 15,000,000 15,000,000 10,000,000 Available Limit (RM) 250,000,000 250,000,000 236,000,000 227,000,000 212,000,000 194,000,000 175,000,000 155,000,000 135,000,000 115,000,000 95,000,000 75,000,000 55,000,000 40,000,000 25,000,000 10,000,000 0 Tenure of Programme/Sukuk Tenure of the SRI Sukuk Programme Sixteen (16) years from the date of the first issuance of SRI Sukuk Tadau under the SRI Sukuk Programme provided that the first issuance of the SRI Sukuk Tadau under the SRI Sukuk Programme shall be made within sixty (60) business days from the date of lodgement with the SC. Tenure of the SRI Sukuk Tadau The SRI Sukuk Tadau shall have a tenure of two (2) years or more but not exceeding sixteen (16) years provided that the maturity date of the SRI Sukuk Tadau shall not extend beyond the tenure of the SRI Sukuk Programme. 1.6.3 Utilisation of Proceeds The proceeds shall be utilised by the Issuer for Shariah compliant purposes in relation to the Project(1) for payment of the Project Costs incurred or to be incurred based on the FE Ratio of 80:20(2). 15
  26. Notes : 1.6.4 (1) The Project is deemed to be an Eligible SRI project under the LOLA Guidelines pursuant to paragraph 7.04 (b)(i) (new or existing renewable energy – solar) of Part 3 of the LOLA Guidelines. (2) This includes reimbursement of fees and expenses paid by the Issuer or the Sponsor in relation to the SRI Sukuk Programme and the BG Facilities. Sponsor Completion Support Kagayaki Energy in its capacity as Sponsor shall provide an unconditional and irrevocable letter of undertaking for the period commencing from (and including) the issue date of the SRI Sukuk Tadau and expiring on the date falling six (6) months from the COD of Unit 2 or the date of declaration of a Dissolution Event (whichever is earlier) (“Undertaking Period”) to: (i) inject the Sponsor Equity Contribution into the Project in accordance with the Financial Model or Revised Financial Model (if applicable); and (ii) fund any cost overruns incurred relating to the Project. In respect of the Sponsor Completion Support, the Sponsor shall have the right, but not the obligation, to increase the amount and/or extend the period of the undertaking at its sole discretion. The Sponsor Completion Support shall cease and have no further effect on the earlier of the expiry of the Undertaking Period or the date on which the following having been fulfilled and confirmed by a director of the Issuer to the Sukuk Trustee and Security Trustee: 1.6.5 (a) the date of acceptance specified in (a) the Final Acceptance Certificate (as defined in the EPC Contract 1) issued under the EPC Contract 1 as the date on which the works are completed in accordance with the EPC Contract 1 and (b) the Final Acceptance Certificate (as defined in the EPC Contract 2) issued under the EPC Contract 2 as the date on which the works are completed in accordance with the EPC Contract 2; (b) all construction costs in relation to the Project payable under the EPC Contracts have been paid (including any cost overruns); and (c) the Conditions Subsequent under item (Conditions Precedent) of the PTC have been satisfied. Rating RAM had vide its letter dated 11 May 2017 assigned a preliminary long-term rating of AA3 with a stable outlook to the SRI Sukuk Programme. 16
  27. 1 .7 OVERVIEW OF THE TRANSACTION STRUCTURE Words and expressions used and defined in this sub-section shall, in the event of an inconsistency with the definitions section of this Information Memorandum, only be applicable for this sub-section. Underlying transaction Islamic medium term notes (“IMTNs”) programme under the Shariah principles of Istisna’ and Ijarah of up to RM250.0 million in nominal value (“SRI Sukuk Programme”). The IMTNs, which may be issued from time to time pursuant to the SRI Sukuk Programme, are referred to as “SRI Sukuk Tadau”. Pursuant to a Trust Deed to be entered into by the Issuer and the Sukuk Trustee, the Sukuk Trustee agrees and declares that it shall act for and on behalf of all the holders of the SRI Sukuk Tadau (“Sukukholders”) in respect of the SRI Sukuk Tadau issued or to be issued pursuant to the SRI Sukuk Programme and in connection therewith to enter into the following agreements in respect of the SRI Sukuk Programme on behalf of the Sukukholders:(i) Istisna' Agreements; (ii) ljarah Agreements; (iii) Service Agency Agreement; and (iv) Purchase Undertaking. A. At inception and during construction of the Assets The Sukuk Trustee shall declare a trust over the Trust Assets (as defined below) on an undivided basis for the benefit of all Sukukholders (“Declaration of Trust”). The “Trust Assets” comprise the rights, interest and benefit in, to and under the Istisna’ Agreements, the completed Assets (as defined herein), the ljarah Agreements, the Service Agency Agreement and the Purchase Undertaking. Istisna’ Agreements The Sukuk Trustee (acting on behalf of the Sukukholders), shall first enter into an Istisna’ Agreement with the Issuer (in its capacity as “Contractor”) in respect of each of Asset 1 and Asset 2 (as described in sub-item (x) (Solar PV Plants) under item (Other Terms and Conditions) of the PTC) (collectively, the “Assets” and references to an “Asset” shall mean any one of them), to effect the following: (i) The Contractor will build, construct and deliver the Assets (for the Sukukholders for the respective Istisna’ Price (as described in sub-item (ii) (Purchase and selling price/Rental) under item (Other Terms and Conditions) of the PTC). The Contractor may appoint sub-contractors to construct and deliver each relevant Asset. The Istisna’ Price shall be determined prior to the first issuance of the SRI Sukuk Tadau and paid in instalments as specified in each Istisna’ Agreement. The Istisna’ Price shall be in compliance with the asset pricing requirement stipulated under the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the 17
  28. Securities Commission Malaysia (“SC”) as may be replaced, substituted, amended or revised from time to time ("Assets Pricing Guidelines"). Upon completion of construction and delivery of the relevant Asset, the Contractor shall accordingly notify the Sukuk Trustee of the completion and delivery of the relevant Asset. Thereafter, the relevant Istisna’ Agreement will be completed in accordance with the terms thereof. (ii) Upon declaration of a Dissolution Event (as described under item (Events of Defaults or Enforcement Event, where applicable, including recourse available to investors) of the PTC) when the relevant Asset has not been completed and delivered to the Sukuk Trustee (on behalf of the Sukukholders) under the relevant Istisna’ Agreement, that Istisna’ Agreement shall be terminated immediately whereupon the Issuer shall:(a) refund the Istisna’ Price, and (b) be liable to pay the Sukuk Trustee (on behalf of the Sukukholders) the “Compensation Amount” as compensation for failure to complete the construction and delivery of the relevant Asset to the Sukuk Trustee, which amount shall be equivalent to the following: (1) aggregate Periodic Distribution Amount (as described in subitem (iii) (Profit/Coupon/Rental Rate) under item (Other Terms and Conditions) of the PTC) paid; and (2) any Periodic Distribution Amount accrued but unpaid up to the date of declaration of Dissolution Event. The Compensation Amount shall be set-off against the Advance Rental (as defined herein) that has been paid to the Sukuk Trustee (on behalf of the Sukukholders) up to the date of declaration of Dissolution Event. Ijarah Agreements The Sukuk Trustee (acting on behalf of the Sukukholders), will subsequently enter into an ljarah Agreement with the Issuer in respect of each Asset, whereby:(i) the Sukuk Trustee (as "Lessor") agrees to lease and the Issuer (as "Lessee") agrees to take on the lease of the relevant Asset (under the concept of ljarah Mawsufah Fi Zimmah i.e. Forward Lease). In consideration of the Sukuk Trustee agreeing to grant to the Lessee a forward lease in respect of the relevant Asset to be completed and delivered, the Lessee shall pay advance rental at a pre-determined rental amount ("Advance Rental") at such times and in the manner as provided in the relevant ljarah Agreement. The Advance Rental shall be equivalent to the Periodic Distribution Amount which is to be channeled to the Sukukholders in proportion to their holdings in the SRI Sukuk Tadau on the Periodic Distribution Dates (as defined in subitem (iv) (Profit/Coupon/Rental Payment frequency) under item (Other Terms and Conditions) of the PTC) prior to completion of the construction of the Asset; (ii) Upon completion and delivery of the relevant Asset up to maturity of the relevant lease (corresponding to the maturity date of the last outstanding tranche of the SRI Sukuk Tadau) ("Lease Period"), the Lessee will pay pre- 18
  29. determined rental amounts to the Lessor ("Lease Rentals") as further described below. SRI Sukuk Tadau Issuance The Issuer issues the SRI Sukuk Tadau, where the SRI Sukuk Tadau shall represent the Sukukholders' interest, rights and entitlements under and to the Trust Assets, including the proportionate undivided ownership of the Assets upon completion and delivery of the same. The SRI Sukuk Tadau proceeds shall be utilised to pay the Issuer (in its capacity as Contractor) the Istisna' Price under the Istisna' Agreements. The Istisna' Price will be paid in accordance with the issuance of the SRI Sukuk Tadau as contemplated under the Sukuk Programme. Non-completion and non-delivery of the Assets In the event the relevant Asset is not completed and delivered to the Sukuk Trustee by the Contractor pursuant to the provisions of the relevant Istisna' Agreement, the total Advance Rental paid shall be refunded by the Lessor to the Lessee (by way of set-off against the Compensation Amount (as defined above)) and the relevant ljarah Agreement will thereafter be terminated. Service Agency Agreement Pursuant to a Service Agency Agreement:(i) the Sukuk Trustee acting on behalf of the Sukukholders shall appoint the Issuer as "Servicing Agent" throughout the Lease Period under each Ijarah Agreement; (ii) the Servicing Agent shall perform all repairs, replacements, acts and maintenance works and pay ownership expenses in respect of each Asset ("Ownership Expenses") during the respective Lease Periods. The Ownership Expenses will be set-off against (1) the Exercise Price payable by the Issuer pursuant to the Purchase Undertaking; (2) the final Lease Rental upon the expiry of each ljarah Agreement or (3) the Mandatory Redemption Amount (as defined in sub-item (xl) (Mandatory Redemption) under item (Other terms and condition) of the PTC) under a Total Loss Event in respect of both Assets or the Asset 1 Mandatory Redemption Amount (as defined in sub-item (xl) (Mandatory Redemption) under item (Other terms and conditions of the PTC) under a Total Loss Event in respect of Asset 1 or the Asset 2 Mandatory Redemption Amount (as defined in sub-item (xl) (Mandatory Redemption) under item (Other terms and conditions of the PTC) under a Total Loss Event in respect of Asset 2, as the case may be; and (iii) the Servicing Agent shall be responsible to procure takaful/insurance that provides sufficient proceeds for the redemption of the relevant SRI Sukuk Tadau under a Total Loss Event. If the takaful/insurance proceeds are insufficient to cover (1) the Mandatory Redemption Amount under a Total Loss Event in respect of both Assets or (2) the Asset 1 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 1 or (3) the Asset 2 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 2, as the case may be, the Servicing Agent shall be liable to make good the difference. Any excess from the takaful/insurance proceeds over the amount required to redeem the relevant SRI Sukuk Tadau and the Ownership Expenses, if any, shall be paid to the Servicing Agent as an incentive fee. 19
  30. B . Post-completion of the Assets and at maturity Upon completion of construction and delivery of the relevant Asset, the Contractor shall accordingly notify the Sukuk Trustee of the completion and delivery of the relevant Asset pursuant to the relevant Istisna’ Agreement. Thereafter, the relevant Istisna' Agreement will be completed in accordance with the terms thereof. Ijarah Agreements (i) During the Lease Period, the Lessee will pay the Lease Rentals to the Lessor pursuant to the Ijarah Agreements. The Lease Rentals for each tranche, save for the final Lease Rental applicable to such tranche, shall be equivalent to the Periodic Distribution Amount which is to be channelled to the Sukukholders in proportion to their holdings in the SRI Sukuk Tadau on the Periodic Distribution Dates. The final Lease Rental for each tranche shall be the aggregate of the following: (a) last Periodic Distribution Amount; (b) nominal value of the relevant maturing tranche of the SRI Sukuk Tadau; and (c) the Ownership Expenses (as defined herein). The final Lease Rental shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent. For the avoidance of doubt, the final Lease Rental shall not be payable if the nominal value and the accrued but unpaid Periodic Distribution Amounts of the SRI Sukuk Tadau to be redeemed is paid via the payment of the Exercise Price (as defined herein) by the Issuer (as Purchaser) in accordance with the terms of the Purchase Undertaking (as defined herein). (ii) Upon the (a) payment in full of the Lease Rentals (which corresponds to each tranche of the SRI Sukuk Tadau); and (b) maturity date of each tranche of the SRI Sukuk Tadau, it is hereby agreed that the Issuer, in its capacity as Lessee, shall not be liable to pay any Lease Rentals in respect of such maturing tranche of the SRI Sukuk Tadau after the maturity date of such tranche. For the avoidance of doubt, it is agreed that conditional upon the full payment of the Lease Rental for the final maturing tranche of the SRI Sukuk Tadau, the Asset shall be granted/transferred without cost to the Lessee based on the contract of hibah (i.e. gift) at the end of the Lease Period, pursuant to which the Declaration of Trust shall be dissolved. On the maturity date of each tranche of the SRI Sukuk Tadau, the Sukukholders of the redeemed tranche shall transfer their undivided and proportionate ownership in the relevant Asset to the Sukukholders of the outstanding tranche of the SRI Sukuk Tadau by way of conditional hibah. The relevant Sukukholders in respect of such redeemed tranche of the SRI Sukuk Tadau shall then cease to have any interest, rights and entitlements in respect of any undivided ownership of the Asset to which the redeemed tranche of the SRI Sukuk Tadau relates to. Conditional upon the full payment of the Lease Rental, upon the maturity date of the final outstanding tranche 20
  31. of the SRI Sukuk Tadau , the relevant Asset shall be granted/transferred without cost to the Lessee by way of conditional hibah in accordance with the Ijarah Agreement. Purchase Undertaking The Issuer (as "Purchaser") will grant a purchase undertaking ("Purchase Undertaking") to the Sukuk Trustee, whereby the Purchaser irrevocably undertakes to purchase the proportionate undivided ownership in the relevant Asset from the Sukuk Trustee acting for the Sukukholders, upon the declaration of any Dissolution Event at the relevant Exercise Price via a sale agreement, which shall be specific to the relevant Asset (the “Sale Agreement”), subject to the relevant Asset being completed and delivered to the Sukuk Trustee (on behalf of the Sukukholders) under the relevant Istisna' Agreement. Upon declaration of a Dissolution Event, the Sukuk Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase the proportionate undivided ownership in the relevant completed Asset from the Sukuk Trustee, at the Exercise Price via the relevant Sale Agreement. The proceeds therefrom shall be utilised for the redemption of such relevant SRI Sukuk Tadau held by the Sukukholders which shall then be cancelled. In relation to the Purchase Undertaking, the Exercise Price for the purchase of each completed Asset from the Sukuk Trustee acting for the Sukukholders upon declaration of a Dissolution Event shall be equal to the following: Exercise Price = the amount equivalent to the Istisna’ Price for the relevant Asset + Ownership Expenses in respect of the relevant Asset + all accrued and unpaid Lease Rentals in relation to the relevant Asset up to the date of the declaration of the Dissolution Event or Mandatory Redemption Event. The Exercise Price payable shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent. Total Loss Event (i) Upon the occurrence of a Total Loss Event (as defined below) in respect of both Asset 1 and Asset 2, the Ijarah Agreements in respect of Asset 1 and Asset 2 will be terminated. All outstanding SRI Sukuk Tadau will be redeemed using the proceeds of takaful/insurance for Asset 1 and Asset 2 pursuant to the Service Agency Agreement (as described below). (ii) Upon the occurrence of a Total Loss Event in respect of Asset 1 only, the Ijarah Agreement in respect of Asset 1 will be terminated. The SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 1 will be redeemed in the inverse order of maturity using the proceeds of the takaful/insurance for Asset 1 pursuant to Service Agency Agreement. For the avoidance of doubt, the Ijarah Agreement in respect of Asset 2 shall not be terminated, and the Advance Rentals and Lease Rentals payable thereunder shall continue to be payable. (iii) Upon the occurrence of a Total Loss Event in respect of Asset 2 only, the Ijarah Agreement in respect of Asset 2 will be terminated. The SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 2 will be redeemed using the proceeds of the takaful/insurance for Asset 2 pursuant to Service Agency Agreement. For the avoidance of doubt, a Total Loss Event in 21
  32. respect of Asset 2 shall constitute a Dissolution Event . Pursuant to that, the Sukuk Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase Asset 1 from the Sukuk Trustee, at the Exercise Price. The proceeds therefrom shall be utilised for the redemption of such relevant SRI Sukuk Tadau held by the Sukukholders which shall then be cancelled. "Total Loss Event" is the total loss or destruction of, or damage to the whole (and not part only) of a completed and delivered Asset under any ljarah Agreement or any event or occurrence that renders the whole (and not part only) of that Asset permanently unfit for any economic use and the repair or remedial work in respect thereof is wholly uneconomical. A diagrammatical illustration for the SRI Sukuk Tadau transaction is set out in Appendix A of the PTC. 1.8 LODGEMENT WITH THE SC The Shariah Advisory Council of the SC has endorsed the structure of the SRI Sukuk Programme vide their letter dated 23 May 2017 and provided their concurrence that the subsequent revisions to the terms of the SRI Sukuk Programme had no Shariah implications vide their email dated 2 June 2017. Information and documents in relation to the SRI Sukuk Programme has been lodged with the SC on 6 June 2017 in accordance with the LOLA Guidelines. [The remainder of this page is intentionally left blank] 22
  33. SECTION 2 - CORPORATE INFORMATION OF THE ISSUER 2 .1 CORPORATE HISTORY The Issuer was incorporated in Malaysia on 18 June 2015 as a private company limited by shares under the name of Tadau Energy Sdn Bhd. The Issuer was first incorporated with an issued and paid-up capital of RM2.00 comprising two (2) ordinary shares of RM1.00 each. Since then, the issued and paidup capital of the Issuer had been increased. As at 15 May 2017, the Issuer has an issued and paid-up capital of RM5,000,000 comprising five million (5,000,000) ordinary shares of RM1.00 each. 2.2 PRINCIPAL ACTIVITIES Tadau Energy’s principal activities are mainly to carry on the business of generation of electricity and to design, construct, commission, operate and maintain power plants. As at 15 May 2017, the Issuer does not have any subsidiaries. 2.3 SHARE CAPITAL AND SHAREHOLDING STRUCTURE The issued and paid-up share capital of the Issuer as at 15 May 2017 is as follows: Issued and Paid-Up Share Capital : RM5,000,000.00 divided into 5,000,000 units of ordinary shares. As at 15 May 2017, the shareholders of Issuer are as follows: Name 2.4 No. of shares held % of shareholding Kagayaki Energy 4,000,000 80 Edra Solar 1,000,000 20 PROFILE OF DIRECTORS The directors of Tadau Energy and their respective profiles as at 15 May 2017 are as follows: 2.4.1 Tan Sri Chua Ma Yu Tan Sri Chua Ma Yu aged 65, a Malaysian, is the Chairman of Tadau Energy. He graduated with a Bachelor of Commerce (Accountancy) from the Nanyang University of Singapore. He is a fellow member of the Institute of Singapore Chartered Accountants (ISCA), the Association of Chartered Certified Accountants (ACCA), the Certified Public Accountants of Australia (CPA, Australia), and the Malaysian Institute of Accountants (MIA). He is the founder 23
  34. of the RHB Capital Group and was its president /chief executive officer from 1983 to 1992. He is currently the Chairman and a shareholder of CMY Capital Group, the company which owns St Regis Hotel & Residences Kuala Lumpur, a luxury hotel worth approximately RM1.2 billion. He is also a permanent trustee on the Board of Trustees of The Community Chest. 2.4.2 Lim Wei Loong Susanna Lim Wei Loong, aged 42, a Malaysian, is the managing director of Tadau Energy. She graduated with a Bachelor of Laws (Hons) from the University of London in 1998 and obtained her certificate of legal practice from the Legal Profession Qualifying Board, Malaysia in 1999. She was admitted as an advocate and solicitor of the High Court of Malaya in 2000 and the High Court of Sabah and Sarawak in 2001. She is also the founder of Susanna & Lau in Kuching, which has seven other branches in Sarawak. 2.4.3 Dato’ Mark William Ling Lee Meng Dato’ Mark Ling Lee Meng, aged 54, a Malaysian, is a director of Tadau Energy. He has 30 years of experience in providing regional business advice including development and strategic planning. He was appointed as the strategic planning advisor of PowerGen International Limited and later, as the executive director of Malakoff Berhad in 2001. He was appointed as the president of Edra Global Energy Berhad on 1 September 2014. As president of Edra Global Energy Berhad, he is primarily responsible for the overall direction of the Edra Global Energy Berhad’s group of companies (“Edra Group”) which includes dealing with various governments, regulators, and any other stakeholders of the Edra Group. 2.4.4 Teoh Paul Ling Teoh Paul Ling, aged 47, a Malaysian, is a director of Tadau Energy. She has vast corporate advisory experience, mainly in evaluating and proposing business plans, corporate proposals and investments. Over her 20-year career, she has developed an extensive business background spanning many industries, combining strong corporate development and regulatory compliance experience. 2.5 SENIOR MANAGEMENT The details of the senior management of Tadau Energy are as follows: 2.5.1 Tony Hoo Swee Seong Mun Tony Hoo Swee Seong Mun, aged 46, a Malaysian, is the Financial Controller of Tadau Energy and Kagayaki Energy. He is a fellow member of the Association of Chartered Certified Accountants (ACCA) and the Malaysian Institute of Accountants (MIA). He has more than 23 years of work experience 24
  35. in the finance , corporate and taxation departments of several public listed companies in Malaysia across various industries, such as property, construction and information technology. He has also worked in the Kingdom of Saudi Arabia for a few years. 2.5.2 Brandon Lim Kian Guan Lim Kian Guan (Brandon), aged 44, a Malaysian, is the Financial Manager of Tadau Energy and Kagayaki Energy. He is a graduate of the ACCA. He has more than 22 years of work experience in the finance, corporate and taxation departments of several public listed companies in Malaysia across various industries, such as property development, plantation and information technology. 2.5.3 Daniel Foo Daniel Foo, aged 41, a Malaysian, is the Project Manager of Tadau Energy and Kagayaki Energy. He graduated from University Sabah of Malaysia (UMS), with a Bachelor of Science (Hons) in Mechanical Engineering in 2004. He held the position of Mechanical/Operation Engineer in SESB from 2008 to 2011. From 2011 to 2014, he was attached with Kimanis Power Sdn Bhd as a Mechanical Engineer for the development of 300MW Combined Cycle Gas Turbines (CCGT) power plant. 2.5.4 Chui Wen San Chui Wen San, aged 29, a Malaysian, is the General Manager of Tadau Energy and Kagayaki Energy. She graduated with a Bachelor of Laws (Hons) from the University of Northumbria. She has developed project management and analytical skills through overseeing various projects by leading developers in Malaysia. 2.5.5 Teoh Zhan Zhi Teoh Zhan Zhi, aged 29, a Malaysian, is the Project Office Manager of Tadau Energy and Kagayaki Energy. He graduated with a Bachelor of Laws (Hons) from the University Aberystwyth, Wales in 2011 and obtained his certificate of legal practice from Legal Profession Qualifying Board, Malaysia in 2014. He was admitted as an advocate and solicitor of the High Court of Malaya in 2015. 2.6 FINANCIAL HIGHLIGHTS The following are the financial highlights of Tadau Energy based on its audited financial statements for the financial year ended 30 June 2016. RM’000 Audited Financial Year Ended 30/06/2016 Revenue 0 25
  36. Loss After Tax (340) Shareholders’ Funds 4,660 Cash and Bank Balances 1,354 Total Assets 6,162 Borrowings 0 [The remainder of this page is intentionally left blank] 26
  37. SECTION 3 3 .1 CORPORATE INFORMATION OF THE SPONSOR CORPORATE HISTORY Kagayaki Energy was incorporated in Malaysia on 2 April 2015 as a private company limited by shares under the name of Kagayaki Energy Sdn. Bhd. Kagayaki Energy is the holding company of the Issuer. 3.2 PRINCIPAL ACTIVITIES AND BUSINESS OVERVIEW The principal activities of Kagayaki Energy are to carry on the business of design, development and integration of environment friendly renewable energy and to generate, transmit, distribute and sell electricity. Kagayaki Energy was involved in the full project management of a 1MW solar PV power project located in Bak Bak, Kudat through a feed-in tariff programme that had achieved its commercial operation date in December 2015. Kagayaki Energy’s responsibilities included project planning, communication with relevant parties, monitoring project progress, project financing and risk management. Apart from the ongoing 50MWac large scale solar Project being undertaken through its subsidiary Tadau Energy, Kagayaki Energy has a concurrent project to build, own and operate a new diesel independent power plant in Lahad Datu, Sabah with a total capacity of 30MW to serve a variable load demand regime which includes peaking duties. The letter of award for this plant has been issued by the Suruhanjaya Tenaga in December 2016. 3.3 SHARE CAPITAL AND SHAREHOLDING STRUCTURE The issued and paid-up share capital of Kagayaki Energy as at 15 May 2017 is as follows: Issued and Paid-Up Share Capital : RM5,000,000 divided into 5,000,000 units of ordinary shares Details of Kagayaki Energy’s shareholding structure as at 15 May 2017are summarised as follows: Name No. of shares held % of shareholding SL Consultancy Incorporated 3,750,000 75 Kenora Pte Ltd 1,250,000 25 Note: Both SL Consultancy Incorporated and Kenora Pte Ltd are 100% owned by Lim Wei Loong. 27
  38. 3 .4 SUBSIDIARIES Kagayaki Energy’s subsidiary as at 15 May 2017 is as follows. Name Tadau Energy 3.5 Country of Incorporation Malaysia % of shareholding 80% Principal Activities Generation of electricity and to design, construct, commission, operate and maintain power plants. PROFILE OF DIRECTORS The Directors of Kagayaki Energy and their respective profiles as at 15 May 2017 are as follows: 3.5.1 Datuk Ir Peter Lajumin Datuk Ir Peter Lajumin (“Datuk Peter”), aged 63, a Malaysian, is a director of Kagayaki Energy and he is also the company advisor of Tadau Energy. Datuk Peter graduated from the University of Southampton in 1976 with a Bachelor of Science (Hons) in Electrical Engineering. He is a Registered Professional Engineer with the Board of Engineers Malaysia, a Fellow of The Institution of Engineers Malaysia, a Registered Chartered Engineer, a member of the United Kingdom based institution of Engineering and Technology, a founding member and chairman of the Renewable Energy Association of Sabah and a Fellow of ASEAN Academy of Engineering and Technology. He was the senior general manager (operation) of SESB until his retirement in December 2009. He has more than 33 years of work experience in the electric power industry which includes system protection, planning, consumer services, generation, transmission, and distribution of electric power, operation and maintenance, rural electrification, purchasing and contracting with independent power producers and negotiating and implementing small renewable energy programme projects. He was appointed as a Member of the Board Directors of Suruhanjaya Tenaga from 1 September 2010 to 31 August 2014. He has been a Board Member of SESB since 1 October 2014. 3.5.2 Lim Wei Loong Please refer to the profile set out in Section 2.4.2 of this Information Memorandum. 3.5.3 Teoh Paul Ling Please refer to the profile set out in Section 2.4.4 of this Information Memorandum. 28
  39. 3 .6 SENIOR MANAGEMENT The Senior Management of Kagayaki Energy and their respective profiles as at 15 May 2017 are as follows: 3.6.1 Tony Hoo Swee Seong Mun Please refer to the profile set out in Section 2.5.1 of this Information Memorandum. 3.6.2 Brandon Lim Kian Guan Please refer to the profile set out in Section 2.5.2 of this Information Memorandum. 3.6.3 Daniel Foo Please refer to the profile set out in Section 2.5.3 of this Information Memorandum. 3.6.4 Chui Wen San Please refer to the profile set out in Section 2.5.4 of this Information Memorandum. 3.6.5 Teoh Zhan Zhi Please refer to the profile set out in Section 2.5.5 of this Information Memorandum. 3.7 FINANCIAL HIGHLIGHTS The following are the financial highlights of Kagayaki Energy based on its audited financial statements for the financial year ended 30 June 2016. Audited Group RM’000 Company RM’000 0 0 Loss After Tax (478) (206) Shareholders’ Funds 4,522 4,794 Cash and Bank Balances 1,513 159 Total Assets 6,824 5,068 0 0 Financial Year Ended 30/06/2016 Revenue Borrowings 29
  40. SECTION 4 - PROJECT INFORMATION 4 .1 DESCRIPTION OF THE SOLAR PV PLANT 4.1.1 Site and Layout The Project undertaken by Tadau Energy involves the financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of the Solar PV Plants to be located in Kudat, Sabah, Malaysia and associated facilities as described under the PPA 1 and the PPA 2, and includes any modification thereto. The Solar PV Plants consist of Unit 1 with the capacity of 2 MWac and Unit 2 with the capacity of 48 MWac. The output of Unit 1 will be generated by one (1) solar PV plant located at Site Yong East. Unit 1 will be connected to the 11 kV distribution network at PMU Kudat. The 11KV interconnection point is situated approximately 1km away from the site at PMU Kudat. The output of Unit 2 will be generated by three (3) solar PV plants each located at Site Yong East, Site Bak Bak and Site Yong West and will be connected to the 132 kV transmission network at PMU Kudat. The 132KV interconnection point at PMU Kudat is situated approximately 1km away from Site Yong East. The details of the Solar PV Plants are as follows: Solar Power Plant Plant/ PPA capacity Site Details Size of the leased land (acres) Unit 1/ PPA 1 2 MWac Site Yong East 17.72 acres Unit 2/PPA 2 1.5 MWac 12.6 MWac Site Bak Bak 35 acres 33.9 MWac Site Yong West 117.16 acres The sites where the Solar PV Plants is and shall be constructed are located in north and west of the town of Kudat, Sabah, Malaysia as shown in Appendix 5. The Project Lands are leased for a period of 23 / 24 years. For details, please refer to Section 4.5 of this Information Memorandum. Access to Site Yong East and Site Yong West shall be through the main highway of Jalan Kota Belud-Kudat. Site Bak Bak will be accessible through Jalan Sin San road to the south of the site. 30
  41. 4 .1.2 Solar PV Plants Components and Technology The Solar PV Plants shall consist of a solar array (being solar PV modules which convert sunlight into DC electrical energy and mounting structure) and inverters that converts DC to AC. The solar PV modules shall be connected in series which shall be connected to the AC distribution box consisting of DC fuses, DC isolators and DC surge protection devices. The collection of DC power generated by the solar PV modules shall be connected to the grid tied inverters. The grid tied inverters will subsequently convert the DC electricity to AC for connection to the utility grid. The collection of AC power from the inverters shall then be stepped up from low voltage AC of 480V to medium voltage AC of 11kV for Unit 1 and 33kV for Unit 2. The output AC power at the 33kV level from each of the three (3) sites of Unit 2 shall then be collected in a collection centre located at Site Yong East and shall then be stepped up to 132kV for its interconnection to the transmission network. The connection point for Unit 1 will be located at PMU Kudat at 11 kV (distribution network). For Unit 2, the connection point will be located at PMU Kudat at 132kV. Appropriate meteorological measuring and/or monitoring facilities for the Solar PV Plants shall be installed to provide weather and power output monitoring. The figure below shows a simplified diagram of how a solar power plant functions along with the roles of the main equipment. 31
  42. The following sets out the key components of the Solar PV Plants : 4.1.2.1 Solar PV modules and modules mounting system Solar PV modules are a core component of the solar power generation system. The solar PV modules convert solar radiation directly into electricity through the PV effect in a silent and clean process that requires no moving parts. The PV effect is a semiconductor effect whereby solar radiation falling onto the semiconductor PV cells generates electron movement. The output from a solar PV cell is DC electricity. Each Solar PV module consists of 72 solar cells. The PV modules are connected in strings (as described in Section 4.1.2.2 below) to produce the required DC power output. The solar PV modules installed in this Project are monocrystalline silicon PV modules from JA Solar Sdn Bhd, with model number JAM6(k)-72-350/PR and the specification of 350Wp per module, and have a twenty five (25)-year manufacturer’s warranty. The solar PV modules will be mounted on a fixed angle structure with a six degree (6o) inclination in order to optimize the PV conversion from sunlight into DC. Advantages of this arrangement include the simplicity of the system, easy installation, compact layout and the saving of space, allowing for the preferred maximum power per unit area of output. 4.1.2.2 Inverters Tadau Energy has selected string inverters which are adopted in a modular design for the Project. The string inverters are required to convert the DC electricity to AC for connection to the utility grid. At the string inverter, there are several strings connected in parallel, each of them comprising several solar PV modules. The string inverters allow for Maximum Power Point (“MPP”) tracking function, which optimizes the string inverters’ efficiency. The advantages of the string inverters are that they have low power consumption, a low failure rate, are easy to maintain, small sized, light weight, space saving and reduce civil engineering works. The string inverter used for the Project is the “Huawei SUN200042KTL String Inverter” (“Huawei Inverter”). The Huawei Inverter has the capability of fault ride through (“FRT”), which is a standard feature, with the ability to continuously operate during distribution system voltage fluctuation. The Huawei Inverter also has a five (5)year warranty. The Huawei Inverter includes the solar array wiring scheme which is primarily the DC and AC cable connection. To illustrate, there are a total of two sub-arrays in Unit 1. Typically, each array electrical connection consists of the following: 20 modules connected in series to form one string, 7 strings connected into 42kW string inverters for group 1 and 6 strings connected into 32
  43. 42kW string inverters for group 2 , with two of each group connected to a 2-in-1 AC distribution box, and every 13 AC distribution boxes connected a step-up transformer. 4.1.2.3 Step-up Transformers for the SPP Interconnection Facility The SPP Interconnection Facility of Unit 1 and Unit 2 serves to step up the AC power output of the solar energy. Generally, the step-up transformer serves to step up the output from the inverters to the required grid voltage. In relation to Unit 1, the Solar PV Plant’s DC power output is converted to 480V AC using the DC/AC inverters. The power generated is subsequently stepped-up to 11kV by two units of 0.48/11kV 1.25 MVA transformers. The power generated is then connected to the SPP 11kV Substation via a 11kV overhead aerial bunch cable (“ABC”) which is approximately 1km, and finally, it is then connected to PMU Kudat’s switchgear. For Unit 2, the SPP Interconnection Facility comprises a new 132/33 kV substation (“Collector Substation”) which serves to guide the AC power output of the DC/AC inverters from Site Yong East, Site Yong West and Site Bak Bak that are transferred to the Collector Substation via 33kV overhead lines. The SPP Interconnection facility for Unit 2 also includes a 132/33kV 60 MVA power transformer (“Interconnection Transformer”) which serves to step up to the AC power marshalled at 33kV to 132kV. 4.1.2.4 SPP Interconnector The SPP Interconnector in respect of Unit 1 comprises the distribution line(s), underground cables and associated facilities between the Solar PV Plants and PMU Kudat for Unit 1, whereas the SPP Interconnector in respect of Unit 2 comprises an underground cable of approximately 1km, which is connected to the 132kV cable termination of the Interconnection Transformer at the Collector Substation on one end and the 132kV cable termination of the newly equipped cable sealing end at the existing spare skeleton bay at PMU Kudat on the other. 4.1.2.5 SPP Works The SPP Works comprises the extension of one lot of 11kV switchgear at PMU Kudat for Unit 1 and extension work of one bay of PMU Kudat for Unit 2. 4.1.2.6 Communication Unit 1’s data will be uploaded to SESB for load scheduling, and requires a physical fibre channel path connecting Unit 1 to PMU Kudat via Unit 2. The Unit 1 switching station is not equipped with Synchronous Digital Hierarchy (“SDH”) and Remote Terminal Unit (“RTU”) equipment. However, Unit 2’s Collector Substation equipment is installed with dedicated SDH and RTU. The SDH and RTU at Unit 2’s Collector Substation will have a fiber optic 33
  44. equipment network installed to link with PMU Kudat Unit 1 , and is designed to share Unit 2’s SDH and RTU to upload the solar PV plant data and equipment data to SESB for load scheduling. As such, Unit 1’s switching station is only configured with switches, a fibre optic cable and an Optical Distribution Frame (“ODF”), whereas Unit 2 comprises a communication system, RTU and telecontrol equipment for network connectivity with the Penampang Main Control Centre (“MCC”) and Wisma SESB Backup Control Centre (“BCC”) for supervisory monitoring, meteorological measuring facilities (MMF) functions and data acquisition for the Solar PV Plants using the equipment of the main optical fibre SDH communication system. When the SDH communication system is commissioned and integrated with SESB’s existing dedicated optical fibre communication system, the Telecommunication Network Management System (TNMS) workstation located at MCC and BCC will be able to provide remote supervisory monitoring, data acquisition and control of the new SDH communication equipment in real-time. Unit 1’s SPP Interconnector line protection will use a direct fibre optic channel connecting to PMU Kudat. An all-dielectric selfsupporting (ADSS) optical fiber cable will be erected along with the overhead ABC, and Unit 1 and PMU Kudat will only be equipped with ODF and a fibre optic terminal box to achieve a direct fibre line differential protection for information interchange. The Unit 2 interconnector line protection will be using a direct fibre optic channel connecting to PMU Kudat electrical substation. 4.1.2.7 Tariff Energy Metering Each of Unit 1 and Unit 2 consists of one (1) main and one (1) backup tariff energy meter which have the same configuration as the metering equipment at PMU Kudat for energy metering purposes. The features of the tariff energy meters are as follows: (i) Two communication facilities (Ethernet and Serial ports) are required for metering data transmissions from the site to remote meter reading (“RMR”) Data Centre via two optical fibre telecommunication channels provided by Tadau Energy for remote telemetering purposes. (ii) The energy meter shall be provided with a Global Positioning System (“GPS”) interface for time synchronizing between the energy meter and time GPS. The GPS input signal shall be acquired from GPS of the substation automation system or any other necessary equipment. (iii) The energy meters shall be provided with meter configuration, relevant hardware and reading software. 34
  45. (iv) 4.2 The energy meters including relevant hardware and latest software for local download and RMR purposes shall be provided with a thirty six (36)-month manufacturer’s warranty. CONSTRUCTION SCHEDULE OF SOLAR PV PLANTS Tadau Energy has entered into the EPC Contracts with the EPC Contractor for the design, engineering, procurement, construction, installation, testing and commissioning of the Solar PV Plants, SPP Interconnection Facility, SPP Interconnector, SESB Interconnection Facility and SPP Works on a turnkey basis for all-inclusive, non-escalating lump sum, fixed contract price and otherwise in accordance with the EPC Contracts on an agreed completion date for the Solar PV Plants. Details of the key milestones and construction schedule of the Solar PV Plants are as follows: Milestones Unit 1 Unit 2 14 March 2017 14 March 2017 Commencement of construction * 28 April 2017 30 June 2017 Guaranteed Completion Date ** 28 May 2017 6 November 2017 Initial Operation Date *** 19 June 2017 15 February 2018 Scheduled COD *** 30 June 2017 31 March 2018 Effective Date of the PPAs Notes: * Being the date of commencement of construction works ** As set out in the EPC Contract 1 and EPC Contract 2, respectively *** As set out in the PPA 1 and PPA 2, respectively The construction works of Unit 1 commenced on 28 April 2017. As at 5 June 2017, Unit 1 is 91% completed with construction of the interconnection facilities and commissioning works still ongoing. The installation of solar PV modules was completed on 31 May 2017 while the installation of the transformer and inverters was completed on 5 June 2017. Construction of Unit 2 is expected to commence on 30 June 2017 with overall progress at 19% as at 5 June 2017, which is the engineering and procurement stage. [The remainder of this page is intentionally left blank] 35
  46. 4 .3 BASE CASE CASHFLOW PROJECTIONS The information and assumptions contained in a detailed financial model (“Base Case Cashflow Projections”) are discussed in this section represent the current and anticipated contractual terms between Tadau Energy and the relevant parties as well as other assumptions on the operating parameters of the Solar PV Plants and financial parameters of the Project, as at 14 June 2017. The Base Case Cashflow Projections and certain statements herein are forwardlooking statements and for illustrative purposes only. The calculations are based on certain assumptions which may not be realised. In addition, the forward-looking statements involve a number of risks and uncertainties. Each recipient should carefully conduct an independent evaluation of the financial projections of the Project and associated due diligence to determine the viability of the under-mentioned assumptions. As the Project is still under development, these parameters are expected to change or be revised from time to time in the future. An extract of the Base Case Cashflow Projections is attached as Appendix 1 of this Information Memorandum. The parameters of the Project assumed in the Base Case Cashflow Projections are summarised in Appendix 3 of this Information Memorandum. [The remainder of this page is intentionally left blank] 36
  47. 4 .4 PROJECT STRUCTURE AND PROJECT PARTIES 4.5 SUMMARY OF KEY PROJECT DOCUMENTS 4.5.1 PPAs 4.5.1.1 PPA 1 The following section incorporates the key terms and conditions that are contained in the PPA 1. In respect of defined terms in this Section 4.5.1.1 only, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the PPA 1. (i) Overview The PPA 1 was entered into between Tadau Energy and SESB on 15 December 2016, and sets out the terms and conditions governing the sale and delivery of electricity and generating capacity from the Unit 1 by Tadau Energy to SESB and the purchase by SESB of such electricity and generating capacity from Tadau Energy. Tadau Energy shall design, construct, commission, own, operate and maintain the Unit 1 in accordance with the terms and conditions of the PPA 1. 37
  48. (ii) Term The PPA 1 takes effect on the Effective Date under the PPA 1 (“PPA 1 Effective Date”) (as defined below) and expires on the day before the twenty-first (21st) anniversary of the Unit 1 COD (as defined below) (including such day) (the “PPA 1 Term”) and may be extended or terminated in accordance with the terms and conditions of the PPA 1. (iii) Conditions Precedent to Effectiveness of the PPA 1 The PPA 1 shall be effective upon satisfaction of the following conditions, namely that: (a) all corporate authorisations which are required to have been obtained by the parties in connection with the execution and delivery of the PPA 1 have been obtained and are in full force and effect and a statement in writing to that effect by each party has been delivered to the other party; (b) the PPA 1 has been executed and delivered by each of the parties; (c) Tadau Energy has submitted to SESB a copy of the letter of award issued by Suruhanjaya Tenaga to Tadau Energy for the award of the 2 MWac Project (“PPA 1 Letter of Award”) and a certified copy of the site agreement granting Tadau Energy the right to occupy and use the site for the 2 MWac Project (“PPA 1 Site Agreement”); (d) Tadau Energy has submitted to SESB a copy of the power system study report conducted on the 2 MWac Project based on generic model (the Stage 1 Power System Study Report) as approved by SESB; (e) Tadau Energy has submitted to SESB and the Suruhanjaya Tenaga, a certified copy of the PPA 1 Site Agreement; and (f) Tadau Energy has submitted to the Suruhanjaya Tenaga a certified copy the PPA 1. The date on which all conditions precedent listed above have been satisfied or waived is the PPA 1 Effective Date. Tadau Energy has three (3) months from the date of execution of the PPA 1 to satisfy the conditions precedent, failing which either party may terminate the PPA 1 by giving notice in writing. (iv) Conditions Precedent to the Initial Operations The Initial Operation Date under PPA 1 (“PPA 1 Initial Operation Date”) and the right of Tadau Energy to commence generation of solar PV energy at the Unit 1 and to supply and deliver Test Energy shall only occur upon satisfaction of the following conditions: 38
  49. (a) Tadau Energy has submitted to SESB, with a copy to Suruhanjaya Tenaga, a certified copy of each of the Project Documents (other than the PPA 1 and the PPA 1 Site Agreement) accompanied by a confirmation that the Project Documents (other than the PPA 1) are in full force and effect, all conditions to their effectiveness are satisfied or waived thereunder and no default of any material provisions thereunder has occurred or is continuing; (b) Tadau Energy has submitted to SESB, with a copy to Suruhanjaya Tenaga, a certified copy of each of the documents relating to the financing and security arrangements for the 2 MWac Project which are entered into by Tadau Energy and the financing parties PPA 1 Initial Financial Model (as defined below) (“PPA 1 Initial Financing Documents”) accompanied by a confirmation that the PPA 1 Initial Financing Documents are in full force and effect, all conditions to their effectiveness are satisfied or waived thereunder and no default of any material provisions thereunder has occurred or is continuing; (c) Tadau Energy has submitted to SESB a certified copy of the licence required by Tadau Energy pursuant to Section 9 of Electricity Supply Act 1990 (“SPP Licence”); (d) Tadau Energy has submitted to SESB, with a copy to Suruhanjaya Tenaga, a certificate from the Independent Engineer that the Unit 1, SPP Interconnection Facility, the SPP Interconnector and the SPP Works have been designed, manufactured, supplied, constructed, installed, tested and commissioned in accordance with the PPA 1; (e) Tadau Energy has submitted to SESB, with a copy to Suruhanjaya Tenaga, the full set of documentation for the PPA 1 Initial Operation Date and the proposed commissioning, start-up and testing programs and relay settings are agreed by SESB in accordance with the PPA 1; (f) the performance security as set out in the PPA 1 has been delivered to SESB and is in full force and effect; (g) Tadau Energy has submitted to SESB, with a copy to Suruhanjaya Tenaga, (i) a certified copy of the approvals required from the Department of Environment under the Environmental Quality Act 1974 in respect of the 2 MWac Project (“EIA Approval”) (if the Department of Environment requires the submission of an Environmental Impact Assessment Report by Tadau Energy); or (ii) a written confirmation from the Department of Environment that EIA Approval is not required; and (h) no default by Tadau Energy of any material provision of the PPA 1, the conditions to the PPA 1 Letter of Award or SPP Licence has occurred or is continuing. 39
  50. (v) Conditions Precedent to Commercial Operations The Unit 1 COD (as defined below) and the right of Tadau Energy to supply, deliver and sell Net Electrical Output and the obligation of SESB to accept and to purchase Net Electrical Output from the Unit 1 or to make Energy Payments to Tadau Energy shall not occur until the following conditions have been satisfied: (a) Tadau Energy has submitted to SESB a copy of the “Commissioning Test Certificate” or similar document to the like effect issued by the Suruhanjaya Tenaga as contemplated by the SPP Licence in respect of the Unit 1 being operational; (b) Tadau Energy has submitted to SESB, with a copy to the Suruhanjaya Tenaga, the final design of the Unit 1 and a certificate from the Independent Engineer stating that the Unit 1, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works have been tested and commissioned in accordance with the PPA 1 and the EPC Contract 1 and that the Unit 1 has the capacity and capability to meet the Unit 1 Contracted Capacity; (c) no default by Tadau Energy of any material provision of the PPA 1, the conditions of the PPA 1 Letter of Award, the SPP Licence, the Project Documents or Financing Documents (being the loan agreements (including agreements for any subordinated debt), notes, bonds, indenture, guarantees, security agreements, hedging agreements and any other documents relating to the financing or refinancing and security arrangements for the 2 MWac Project which have been or are to be entered into by Tadau Energy, excluding any agreements relating to Sponsors’ Gross Equity Contribution (as defined below)) (“PPA 1 Financing Documents”), shall have occurred and is continuing; (d) the representations and warranties by Tadau Energy in the PPA 1 are true and correct in all material respects as if made on the Unit 1 COD; and (e) all the documentation, data, information and certified test results set out in the PPA 1, together with a certificate from the Independent Engineer confirming that such documentation, date and test results are valid have been submitted by Tadau Energy to SESB, with a copy to the Suruhanjaya Tenaga, and verified by SESB as being in conformance with the requirements of the PPA 1 within the timeframes set out therein. The date on which all conditions precedent listed above have been satisfied or waived is the COD under the PPA 1 (“Unit 1 COD”). (vi) Critical Milestones Critical milestones in the PPA 1 are as below: 40
  51. (a) the conceptual design for the Unit 1, the Meteorological Measuring Facilities, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works shall be submitted to SESB on or before 19 January 2017; (b) the PPA 1 Financial Closing Date shall occur on or before 31 January 2017. The “PPA 1 Financial Closing Date” means the date on which the PPA 1 Financing Documents relating to the financing or refinancing for the total construction costs of the 2 MWac Project have been entered into by Tadau Energy and the Financing Parties, and all of the conditions precedent for the initial drawdown under such PPA 1 Financing Documents have been satisfied by Tadau Energy or waived by the Financing Parties thereunder; (c) the PPA 1 Initial Operation Date shall occur no earlier than 19 June 2017. Notwithstanding the above, the failure to meet any of the critical milestones set out above does not in itself amount to an event of default by Tadau Energy under the PPA 1. (vii) Sales and Purchase Obligations From the Unit 1 COD and continuing throughout the PPA 1 Term: (a) Tadau Energy shall deliver and sell to SESB, and SESB shall accept and purchase the Net Electrical Output which is generated by the Unit 1; (b) the Net Electrical Output generated and delivered by Tadau Energy and accepted by SESB up to the MAAQ, shall be at the Energy Rate; and (c) any Net Electrical Output generated in excess of the MAAQ may be, but without any obligation, accepted by SESB where the Energy Payments shall be computed based on the Excess Energy Rate. SESB is not obliged to accept Net Electrical Output from the Unit 1: (i) if the Unit 1 delivers to SESB Net Electrical Output which does not conform to the electrical characteristics set forth in the PPA 1; (ii) if an Emergency Condition occurs within the Distribution Network as a result of which the Distribution Network is unable to accept Net Electrical Output from the Unit 1 which may result in SESB disconnecting the Unit 1 from the Distribution Network and/or issuing a Despatch Instruction for Tadau Energy to reduce generation from the Unit 1 provided such period shall in aggregate not exceed one hundred and eight five (185) hours in each Contract Year; 41
  52. (viii) (iii) if SESB interrupts the acceptance of solar PV energy from the Unit 1 to conduct necessary maintenance of the SESB Metering Equipment or the Distribution Network, provided that such maintenance shall not exceed (1) forty eight (48) hours in aggregate in each Contract Year for any maintenance to be carried out from 9.00 a.m. to 3.00 p.m.; and (2) one hundred and thirty seven (137) hours in aggregate in each Contract Year for any maintenance to be carried out from 3.01 p.m. to 8.59 a.m.; (iv) if the Unit 1 delivers to SESB Net Electrical Output which is not solely driven by solar PV technology, for example output from energy storage devices, hybrid generating devices with other fuel sources or concentrated solar thermal technology; (v) if any constraint or interruption in the Distribution Network as a result of which the Distribution Network is unable to accept Net Electrical Output from the Unit 1 which may result in SESB disconnecting the Unit 1 from the Distribution Network and/or issuing a Despatch Instruction for Tadau Energy to reduce generation from the Unit 1 provided that such period shall in aggregate not exceed one hundred and eighty five (185) hours in each Contract Year; (vi) if the Unit 1 has delivered to SESB Net Electrical Output in a Contract Year which exceed the MAAQ of such Contract Year; or (vii) if the instantaneous output (in MW) delivered by the Unit 1 exceeds the Unit 1 Contracted Capacity. Energy Payments If, other than the events or circumstances described in item (i) to (vi) above and any defects in (a) the SPP Interconnection Facility and/or the SPP Interconnector or (b) the SPP Works in accordance with the provisions of the PPA 1, SESB fails to accept the Net Electrical Output as may be generated and delivered by Tadau Energy, then SESB shall pay Tadau Energy the Non-Acceptance Payment for such period SESB fails to accept the Net Electrical Output in accordance with the PPA 1. The Energy Payments are calculated in accordance with Appendix G of the PPA 1, as follows: Energy Payment : EP = (NEOT1i x ER) + (NEOT2i x EER) EP = the Energy Payment (in RM) in such Billing Period (as defined in the PPA 1) ER = the prevailing Energy Rate (in RM/kWh) applicable for that Billing Period 42
  53. EER = the Excess Energy Rate (in RM/kWh) for that Billing Period NEOi = the total Net Electrical Output (in kWh) delivered in such Billing Period NEOT1i = the Net Electrical Output (in kWh) delivered in such Billing Period not exceeding MAAQ for such Contract Year NEOT2i = the Net Electrical Output (in kWh) delivered in such Billing Period exceeding MAAQ for such Contract Year MAAQ = the Maximum Annual Allowable Quantity (in kWh) calculated as follows: MAAQ = [A quantum determined as a function of Unit 1 Contracted Capacity x (365 x 24) x Capacity Factor]MWh x n ÷ N, when the capacity of the Unit 1 as certified by the Independent Engineer is not less than the Unit 1 Contracted Capacity; or (b) MAAQ = ([A quantum determined as a function of Unit 1 Contracted Capacity x (365 x 24) x Capacity Factor]MWh x n x Revised Unit 1 Contracted Capacity) ÷ (N x Unit 1 Contracted Capacity), when the Unit 1 Contracted Capacity is revised downwards to reflect the actual capacity of the Unit 1 ANEOm = the aggregate of NEOi for each Billing Period (in kWh) in such Contract Year including such Billing Period i = an index representing each of the preceding Billing Period i in such Contract Year n = the actual number of days in the prevailing Contract Year N = (a) 365, for all years; or (b) 366, for a leap year Capacity Factor (ix) (a) = 19.17% Billing and Payment A Billing Statement is to be issued monthly starting from the Unit 1 COD. SESB shall within thirty (30) days of receipt of the Billing Statement pay to Tadau Energy the Energy Payment and/or the NonAcceptance Payment (if any) invoiced in such Billing Statement (but 43
  54. less any amount due to SESB from Tadau Energy (including but not limited to the Non-Delivery Payment (as described below) as set out in the PPA 1) and less any amount in the Billing Statement disputed by SESB in good faith which is to be settled under the PPA 1). Late payment will be subject to a Default Rate (being one per cent (1%) above the base lending rate then in effect at the principal office of Malayan Banking Berhad or its successor-in-title). (x) No Set Off Except as otherwise provided in the PPA 1, all payments by either party to the other party under the PPA 1 shall be made free of any restriction or condition and without deduction on account of any amount claimed from the other party which is disputed in good faith by that party. (xi) Energy Rate Review and Adjustments At the date of the execution of the PPA 1, the Energy Rate is calculated from the financial model as confirmed by the Suruhanjaya Tenaga to be the basis of the award of the 2 MWac Project to Tadau Energy as set out in the PPA 1 (“PPA 1 Initial Financial Model”). SESB and the Suruhanjaya Tenaga shall be entitled to amend the PPA 1 Initial Financial Model, or the then prevailing PPA 1 Updated Input Financial Model (being the PPA 1 Initial Financial Model as updated pursuant to the PPA 1) to determine and reduce the Energy Rate (i) on the occurrence of the Unit 1 COD, (ii) in the event of a failure by Tadau Energy to deliver input data and information specified in the PPA 1 (“PPA 1 Input Data”) within the stipulated time frame or comply with its obligations and/or warranties under Clause 7.2(b) or Clause 7.5 of the PPA 1 or (iii) one (1) year after the Unit 1 COD. Upon determination of the Energy Rate by the PPA 1 Updated Input Financial Model by SESB and the Suruhanjaya Tenaga, the Energy Rate shall be adjusted downwards to reflect such determination with effect from the month following the determination. In the event of a failure by Tadau Energy to deliver PPA 1 Input Data within the stipulated time frame or comply with its obligations and/or warranties under Clause 6.4(b) or Clause 6.5 of the PPA 1, the PPA 1 Initial Financial Model or the PPA 1 Updated Input Financial Model, as the case may be, shall be revised so that the Energy Rate shall be seventy five percent (75%) of the then prevailing Energy Rate. If: (a) the construction costs of the 2 MWac Project is reduced below the amounts appearing in the PPA 1 Initial Financial Model or the then existing PPA 1 Updated Input Financial Model, as the case may be, the Energy Rate shall be adjusted downwards to reflect fifty percent (50%) of the construction costs reductions. (b) the financing costs of the 2 MWac Project is reduced below the amounts appearing in the PPA 1 Initial Financial Model or the then existing PPA 1 Updated Input Financial Model, as the 44
  55. case may be , the Energy Rate shall be adjusted downwards to reflect sixty percent (60%) of the financing costs reductions. (c) Tadau Energy received any incentive or benefit in respect of Taxes from any Government Entity at any time from the date of the PPA 1 up to one (1) year after the Unit 1 COD, SESB shall be entitled to reflect the whole of such incentive or benefit when revising the Energy Rate. Any downwards adjustment to the Energy Rate as set out above shall be based on each separate and independent savings as specified in items (a), (b) and (c) above without the aggregation of all differences, changes or variations in relation to such savings provided that if the foreign exchange rate in relation to such savings applied in both the EPC Contract 1 and the PPA 1 Initial Financing Documents at the time of the Commencement Date under PPA 1, being the date notified by Tadau Energy to SESB on which the construction work at Site Yong East has started (“PPA 1 Commencement Date”) and the PPA 1 Financial Closing Date for the PPA 1 Initial Financing Documents exceeded the reference foreign exchange rate of RM4.20 for each U.S. Dollar, any downwards adjustment to the Energy Rate due to any savings as specified in items (a) and (b) above shall be based on the net savings through the aggregation of all differences, changes or variations in relation to the savings as specified in items (a) and (b) above. (xii) Delay Compensation Tadau Energy agrees to pay SESB by way of pre-ascertained and agreed compensation the following: (a) if, due to the default of Tadau Energy or its contractors or agents under the PPA 1, the Unit 1 COD does not occur on the Scheduled COD of Unit 1, Tadau Energy shall compensate SESB an amount equal to Ringgit One Thousand (RM1,000.00) per day for each day (or any part thereof) of delay, commencing on the Scheduled COD of Unit 1 until the earlier of (i) the Unit 1 COD; (ii) the date on which the PPA 1 is terminated by SESB in accordance with the provisions of the PPA 2; and (iii) one hundred and eighty (180) days after the Scheduled COD of Unit 1; and (b) if Tadau Energy abandons the 2 MWac Project after the PPA 1 Effective Date, Tadau Energy shall forthwith compensate SESB an amount equal to Ringgit One Hundred and Eighty Thousand (RM180,000.00). Abandonment during the construction period shall occur if Tadau Energy fails to perform any material part of the construction works on the 2 MWac Project and the Independent Engineer is unable to confirm within fifteen (15) days of being requested to do so by SESB that there is a reasonable prospect of Tadau Energy achieving the Unit 1 COD before 27 December 2017. 45
  56. Abandonment after the Unit 1 COD shall occur if Tadau Energy fails to operate the Unit 1 for a continuous period of more than six (6) months unless (i) SESB is in breach of a material obligation under the PPA 1, (ii) the Unit 1 was during such period the subject of repair, rehabilitation or repowering or (iii) Tadau Energy is excused from doing so pursuant to a Force Majeure Event in accordance with the PPA 1 or as a result of the occurrence of an event of the type contemplated in Clause 4.4(a) of the PPA 1 (where an Emergency Condition occurs within the Distribution Network as a result of which the Distribution Network is unable to accept Net Electrical Output from the Unit 1) or Clause 4.4(c) of the PPA 1 (where SESB interrupts the acceptance of solar PV energy from the Unit 1 to conduct necessary maintenance of the SESB Metering Equipment or the Distribution Network). For the avoidance of doubt, the aggregate of compensation described in paragraphs (a) and (b) that are payable by Tadau Energy shall not exceed Ringgit One Hundred and Eighty Thousand (RM180,000.00). (xiii) Performance Security Tadau Energy shall secure payment of the delay compensation described above by providing to SESB, and no later than the earlier of (i) seven (7) days from the PPA 1 Financial Closing Date; and (ii) two hundred and ten (210) days after the PPA 1 Effective Date, an irrevocable bank guarantee issued by a commercial bank reasonably acceptable to SESB in the form set out in the PPA 1 for an amount equal to Ringgit One Hundred and Eighty Thousand (RM180,000.00). This bank guarantee shall permit drawings by SESB to satisfy the performance obligations of Tadau Energy for the delay compensation described above. The bank guarantee is to remain valid until expiration of one hundred and ninety (190) days after the Scheduled COD of Unit 1. If Tadau Energy fails to provide the bank guarantee to SESB within this time frame and valid for the duration set forth in the PPA 1 (or such other date as may be agreed between the parties), SESB may terminate the PPA 1 by giving notice to Tadau Energy. (xiv) The Unit 1, the SPP Interconnection Interconnector and the SPP Works Facility, the SPP Tadau Energy shall design, engineer, procure, construct, install, energise, test and commission the Unit 1, the SPP Interconnection Facility and the SPP Interconnector in accordance with Prudent Utility Practices and the terms and conditions of the PPA 1. Tadau Energy shall design, engineer, procure, construct, install, energise, test and commission the SPP Works in accordance with the terms and conditions of the PPA 1. Tadau Energy shall provide SESB with fifteen (15) days’ prior notice of the proposed PPA 1 Commencement Date and written confirmation that the PPA 1 Commencement Date has occurred within five (5) days after it occurs. 46
  57. (xv) Conceptual Design Report of the Unit 1, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works Not less than one hundred and fifty (150) days prior to the PPA 1 Initial Operation Date, Tadau Energy shall submit to SESB the conceptual design report of the Unit 1, the Meteorological Measuring Facilities, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works together with the Independent Engineer’s certificate stating that (i) the Unit 1, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works when constructed in accordance with such design drawings, scope of work and specification requirements will conform to the description set forth in the PPA 1 in all material respects and have the capacity and technical capabilities to meet the operational characteristics set out in the PPA 1, (ii) it is technically feasible for the Unit 1 COD to occur on or before the Scheduled COD of Unit 1 and (iii) the Unit 1, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works should have a useful life no shorter than the PPA 1 Term. (xvi) The Unit 1 11kV Transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works Protection Scheme, Relay Type and Settings Tadau Energy shall provide SESB with the protection schemes and relay type in relation to the Unit 1 11kV transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works not less than thirty (30) days before the PPA 1 Commencement Date. Within twenty one (21) days upon receipt of the same, SESB shall give Tadau Energy written notification of whether such protection schemes and relay type are acceptable to SESB. Not less than ninety (90) days prior to the PPA 1 Initial Operation Date, Tadau Energy shall provide SESB all protection data, the protection relay settings and coordination study report, related primary data, capability curves, relay terminal drawings and relay settings in relation to the Unit 1’s 11kV transformer(s), the SPP Interconnection Facility and the SPP Interconnector together with the Independent Engineer’s certificate. SESB shall revert to Tadau Energy with its recommendations (if any) within thirty (30) days of being furnished such material. Upon Tadau Energy having completed a specification compliance audit (the SCA), a site acceptance test (the SAT) and a precommissioning inspection and testing audit procedure (the PIAT) on the SPP Works specified in the PPA 1, Tadau Energy shall, within fourteen (14) days after the successful completion of the SCA, SAT and PIAT on the SPP Works, submit to SESB the relay settings as installed at the Unit 1’s 11kV transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works. Tadau Energy shall submit the printout of final relay settings of the Unit 1’s 11kV transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works with endorsement by the Electrical Service Engineer for SESB’s acceptance. 47
  58. Tadau Energy shall provide SESB with copies of the monthly reports provided by the EPC Contractor to Tadau Energy and any periodic reports provided to the Financing Parties describing the progress of construction of the Unit 1 , the SPP Interconnection Facility, the SPP Interconnector and the SPP Works. In addition to providing SESB with copies of monthly reports provided to the Financing Parties, Tadau Energy shall also throughout the construction period furnish SESB with a work programme and schedule relating to the Unit 1, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works and update SESB from time to time in respect of the progress and changes to the work programme and schedule. (xvii) Back-up Electricity Supply No later than sixty (60) days prior to the Unit 1’s need to backfeed power supply, Tadau Energy shall submit the necessary applications to SESB and enter into a consumer agreement with SESB. SESB shall only make available to the Unit 1 such backfeed power supply starting from the date on which the SPP Interconnector and the SPP Works have been successfully commissioned, which backfeed power supply shall be measured by the SESB Metering Equipment and charged at SESB’s then prevailing tariff. (xviii) Commencement of Initial Operation Date No generation of solar PV energy from the Plant in an interconnected mode with the Distribution Network may take place and the PPA 1 Initial Operation Date may not occur until (i) all interconnection protective devices in relation to the Unit 1 have been installed by Tadau Energy and been inspected and approved by SESB, (ii) all the relay types and relay settings in relation to the Unit 1 have been installed by Tadau Energy and been approved by SESB; and (iii) the SESB has confirmed in writing, within a reasonable period, that the operation of the Unit 1 with the Distribution Network may commence. (xix) Consequences of Delay by SESB If, otherwise than due to any default by Tadau Energy, the Unit 1 COD is delayed by: (a) the failure by SESB to inspect or approve without reasonable cause the interconnection protective devices referred to in the PPA 1; or (b) the failure by SESB without reasonable cause to accept the required generation to enable the testing of the Unit 1, then the Scheduled COD of Unit 1 shall be extended by one (1) day for each day the Unit 1 COD is delayed as a result of items (a) or (b) above. (xx) COD Tadau Energy shall provide SESB with thirty (30) days’ prior notice of the proposed Unit 1 COD, and written confirmation that the Unit 1 48
  59. COD has occurred within twenty four (24) hours after the occurrence of the Unit 1 COD. If Tadau Energy notifies SESB that the Unit 1 COD can be achieved earlier than the Scheduled COD of Unit 1, SESB may agree to an earlier Unit 1 COD from which Energy Payments shall be payable in accordance with the PPA 1. (xxi) Revised Contracted Capacity If the test results of the performance tests conducted on the Unit 1 to be submitted to SESB no later than the Unit 1 COD, show that declared capacity of the Unit 1 as certified by the Independent Engineer: (a) is more than the Unit 1 Contracted Capacity, then the Unit 1 Contracted Capacity shall be used for the purpose of the calculation of the payments set out in Appendix G of the PPA 1 for the remainder of the PPA 1 Term, unless revised in accordance with the PPA 1; (b) is less than the Unit 1 Contracted Capacity, then the Unit 1 Contracted Capacity shall be revised downwards to reflect the actual capacity of the Unit 1 as certified by the Independent Engineer. In the event that the test results of the performance tests conducted on the fifth (5th), tenth (10th) and fifteenth (15th) anniversary of the Unit 1 COD (each a “PPA 1 Performance Test Date”) in accordance with the PPA 1 show that the capacity of the Unit 1 is less than the Unit 1 Contracted Capacity, then the Unit 1 Contracted Capacity shall be revised downwards to reflect the actual capacity of the Unit 1. In the event of a failure by Tadau Energy to comply with the aforesaid obligations, the Unit 1 Contracted Capacity shall be revised downwards to be the lower of (i) seventy five percent (75%) of the then prevailing Unit 1 Contracted Capacity; and (ii) seventy five percent (75%) of the highest load of the Unit 1 as measured by the SESB Metering Equipment during a period of thirty (30) days immediately preceding the PPA 1 Performance Test Date. (xxii) Consequences of Tadau Energy’s Failure to Deliver Net Electrical Output If, otherwise than due to an Emergency Condition, an interruption due to a Force Majeure Event affecting Tadau Energy or any default of omission on the part of SESB, the total Net Electrical Output delivered by the Unit 1 in a Contract Year is less than seventy percent (70%) of the DAQ of such Contract Year, Tadau Energy shall pay SESB the Non-Delivery Payment in accordance with the PPA 1. (xxiii) The SPP Interconnection Facility, the SPP Interconnector and the SPP Works Tadau Energy shall complete the construction, installation and testing of the SPP Interconnection Facility, the SPP Interconnector and the 49
  60. SPP Works not later than twenty (20) days before the PPA 1 Initial Operation Date. Tadau Energy shall at its cost and expense procure all necessary ownership and all access rights relating to the land on which the SPP Interconnection Facility and the SPP Interconnector shall be constructed and located pursuant to the PPA 1. Tadau Energy shall at its cost and expense, acquire all necessary ownership and/or all access rights relating to the land on which the SPP Works shall be constructed and located, if applicable. Tadau Energy shall transfer to SESB and take all actions necessary to effect the transfer of all rights, title and interest to the completed SPP Works, free from encumbrances and defects and without any outstanding works subsisting at least twenty (20) days before the PPA 1 Initial Operation Date so that SESB shall become the owner thereof. SESB may, at its sole discretion, take operational control of the SPP Works by issuing a provisional certificate of taking over of operations. Upon such transfer, all property and title in such completed and transferred SPP Works shall pass to SESB. Tadau Energy warrants that the SPP Works will be free from defects. The obligation to correct any defects shall continue for twenty four (24) months from the date of transfer of the SPP Works to SESB. The period may be extended by an additional twenty four (24) months in respect of any repaired or replaced work, provided that no warranty shall extend beyond a period of forty-eight (48) months from the date of transfer of the SPP Works to SESB. Tadau Energy also provides a warranty against latent defects in the SPP Works for a period of sixty (60) months from the date of transfer. If, as a result of any defect in (a) the SPP Interconnection Facility and/or the SPP Interconnector or (b) the SPP Works, the Distribution Network is unable to accept Net Electrical Output from the Unit 1, Tadau Energy shall not be entitled to any Energy Payment and/or Non-Acceptance Payment during such period. (xxiv) Insurance Tadau Energy undertakes to SESB that it shall maintain or procure to be maintained in effect the following insurance policies and coverage with respect to the Unit 1 and where applicable, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works: (a) all insurances required by law; (b) such insurance as is appropriate and customary for a prudent PV energy independent power producer; and (c) without prejudice to item (b) above, all insurances as required under the PPA 1 Financing Documents. If any of the insurances referred to above are not available on reasonable commercial terms, Tadau Energy shall provide to SESB detailed information as to the maximum amount of available coverage 50
  61. that it is able to purchase and shall be required to obtain SESB ’s consent (which consent shall not be unreasonably withheld or delayed) as to the adequacy of such coverage under the circumstances prevailing at the time. Tadau Energy shall apply the proceeds of any such insurance policies received following a claim by Tadau Energy for loss or damage to the Unit 1, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works in accordance with the requirements of the PPA 1 Financing Documents (so long as they are in effect) and otherwise to repair and/or reinstate the Unit 1, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works. (xxv) Force Majeure For the purposes of the PPA 1, a Force Majeure Event shall mean an event, condition, or circumstance or its effect which: (a) is beyond the reasonable control of and occurs without fault or negligence on the part of the party claiming it as a Force Majeure Event; and (b) causes a delay or disruption in the performance of any obligation under the PPA 1 despite all reasonable efforts of the party claiming it as a Force Majeure Event to prevent it or mitigate its effects. Subject to satisfying the foregoing criteria, Force Majeure Events include without limitation, the following: (a) strikes or lockouts and/or other work stoppages or industrial action (other than those solely affecting the party claiming the same as a Force Majeure Event); (b) acts of public enemies or terrorists or acts of war, whether or not war is declared, acts of force by a foreign nation or embargo; (c) public disorders, insurrection, rebellion, sabotage, riots or violent demonstrations; (d) explosions, fire, earthquakes, landslides, subsidence, sabotage, and/or other natural calamities and acts of God; (e) unusually severe weather conditions; (f) expropriation or compulsory acquisition by any Government Entity; (g) failure to obtain or renew any Government Authorisations; and (h) any force majeure event affecting the performance of any person that is a party to the EPC Contract 1 or other contract between Tadau Energy and such person relating to the construction, operation or maintenance of the Unit 1. 51
  62. (xxvi) Effect of Force Majeure Event and Consequences Subject to the limitations set out in the PPA 1, if either party is rendered unable by reason of a Force Majeure Event to perform any obligation under the PPA 1, then upon that party giving notice of Force Majeure, those obligations of that party shall be suspended or excused to the extent their performance is affected by the Force Majeure Event. The Scheduled COD of Unit 1 shall be extended by one (1) day for each day the Unit 1 COD is delayed by a Force Majeure Event. The PPA 1 Term shall be extended by one (1) day for each day in the event that (i) the Unit 1 is unavailable after the Unit 1 COD due to any Force Majeure Event affecting the Unit 1; and (ii) Tadau Energy is not entitled under its insurance to receive insurance proceeds which replace any Energy Payments not received by Tadau Energy for such period. (xxvii) Right to Terminate under Force Majeure Either party may terminate the PPA 1 if a Force Majeure Event prevents either party from substantially performing any material obligation under the PPA 1 for a period which exceeds one hundred and eighty (180) days. While there is a right of termination as a result of a Force Majeure Event provided under the PPA 1, the right is only exercisable upon giving thirty (30) days’ written notice if a Force Majeure Event is preventing either party from substantially performing any material obligation under the PPA 1 for a period exceeding one hundred and eighty (180) days, subject to the following: (a) if a Force Majeure Event cannot be remedied within one hundred and eighty (180) days with the use of reasonable diligence then the one hundred and eighty (180) days period shall be extended by a further period of one hundred and eighty (180) days; and (b) if the party affected is unable to remedy the Force Majeure Event by the end of the further period of one hundred and eighty (180) days, then the parties shall consult as to what steps shall be taken with a view to mitigating or remedying the consequences of a Force Majeure Event. If the parties agree to extend the second period, then the above provisions apply with regards to the remedy and mitigation of the Force Majeure Event. If the parties are unable to agree to extend the further period of one hundred and eighty (180) days, then either party may terminate the PPA 1 by giving thirty (30) days’ written notice of termination. 52
  63. (xxviii) Events of Default and Termination Each of the following events shall constitute an event of default by Tadau Energy, unless excused under another provision of the PPA 1: (a) Tadau Energy fails to make a payment of any amount of a substantial nature which is due and payable under the PPA 1 within sixty (60) days after receipt of notice of non-payment from SESB; (b) Tadau Energy fails to comply with or operate in conformity with any obligation of the PPA 1 (other than a payment obligation) and such failure, if capable of remedy, continues uncured for a period of ninety (90) days, after receipt of notice of such failure from SESB; (c) (i) Tadau Energy is dissolved or liquidated, other than for the purpose of a voluntary dissolution or liquidation as part of a reorganisation or reincorporation; (ii) Tadau Energy applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) Tadau Energy admits in writing its inability to pay its debts as they fall due; (iv) Tadau Energy makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (v) Tadau Energy commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) Tadau Energy fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; (vii) Tadau Energy takes any action for the purpose of effecting any of the events described in paragraphs (c)(i) through (v) above; (d) the Unit 1 delivers to SESB Net Electrical Output which is not solely driven by solar PV technology or any of the Unit 1 and/or the 2 MWac Project comprises energy storage devices; (e) the Unit 1 COD fails to occur within one hundred and eighty (180) days from the Scheduled COD of Unit 1; (f) Tadau Energy abandons the 2 MWac Project within the meaning set out in the PPA 1 after the PPA 1 Effective Date 53
  64. and fails to resume activities within a period of time agreeable to SESB ; (g) the PPA 1 Site Agreement is terminated; (h) the SPP Licence is suspended or revoked or terminated or expired due to Tadau Energy’s default, and Tadau Energy has not caused the SPP Licence to be reinstated or renewed either (i) within the shorter of three hundred and sixty-five (365) days and the legally permissible period for such reinstatement or renewal or (ii) after having exhausted all available administrative or legal appeals and applications for such reinstatement or renewal; or (i) any of the following events occur prior to the fifth (5th) anniversary of the Unit 1 COD, without the prior written approval of the Federal Government of Malaysia: (i) Tadau Energy sells, conveys, transfers or otherwise disposes of the 2 MWac Project or any material part or any interest in the 2 MWac Project to any other Person or enters into an agreement to do so; or (ii) any Shareholder sells, transfers or otherwise disposes of any share of Tadau Energy, Kagayaki Energy or Edra Solar (including for this purpose the assignment of the beneficial interest therein the creation of any charge or other security interest over, such share or the renunciation or assignment of any right to receive or to subscribe for such share) or any interest in such share or enters into an agreement to do so; or (iii) there is a change in Control of Tadau Energy, and for the purposes of this paragraph (i): (i) “interest in a share” shall have the meaning assigned to such phrase in Section 6A of the Companies Act 1965; (ii) “Shareholder” means a person who, legally or beneficially, owns or Controls any share of Tadau Energy, Kagayaki Energy or Edra Solaror any interest in such share; and (iii) “Control” means the power (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract or otherwise) to appoint and/or remove all or such of the members of the board of directors or other governing body of a person as are able to cast a majority of the votes capable of being cast by the members of that board or otherwise to control or have the power to control the policies and affairs of that person; and for the purposes of this definition, a person (the “relevant person”) “Controls” a person if (i) it can exercise the 54
  65. requisite power by acting in concert with one or more other persons pursuant to an agreement or understanding (whether formal or informal) and (ii) the relevant person owns twenty percent (20%) or more of the securities of the person who is Controlled having ordinary voting power for the election of the members of the board of directors or other governing body of that person, or if that person has no such board of directors or other governing body, twenty percent (20%) or more of the ownership interests in that person; and “Controls”, “Controlling” and “Controlled” shall be construed accordingly. Each of the following events shall constitute an event of default by SESB, unless excused under another provision of the PPA 1: (a) SESB fails to make a payment of any amount of substantial nature which is due and payable under the PPA 1 within sixty (60) days after receipt of notice of non-payment from Tadau Energy; (b) SESB fails to comply with or operate in conformity with any obligation of the PPA 1 (other than a payment obligation) and such failure, if capable of remedy, continues uncured for a period of ninety (90) days, after receipt of notice of such failure from Tadau Energy; or (c) (i) SESB is dissolved or liquidated, other than voluntary dissolution or liquidation as part of a reorganisation or reincorporation; (ii) SESB applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) SESB admits in writing its inability to pay its debts as they fall due; (iv) SESB makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (v) SESB commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) SESB fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; (vii) SESB takes any action for the purpose of effecting any of the events described in paragraphs (c) (i) through (v) above. 55
  66. If an event of default described above (other than that described in paragraphs (b) of Tadau Energy’s Events of Default and SESB’s Events of Default above respectively) that cannot be cured with the exercise of reasonable diligence within the period of ninety (90) days therein) occurs, the non-defaulting party may terminate the PPA 1 by giving fourteen (14) days’ written notice to the other party. If the event of default described in paragraphs (b) of Tadau Energy’s Events of Default and SESB’s Events of Default above occurs and cannot be cured with the exercise of reasonable diligence within the period of ninety (90) days specified therein, the cure period shall be extended by a further one hundred and eighty (180) days and the default continues uncured at the end of such further period, the non-defaulting party may terminate the PPA 1 immediately by giving written notice to the defaulting party. (xxix) Consequences of Termination Event of default by Tadau Energy If SESB terminates the PPA 1 as a result of an event of default under PPA 1 by Tadau Energy, SESB shall have the option but not the obligation, exercisable by prior notice in writing within sixty (60) days of the termination of the PPA 1, to purchase the 2 MWac Project in the manner and for the purchase price determined in accordance with the provisions of the PPA 1. Such purchase price is essentially an amount equal to: (a) the PPA 1 Outstanding Indebtedness (as defined below), if the PPA 1 Sponsors Gross Equity Contribution (as defined below) amounts to twenty percent (20%) or more of the PPA 1 Total Project Cost (as defined below) and ninety five percent (95%) of the PPA 1 Outstanding Indebtedness if the PPA 1 Sponsors Gross Equity Contribution is less than twenty percent (20%) of the PPA 1 Total Project Costs; plus (b) the “A” Purchase Price, which is Ringgit Ten (RM10.00); plus (c) the Transfer Costs, being all reasonable costs and expenses of Tadau Energy incurred or suffered as a result of the purchase of the 2 MWac Project by SESB, including any reasonable and customary termination payments or novation fees on contracts in connection with the 2 MWac Project, all Taxes, any reasonable breakage costs and other reasonable and necessary termination costs, but excluding the PPA 1 Outstanding Indebtedness; less (d) the Retained Sum, being the aggregate of all cash balances at bank and in hand and liquid securities held by Tadau Energy and to be retained by Tadau Energy after the date of termination of the PPA 1. For the purpose of this provision, “PPA 1 Outstanding Indebtedness” shall mean the lesser of: 56
  67. (a) the aggregate amount owing to the Financing Parties (excluding shareholders of Tadau Energy and their respective affiliates) as of the termination date as incurred under the PPA 1 Initial Financing Documents and as amortised in accordance thereunder and reflected in the PPA 1 Initial Financial Model; and (b) the aggregate amounts owing to the Financing Parties (excluding shareholders of Tadau Energy and their respective affiliates) as of the termination date the PPA 1 Financing Documents; including any reasonable costs and fees related to accelerated repayment and other financing termination costs, but excluding any costs and fees relating to the Sponsors Gross Equity Contribution. “PPA 1 Sponsors Gross Equity Contribution” shall mean an amount as certified by the Auditor as at the termination date as being the lesser of: (a) total capital contributed by shareholders of Tadau Energy and their affiliates (including share capital, loan, loan stocks, bonds and redeemable shares received by Tadau Energy) for financing of the Unit 1 as committed by Tadau Energy, its shareholders and their affiliates at the PPA 1 Financial Closing Date in accordance with the PPA 1 Initial Financing Documents; and (b) total capital contributed by shareholders of Tadau Energy and their affiliates (including share capital, loan, loan stocks, bonds and redeemable shares received by Tadau Energy) for financing of the Unit 1, as outstanding as at the termination date; “PPA 1 Total Project Costs” shall mean the aggregate amount of the expenditure incurred and paid by Tadau Energy in connection with the 2 MWac Project up to the first anniversary of the Unit 1 COD. (xxx) Event of default by SESB If Tadau Energy terminates the PPA 1 as a result of an event of default under PPA 1 by SESB, Tadau Energy shall have the option but not the obligation, (exercisable by prior notice in writing within sixty (60) days of the termination of the PPA 1), to sell the 2 MWac Project to SESB, in the manner and for the purchase price determined in accordance with the PPA 1. In the event this option is exercised by Tadau Energy, SESB shall be required to purchase the 2 MWac Project from Tadau Energy. Such purchase price is essentially an amount equal to: If termination occurs pre-COD (i) the PPA 1 Outstanding Indebtedness; plus 57
  68. (ii) the PPA 1 Sponsors Gross Equity Contribution; plus (iii) the Interest on the Sponsors’ Gross Equity Contribution, being the aggregate amount determined by applying the Default Rate to each amount comprising the Sponsors’ Gross Equity Contribution from the date of injection of such amount to the date of termination of the PPA 1; plus (iv) the Transfer Costs; less (v) the Retained Sum. If termination occurs post-COD (i) the PPA 1 Outstanding Indebtedness; plus (ii) the “B” Purchase Price, which is determined in accordance with Attachment A of Appendix J of the PPA 1 and consists of equity contributions, plus a return on equity, less any dividends /distribution/ profit/ equity repayments/ redemption and other payments in respect of the PPA 1 Sponsors Gross Equity Contribution actually paid by or on behalf of Tadau Energy; plus (iii) the Transfer Costs; less (iv) the Retained Sum. Once payment in full has been made by SESB of the amount set out above, all Tadau Energy’s rights, title and interest in the 2 MWac Project and Site Yong East (including the Access Rights) shall simultaneously be transferred by Tadau Energy to SESB (or its nominees) free from any encumbrance whatsoever. Where the PPA 1 Outstanding Indebtedness is payable by SESB above, it shall be paid by SESB directly to the Financing Parties (other than the shareholders of Tadau Energy and their respective affiliates) whose receipt shall be a good discharge for SESB and the PPA 1 Outstanding Indebtedness shall thereby be deemed to have been paid to Tadau Energy. Payment of the PPA 1 Outstanding Indebtedness shall, where required by SESB, be in exchange for a transfer or assignment to SESB (or its nominees) of all rights, title and interests in the PPA 1 Initial Financing Documents (other than those in respect of the Sponsors’ Gross Equity Contribution), documented and evidenced to the satisfaction of SESB. Where required by SESB, Tadau Energy shall procure that the Financing Parties discharge all securities and other encumbrances given on or over the 2 MWac Project and Site Yong East (including the Access Rights) in exchange for the payment of the PPA 1 Outstanding Indebtedness. For this purpose, Tadau Energy shall procure that the Financing Parties sign all reassignments, discharge of charge, agreements, and other documents in a form required by SESB so as to transfer all rights, title and interest in the 2 MWac Project and Site Yong East (including the Access Rights) to SESB (or 58
  69. its nominees ) free of encumbrances and Tadau Energy shall procure that the Financing Parties shall take all steps and actions considered by SESB to be necessary or desirable to procure that all rights, title and interest in the 2 MWac Project and Site Yong East (including the Access Rights) are transferred to SESB (or its nominees) free of encumbrances. (xxxi) The Suruhanjaya Tenaga’s Step In Rights If the Suruhanjaya Tenaga exercises its statutory right to step in and operate the Unit 1, SESB shall, so long as consistent with the terms of the PPA 1 Financing Documents or the rights of the Financing Parties thereunder, be entitled to make Energy Payments and/or NonAcceptance Payments to the Suruhanjaya Tenaga or at the Suruhanjaya Tenaga’s direction and such payment shall for the purposes of the PPA 1 be deemed to be a payment made to Tadau Energy in full discharge of SESB’s obligation to Tadau Energy thereunder. (xxxii) Indemnification and Liability Each party (the liable party) is liable to the other party (the injured party) for property damage or personal injury suffered by the third parties as a consequence of any act or omission by the liable party or its officer, directors, agents or employees arising in connection with the performance of the PPA 1, except (i) workers compensation claims by any officers, directors, agents, employees, contractors and subcontractors of the injured party; and (ii) to the extent such injury, death or damage is attributable to the negligence or misconduct of, or breach of the PPA 1, by the injured party. Tadau Energy shall defend, indemnify and hold SESB, and its officers, directors, agents, employees, contractors and subcontractors, harmless from and against any and all claims, judgments, liabilities, losses, costs, expenses (including reasonable lawyers’ fees) and damages under all applicable environmental laws or regulations arising out of the condition of Site Yong East, Tadau Energy’s construction, ownership or operation of the Unit 1, the SPP Interconnection Facility and the SPP Interconnector or the construction of the SPP Works, except to the extent such damages are attributable to the negligence or misconduct of, or breach of the PPA 1 by SESB, its officers, directors, agents, employees, contractors or subcontractors. Likewise, SESB indemnifies Tadau Energy against all such claims under all applicable environmental laws or regulations arising out of SESB’s ownership or operation of the SPP Works. (xxxiii) Change in Law Adjustment If there is a Change-in-Law which requires Tadau Energy to make any material capital improvement or other material modification to the Unit 1, the cost of which is in excess of the capital improvement threshold of Ringgit Two Hundred and Fifty Thousand (RM250,000.00) in any calendar year, which material capital improvement or other material modification is required for the purpose of enabling Tadau Energy to fulfil its obligations under the PPA 1 in compliance with such Change- 59
  70. in-Law , SESB and Tadau Energy shall agree upon, in good faith, any extension to the PPA 1 Term or any adjustment to the Energy Rate to reflect such cost in excess of the aforementioned capital improvement threshold for submission to the Suruhanjaya Tenaga for approval. Tadau Energy and SESB shall use their respective best efforts to limit the remedy to an extension of the PPA 1 Term only and only in the event it is not commercially feasible to do so, resort to an adjustment to the Energy Rate. After receipt by SESB of the Suruhanjaya Tenaga’s written approval of: (a) the costs of the material capital improvement or material modification to the Unit 1, as the case may be; (b) such extension of the PPA 1 Term or adjustment to the Energy Rate; and (c) the inclusion of any adjustments to the Energy Rate as part of SESB’s tariff rates to its customers in a manner consistent with such adjustments, the Term or the Energy Rate, as the case may be, shall be adjusted in a manner approved by the Suruhanjaya Tenaga. (xxxiv) Transfers and Assignment Except as required by the Financing Parties under the PPA 1 Financing Documents or as provided in the PPA 1, Tadau Energy shall not sell, convey, transfer or otherwise dispose of the 2 MWac Project or any material part or any interest in it to any other Person without the prior written consent of SESB and the Suruhanjaya Tenaga. If the PPA 1 Financing Documents so require, SESB shall: (a) provide its consent to assignments and acknowledgement of rights of the Financing Parties (including cure rights and the rights of the Financing Parties under the PPA 1 Financing Documents to be substituted for Tadau Energy upon the occurrence of any default provided that the Financing Parties shall notify SESB in writing before exercising such rights) as shall be necessary or reasonably appropriate in order to obtain financing for the 2 MWac Project in a timely manner provided that such rights shall be subject to the terms of the PPA 1 and not inconsistent with SESB’s rights under the PPA 1; (b) make payments to Tadau Energy directly into a collateral security account established under the PPA 1 Financing Documents (subject to any claims or rights SESB may have against Tadau Energy under the PPA 1); (c) in the event of a default and provided that a prior written notice has been given to SESB, accept as a substitute for Tadau Energy under the PPA 1, the agent for the Financing Parties, 60
  71. any designee or transferee of such agent or any purchaser of Tadau Energy or the 2 MWac Project upon a foreclosure sale conducted on behalf of the Financing Parties of Tadau Energy ’s interest in the 2 MWac Project or of the issued share capital of Tadau Energy; and (d) subject to prior written notice already being given to SESB, afford the Financing Parties an opportunity to remedy any event of default by Tadau Energy within the relevant cure period hereunder before terminating the PPA 1. Tadau Energy acknowledges: (a) that any assignment or transfer to a secured party pursuant to the PPA 1 Financing Documents shall not relieve Tadau Energy of its obligations to SESB under the PPA 1; (b) no such assignee or transferee shall be liable for the performance of Tadau Energy’s obligations under the PPA 1; and (c) any exercise by any such assignee or transferee shall be subject to the terms of the PPA 1. (xxxv) Governing Law and Dispute Resolution The PPA 1 is be governed by, and shall be construed in accordance with the laws of Malaysia. If any dispute in relation to the PPA 1 cannot be resolved between the parties by mutual agreement in the manner provided thereunder, then such dispute shall be settled exclusively and finally by arbitration conducted in accordance with the Rules for Arbitration of the Regional Centre for Arbitration at Kuala Lumpur. Subject to the arbitration provisions in the PPA 1, the parties hereby submit to the exclusive jurisdiction of courts located in Kota Kinabalu, Sabah. (xxxvi) Goods and Services Tax All amounts stated in the PPA 1 are exclusive of the goods and services tax, unless otherwise clearly stated otherwise. The parties acknowledge and agree that if the goods and services tax is imposed on any supplies made by any party under the PPA 1, such party shall have the right to increase the consideration payable on the supply by an amount equal to the goods and services tax imposed. Notwithstanding the imposition of goods and services tax on either party, the Energy Rate shall not be subject to any adjustment whatsoever. 4.5.1.2 PPA 2 The following section incorporates the key terms and conditions that are contained in the PPA 2. 61
  72. In respect of defined terms in this Section 4 .5.1.2 only, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the PPA 2. (i) Overview The PPA 2 was entered into between Tadau Energy and SESB on 15 December 2016, and sets out the terms and conditions governing the sale and delivery of electricity and generating capacity from Unit 2 by Tadau Energy to SESB and the purchase by SESB of such electricity and generating capacity from Tadau Energy. Tadau Energy shall design, construct, commission, own, operate and maintain the Unit 2 in accordance with the terms and conditions of the PPA 2. (ii) Term The PPA 2 takes effect on the Effective Date under the PPA 2 (“PPA 2 Effective Date”) and expires on the day before the twenty-first (21st) anniversary of the Unit 2 COD (as defined below) (including such day) (the “PPA 2 Term”) and may be extended or terminated in accordance with the terms and conditions of the PPA 2. (iii) Conditions Precedent to Effectiveness of PPA 2 The PPA 2 shall be effective upon satisfaction of the following conditions, namely that: (a) all corporate authorisations which are required to have been obtained by the parties in connection with the execution and delivery of the PPA 2 have been obtained and are in full force and effect and a statement in writing to that effect by each party has been delivered to the other party; (b) the PPA 2 has been executed and delivered by each of the parties; (c) Tadau Energy has submitted to SESB a copy of the letter of award issued by Suruhanjaya Tenaga to Tadau Energy for the award of the 48 MWac Project; (d) Tadau Energy has submitted to SESB a copy of the power system study report conducted on the 48 MWac Project based on generic model (the Stage 1 Power System Study Report) as approved by SESB; (e) Tadau Energy has submitted to SESB and the Suruhanjaya Tenaga, a certified copy of the executed sites agreement granting Tadau Energy the right to occupy and use the sites for the 48 MWac Project (“PPA 2 Sites Agreement”) which is in full force and effect and all conditions precedent to its effectiveness are satisfied or waived thereunder; and 62
  73. (f) Tadau Energy has submitted to the Suruhanjaya Tenaga one (1) certified copy the PPA 2. The date on which all conditions precedent listed above have been satisfied or waived is the PPA 2 Effective Date. Tadau Energy has three (3) months from the date of execution of the PPA 2 to satisfy the conditions precedent, failing which either party may terminate the PPA 2 by giving notice in writing. (iv) Conditions Precedent to the Initial Operations The Initial Operation Date under the PPA 2 (“PPA 2 Initial Operation Date”) and the right of Tadau Energy to commence generation of solar PV energy at the Unit 2 and to supply and deliver Test Energy shall only occur upon satisfaction of the following conditions: (a) each of the Project Documents (other than the PPA 2) is in full force and effect and all conditions precedent to their effectiveness (except for conditions relating to the PPA 2 are satisfied or waived thereunder; (b) the documents relating to the financing and security arrangements for the 48 MWac Project which are entered into by Tadau Energy and the financing parties and reflecting accurately the PPA 2 Initial Financial Model (as defined below) (“PPA 2 Initial Financing Documents”) are in full force and effect and all conditions precedent to their effectiveness have been satisfied or waived thereunder; (c) Tadau Energy has submitted to SESB, with a copy to the Suruhanjaya Tenaga, the conceptual design report of the Unit 2, accompanied by a certificate from the Independent Engineer that the Unit 2 have been designed, manufactured, supplied, constructed, installed and tested in accordance with the conceptual design report of the Unit 2; (d) Tadau Energy has submitted to SESB, with a copy to the Suruhanjaya Tenaga, one (1) certified copy of each of the PPA 2 Initial Financing Documents and the Project Documents (other than the PPA 2 and the PPA 2 Sites Agreement); (e) Tadau Energy has submitted to SESB (i) a certified copy of the SPP Licence and (ii) a copy of the final power system study report conducted on the 48 MWac Project based on comprehensive models provided by the manufacturer of the solar PV energy panels and other components which will be used in the Unit 2 (the Stage 2 Power System Study Report) as approved by SESB in writing; (f) Tadau Energy has submitted to SESB, with a copy to the Suruhanjaya Tenaga, a certificate from the Independent Engineer that the SPP Interconnection Facility, the SPP Interconnector and the SPP Works have been designed, manufactured, supplied, constructed, installed, tested and 63
  74. commissioned in accordance with the requirements of the PPA 2 ; (v) (g) the performance security as set out in the PPA 2 has been delivered to SESB and is in full force and effect; (h) Tadau Energy has submitted to SESB, with a copy to the Suruhanjaya Tenaga, (i) a certified copy of the EIA Approval (if the Department of Environment requires the submission of an Environmental Impact Assessment Report by Tadau Energy); or (ii) a written confirmation from the Department of Environment that the EIA Approval is not required; (i) the commissioning and testing programs as set out in the PPA 2 have been submitted by Tadau Energy to SESB, with a copy to the Suruhanjaya Tenaga, and approved by SESB which approval shall not be unreasonably withheld or delayed; and (j) the test procedures as set out in the PPA 2 has been submitted by Tadau Energy to SESB, and approved by SESB which approval shall not be unreasonably withheld or delayed. Conditions Precedent to Commercial Operations The Unit 2 COD and the right of Tadau Energy to supply, deliver and sell Net Electrical Output and the obligation of SESB to accept and to purchase Net Electrical Output from the Unit 2 or to make Energy Payments to Tadau Energy shall not occur until the following conditions have been satisfied: (a) Tadau Energy has submitted to SESB a copy of the “Commissioning Test Certificate” or similar document to the like effect issued by the Suruhanjaya Tenaga as contemplated by the SPP Licence in respect of the Unit 2 being operational; (b) Tadau Energy has submitted to SESB, with a copy to the Suruhanjaya Tenaga, the final design of the Unit 2 and a certificate from the Independent Engineer stating that the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works have been tested and commissioned in accordance with the tests contained in the PPA 2 and the EPC Contract 2; (c) Tadau Energy has submitted to SESB, with a copy to the Suruhanjaya Tenaga, a certificate from the Independent Engineer confirming that the Unit 2 have the capacity and capability to meet the declared capacity of the Unit 2 and the test results which show that Tadau Energy can meet the Unit 2 Contracted Capacity; (d) no default by Tadau Energy of any material provision of the PPA 2; or (ii) any provision of the financing documents (being the loan agreements (including agreements for any subordinated debt), notes, bonds, indenture, guarantees, security agreements, hedging agreements and any other 64
  75. documents relating to the financing or refinancing and security arrangements for the 48 MWac Project which have been or are to be entered into by Tadau Energy , excluding any agreements relating to Sponsors' Gross Equity Contribution (as defined below)) (“PPA 2 Financing Documents”) whereby the breach could reasonably be expected to have a material adverse effect on the ability of Tadau Energy to perform its obligations or availability of the rights of SESB under the PPA 2, shall have occurred and is continuing; (e) the representations and warranties by Tadau Energy in the PPA 2 are true and correct in all material respects as if made on the Unit 2 COD; and (f) all the documentation, data, information and certified test results set out in the PPA 2, together with a certificate from the Independent Engineer confirming that such documentation, date and test results are valid have been submitted by Tadau Energy to SESB, with a copy to the Suruhanjaya Tenaga, and verified by SESB as being in conformance with the requirements of the PPA 2 within the timeframes set out therein. The date on which all conditions precedent listed above have been satisfied or waived is the “Unit 2 COD.” (vi) Critical Milestones Critical milestones in the PPA 2 are as below: (a) the PPA 2 Financial Closing Date shall occur on or before 10 May 2017. The “PPA 2 Financial Closing Date” means the date on which the PPA 2 Financing Documents relating to the financing or refinancing for the total construction costs of the 48 MWac Project have been entered into by Tadau Energy and the Financing Parties, and all of the conditions precedent for the initial drawdown under such PPA 2 Financing Documents have been satisfied by Tadau Energy or waived by the Financing Parties thereunder; (b) the Commencement Date under the PPA 2, being the date notified by Tadau Energy to SESB on which the construction work at Site Yong East, Site Yong West and Site Bak Bak has started (“PPA 2 Commencement Date”) shall occur no later than 10 April 2017; (c) each of the Project Documents (being the PPA 2, the EPC Contract 2, the O&M Agreement 2, the PPA 2 Sites Agreement and such other agreements as mutually agreed) shall be in full force and effect and all conditions precedent to their effectiveness shall be satisfied or waived no later than 10 April 2017; and (d) the PPA 2 Initial Operation Date shall occur no earlier than 15 February 2018. 65
  76. Notwithstanding the above , the failure to meet any of the critical milestones set out above does not in itself amount to an event of default by Tadau Energy under the PPA 2. The PPA 2 Financial Closing Date and the Commencement Date have been extended to 30 June 2017 vide the letters issued by SESB dated 5 April 2017 and 11 April 2017 respectively. (vii) Sale and Purchase Obligations From the Unit 2 COD and continuing throughout the PPA 2 Term: (a) Tadau Energy shall deliver and sell to SESB, and SESB shall accept and purchase the Net Electrical Output which is generated by the Unit 2; and (b) the Net Electrical Output generated and delivered by Tadau Energy and accepted by SESB up to the MAAQ of such Contract Year, shall be at the Energy Rate; and (c) Energy Payments for any Net Electrical Output generated in excess of the MAAQ of such Contract Year accepted by SESB shall be at the Excess Energy Rate. SESB shall pay Tadau Energy for such Net Electrical Output in accordance with the PPA 2. SESB is not obliged to accept Net Electrical Output from the Unit 2: (i) if the Unit 2 delivers to SESB Net Electrical Output which does not conform to the electrical characteristics set forth in the PPA 2; (ii) if an Emergency Condition occurs within the Grid System as a result of which the Grid System is unable to accept Net Electrical Output from the Unit 2 which may result in SESB disconnecting the Unit 2 from the Grid System and/or issuing a Despatch Instruction for Tadau Energy to reduce generation from the Unit 2 provided such period shall in aggregate not exceed one hundred and eight five (185) hours in each Contract Year; (iii) if SESB interrupts the acceptance of solar PV energy from the Unit 2 to conduct necessary maintenance of the SESB Metering Equipment or the Grid System, provided that such maintenance shall not exceed (1) forty eight (48) hours in aggregate in each Contract Year for any maintenance to be carried out from 9.00 a.m. to 3.00 p.m.; and (2) one hundred and thirty seven (137) hours in aggregate in each Contract Year for any maintenance to be carried out from 3.01 p.m. to 8.59 a.m.; (iv) if any of the Unit 2 delivers to SESB Net Electrical Output which is not solely driven by solar PV technology or any of the 66
  77. solar PV facilities in Unit 2 and /or the 48 MWac Project comprises energy storage devices; (v) if any constraint or interruption in the Grid System as a result of which the Grid System is unable to accept Net Electrical Output from the Unit 2 which may result in SESB disconnecting the Unit 2 from the Grid System and/or issuing a Despatch Instruction for Tadau Energy to reduce generation from the Unit 2 provided that such period shall in aggregate not exceed one hundred and eighty five (185) hours in each Contract Year; (vi) if the Unit 2 has delivered to SESB Net Electrical Output in a Contract Year which exceed the MAAQ of such Contract Year; or (vii) if the Net Electrical Output delivered by the Unit 2 over any half (1/2) hour period exceeds the Unit 2 Contracted Capacity. If, other than the events or circumstances described in item (i) to (vii) above and any defects in (a) the SPP Interconnection Facility and/or the SPP Interconnector or (b) the SPP Works in accordance with the provisions of the PPA 2, SESB fails to accept the Net Electrical Output as may be generated and delivered by Tadau Energy, then SESB shall pay Tadau Energy the Non-Acceptance Payment for such period SESB fails to accept the Net Electrical Output in accordance with the PPA 2. (viii) Energy Payments The Energy Payments are calculated in accordance with Appendix G of the PPA 2, as follows: Energy Payment : EP = (NEOT1i x ER) + (NEOT2i x EER) EP = the Energy Payment (in RM) in such Billing Period NEOi = the total Net Electrical Output (in kWh) delivered in such Billing Period provided always that such total Net Electrical Output is subject to the provisions of the PPA 2 NEOTl = the Net Electrical Output (in kWh) delivered in such Billing Period not exceeding MAAQ for such Contract Year calculated based on the following conditions: (a) NEOTli = NEOi, when ANEOm + ENEO ≤MAAQ; or (b) NEOTli = MAAQ – ANEOm-l – ENEO, when ANEOm + ENEO > MAAQ and ANEOm l + ENEO ≤MAAQ; or (c) NEOTli = 0, when ANEOm-l + ENEO > MAAQ 67
  78. NEOT2i MAAQ = = the Net Electrical Output (in kWh) delivered in such Billing Period exceeding MAAQ for such Contract Year calculated based on the following conditions: (a) NEOT2i = 0, when ANEOm + ENEO ≤MAAQ; or (b) NEOT2i = ANEOm – MAAQ – ENEO, when ANEOm + ENEO > MAAQ and ANEOm-l + ENEO ≤MAAQ; or (c) NEOT2i = NEOi, when ANEOm-l; + ENEO > MAAQ the Maximum Annual Allowable Quantity (in kWh) calculated as follows: (a) MAAQ = [A quantum determined as a function of Unit 2 Contracted Capacity x (365 x 24) x Capacity Factor]MWh x n ÷ N, when the capacity of the Facility as certified by the Independent Engineer is not less than the Unit 2 Contracted Capacity; or (b) MAAQ = ([A quantum determined as a function of Unit 2 Contracted Capacity x (365 x 24) x Capacity Factor]MWh x n x Revised Unit 2 Contracted Capacity) ÷ (N x Unit 2 Contracted Capacity), when the Unit 2 Contracted Capacity is revised downwards to reflect the actual capacity of the Facility ER = the prevailing Energy Rate (in RM/kWh) applicable for that Billing Period EER = the Excess Energy Rate (in RM/kWh) for that Billing Period ANEOm = the aggregate of NEOi for each Billing Period (in kWh) in such Contract Year including such Billing Period ANEOm-l = the aggregate of NEOi for each Billing Period (in kWh) in such Contract Year excluding such Billing Period ENEO = the aggregate of ENEOP in such Contract Year ENEOP = the equivalent Net Electrical Output (in kWh) during such period P calculated based on the following conditions: (a) AEQ x P x 2, when ENEOP-l + ANEOT1 ≤MAAQ; or 68
  79. (b) ENEOP = 0, when ENEOP-l + ANEOT1 > MAAQ, provided always that Σ[ANEOT1 + ENEOP] shall not exceed MAAQ and such total Net Electrical Output is subject to the provisions of the PPA 2; i = an index representing each of the preceding Billing Period i in such Contract Year n = the actual number of days in the prevailing Contract Year N = (a) 365, for all years; or (b) 366, for a leap year Capacity Factor (ix) = 19.17% Billing and Payment A Billing Statement is to be issued monthly starting from the Unit 2 COD. SESB shall within thirty (30) days of receipt of the Billing Statement pay to Tadau Energy the Energy Payment and/or the NonAcceptance Payment (if any) invoiced in such Billing Statement (but less any amount due to SESB from Tadau Energy (including but not limited to the Non-Delivery Payment as set out in the PPA 2) and less any amount in the Billing Statement disputed by SESB in good faith which is to be settled under the PPA 2). Late payment will be subject to a Default Rate (being one per cent (1%) above the base lending rate then in effect at the principal office of Malayan Banking Berhad or its successor-in-title). (x) No Set-Off Except as otherwise provided in the PPA 2, all payments by either party to the other party under the PPA 2 shall be made free of any restriction or condition and without deduction on account of any amount claimed from the other party which is disputed in good faith by that party. (xi) Energy Rate Review and Adjustments At the date of the execution of the PPA 2, the Energy Rate is calculated from the financial model as confirmed by the Suruhanjaya Tenaga to be the basis of the award of the 48 MWac Project to Tadau Energy as set out in the PPA 2 (“PPA 2 Initial Financial Model”). SESB and the Suruhanjaya Tenaga shall be entitled to amend the PPA 2 Initial Financial Model, or the then prevailing PPA 2 Updated Input Financial Model (being the PPA 2 Initial Financial Model as updated pursuant to the PPA 2) to determine and reduce the Energy Rate (i) on the occurrence of the Unit 2 COD, (ii) in the event of a failure by Tadau Energy to deliver input data and information specified 69
  80. in the PPA 1 (“PPA 2 Input Data”) within the stipulated time frame or comply with its obligations and/or warranties under Clause 7.2(b) or Clause 7.5 of the PPA 2 or (iii) one (1) year after the Unit 2 COD. Upon determination of the Energy Rate by the PPA 2 Updated Input Financial Model by SESB and the Suruhanjaya Tenaga, the Energy Rate shall be adjusted downwards to reflect such determination with effect from the month following the determination. In the event of a failure by Tadau Energy to deliver PPA 2 Input Data within the stipulated time frame or comply with its obligations and/or warranties under Clause 7.2(b) or Clause 7.5 of the PPA 2, the PPA 2 Initial Financial Model or the PPA 2 Updated Input Financial Model, as the case may be, shall be revised so that the Energy Rate shall be seventy five percent (75%) of the then prevailing Energy Rate. If: (a) the construction costs of the 48 MWac Project is reduced below the amounts appearing in the PPA 2 Initial Financial Model or the then existing PPA 2 Updated Input Financial Model, as the case may be, the Energy Rate shall be adjusted downwards to reflect fifty percent (50%) of the construction costs reductions. (b) the financing costs of the 48 MWac Project is reduced below the amounts appearing in the PPA 2 Initial Financial Model or the then existing PPA 2 Updated Input Financial Model, as the case may be, the Energy Rate shall be adjusted downwards to reflect sixty percent (60%) of the financing costs reductions. (c) Tadau Energy received any incentive or benefit in respect of Taxes from any Government Entity at any time from the date of the PPA 2 up to one (1) year after the Unit 2 COD, SESB shall be entitled to reflect the whole of such incentive or benefit when revising the Energy Rate. Any downwards adjustment to the Energy Rate as set out above shall be based on each separate and independent savings as specified in items (a), (b) and (c) above without the aggregation of all differences, changes or variations in relation to such savings provided that if the foreign exchange rate in relation to such savings applied in both the EPC Contract 2 and the PPA 2 Initial Financing Documents at the time of the PPA 2 Commencement Date and the PPA 2 Financial Closing Date for the PPA 2 Initial Financing Documents exceeded the reference foreign exchange rate of RM4.20 for each U.S. Dollar, any downwards adjustment to the Energy Rate due to any savings as specified in items (a) and (b) above shall be based on the net savings through the aggregation of all differences, changes or variations in relation to the savings as specified in items (a) and (b) above. (xii) Delay Compensation Tadau Energy agrees to pay SESB by way of pre-ascertained and agreed compensation the following: 70
  81. (a) if, due to the default of Tadau Energy or its contractors or agents under the PPA 2, the Unit 2 COD does not occur on the the Scheduled COD of Unit 2, Tadau Energy shall compensate SESB an amount equal to Ringgit Twenty Four Thousand (RM24,000.00) per day for each day (or any part thereof) of delay, commencing on the Scheduled CODof Unit 2 until the earlier of (i) the Unit 2 COD; (ii) the date on which the PPA 2 is terminated by SESB in accordance with the provisions of the PPA 2; and (iii) one hundred and eighty (180) days after the Scheduled COD of Unit 2; and (b) if Tadau Energy abandons the 48 MWac Project after the PPA 2 Effective Date, Tadau Energy shall forthwith compensate SESB an amount equal to Ringgit Four Million Three Hundred Twenty Thousand (RM4,320,000.00). Abandonment during the construction period shall occur if Tadau Energy fails to perform any material part of the construction works on the 48 MWac Project and the Independent Engineer is unable to confirm within fifteen (15) days of being requested to do so by SESB that there is a reasonable prospect of Tadau Energy achieving the Unit 2 COD before 27 September 2018. Abandonment after the Unit 2 COD shall occur if Tadau Energy fails to operate the Unit 2 for a continuous period of more than six (6) months unless (i) SESB is in breach of a material obligation under the PPA 2, (ii) the Unit 2 were during such period the subject of repair, rehabilitation or repowering or (iii) Tadau Energy is excused from doing so pursuant to a Force Majeure Event in accordance with the PPA 2 or as a result of the occurrence of an event of the type contemplated in Clause 4.3(a) of the PPA 2 (where an Emergency Condition occurs within the Grid System as a result of which the Grid System is unable to accept Net Electrical Output from the Unit 2) or Clause 4.3(c) of the PPA 2 (where SESB interrupts the acceptance of solar PV energy from the Unit 2 to conduct necessary maintenance of the SESB Metering Equipment or the Grid System). For the avoidance of doubt, the aggregate of compensation described in paragraphs (a) and (b) that are payable by Tadau Energy shall not exceed Ringgit Four Million Three Hundred Twenty Thousand (RM4,320,000.00). (xiii) Performance Security Tadau Energy shall secure payment of the delay compensation described above by providing to SESB, and no later than the earlier of (i) seven (7) days from the PPA 2 Financial Closing Date; and (ii) two hundred and ten (210) days after the PPA 2 Effective Date, an irrevocable bank guarantee issued by a commercial bank reasonably acceptable to SESB in the form set out in the PPA 2 for an amount equal to Ringgit Four Million Three Hundred Twenty Thousand 71
  82. (RM4,320,000.00). This bank guarantee shall permit drawings by SESB to satisfy the performance obligations of Tadau Energy for the delay compensation described above. The bank guarantee is to remain valid until expiration of one hundred and ninety (190) days after the Scheduled COD of Unit 2. If Tadau Energy fails to provide the bank guarantee to SESB within this time frame and valid for the duration set forth in the PPA 2 (or such other date as may be agreed between the parties), SESB may terminate the PPA 2 by giving notice to Tadau Energy. (xiv) The Unit 2, the SPP Interconnection Interconnector and the SPP Works Facility, the SPP Tadau Energy shall design, engineer, procure, construct, install, energise, test and commission the Unit 2, the SPP Interconnection Facility and the SPP Interconnector in accordance with Prudent Utility Practices and the terms and conditions of the PPA 2. Tadau Energy shall design, engineer, procure, construct, install, energise, test and commission the SPP Works in accordance with the terms and conditions of the PPA 2. Tadau Energy shall provide SESB with fifteen (15) days’ prior notice of the proposed PPA 2 Commencement Date and written confirmation that the PPA 2 Commencement Date has occurred within five (5) days after it occurs. (xv) Conceptual Design Report of the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works Not less than sixty (60) days prior to the PPA 2 Commencement Date, Tadau Energy shall submit to SESB the conceptual design report of the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works together with the Independent Engineer’s certificate stating that (i) the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works when constructed in accordance with such design drawings, scope of work and specification requirements will conform to the description set forth in the PPA 2 in all material respects and have the capacity and technical capabilities to meet the operational characteristics set out in the PPA 2, (ii) it is technically feasible for the Unit 2 COD to occur on or before the Scheduled COD of Unit 2 and (iii) the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works should have a useful life no shorter than the PPA 2 Term. (xvi) The Unit 2 132kV Transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works Protection Scheme, Relay Type and Settings Tadau Energy shall provide SESB and the Grid System Operator with the protection schemes and relay type in relation to the Unit 2’s 132kV transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works not less than sixty (60) days before the PPA 2 Commencement Date. Within thirty (30) days upon receipt of the same, SESB shall give Tadau Energy written notification of 72
  83. whether such protection schemes and relay type are acceptable to SESB . Not less than one Hundred and twenty (120) days prior to the PPA 2 Initial Operation Date, Tadau Energy shall provide SESB all protection data, the protection relay settings and coordination study report, related primary data, capability curves, relay terminal drawings and relay settings in relation to the Unit 2’s 132kV transformer(s), the SPP Interconnection Facility and the SPP Interconnector together with the Independent Engineer’s certificate. SESB shall revert to SPP with its recommendations (if any) within sixty (60) days of being furnished such material. Upon Tadau Energy having completed a specification compliance audit (the SCA), a site acceptance test (the SAT) and a precommissioning inspection and testing audit procedure (the PIAT) on the SPP Works specified in the PPA 2, SPP shall, within fourteen (14) days after the successful completion of the SCA, SAT and PIAT on the SPP Works, submit to SESB the relay settings as installed at the Unit 2’s 132kV transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works. Tadau Energy shall submit the printout of final relay settings of the Unit 2’s 132kV transformer(s), the SPP Interconnection Facility, the SPP Interconnector and the SPP Works with endorsement by the Electrical Service Engineer for SESB’s acceptance. Tadau Energy shall provide SESB with copies of the monthly reports provided by the EPC Contractor to Tadau Energy and any periodic reports provided to the Financing Parties describing the progress of construction of the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works. In addition to providing SESB with copies of monthly reports provided to the Financing Parties, Tadau Energy shall also throughout the construction period furnish SESB with a work programme and schedule relating to the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works and update SESB from time to time in respect of the progress and changes to the work programme and schedule. (xvii) Back-up Electricity Supply No later than sixty (60) days prior to the Unit 2’s need to backfeed power supply, Tadau Energy shall submit the necessary applications to SESB and enter into a consumer agreement with SESB. SESB shall only make available to the Unit 2 such backfeed power supply starting from the date on which the SPP Interconnector and the SPP Works have been successfully commissioned, which backfeed power supply shall be measured by the SESB Metering Equipment and charged at SESB’s then prevailing tariff. (xviii) Commencement of PPA 2 Initial Operation Date No generation of solar PV energy from the Unit 2 in an interconnected mode with the Grid System may take place and the PPA 2 Initial Operation Date may not occur until (i) acceptance by SESB of all the relay settings as installed by Tadau Energy, tested and certified by the 73
  84. Electrical Service Engineer and final relay settings printout with endorsement by the Electrical Service Engineer in relation to the Unit 2 ’s 132kV transformer(s), the SPP Interconnection Facility, SPP Interconnector and SPP Works, (ii) all protection relay settings in relation to the Unit 2 have been installed by Tadau Energy, tested and certified by the Electrical Service Engineer in accordance with the PPA 2; and (iii) the Grid System Operator has confirmed in writing, within a reasonable period, that the operation of the Unit 2 with the Grid System may commence. (xix) Consequences of Delay by SESB If, otherwise than due to any default by Tadau Energy, the Unit 2 COD is delayed by: (a) the failure by SESB to inspect or approve without reasonable cause the interconnection protective devices referred to in the PPA 2; or (b) the failure by SESB without reasonable cause to accept the required generation to enable the testing of the Unit 2, then the Scheduled COD of Unit 2 shall be extended by one (1) day for each day the Unit 2 COD is delayed as a result of items (a) or (b) above. (xx) COD Tadau Energy shall provide SESB with thirty (30) days’ prior notice of the proposed Unit 2 COD. If the Unit 2 COD does not occur on the proposed Unit 2 COD, Tadau Energy shall notify SESB of the new proposed Unit 2 COD. Tadau Energy shall also notify SESB not less than one (1) business day before the Unit 2 COD actually occurs and until such notice is given, Tadau Energy shall be deemed not to have achieved the Unit 2 COD. If Tadau Energy notifies SESB that the Unit 2 COD can be achieved earlier than the Scheduled COD of Unit 2, SESB may agree to an earlier Unit 2 COD from which Energy Payments shall be payable in accordance with the PPA 2. (xxi) Consequences of Tadau Energy’s Failure to Meet the Unit 2 Contracted Capacity If the test results of the performance tests conducted on the Unit 2 to be submitted to SESB no later than thirty (30) days prior to the Unit 2 COD, show that declared capacity of the Unit 2 as certified by the Independent Engineer: (a) is more than the Unit 2 Contracted Capacity, then the Unit 2 Contracted Capacity shall be used for the purpose of the calculation of the payments set out in Appendix G of the PPA 2 for the remainder of the PPA 2 Term, unless revised in accordance with the PPA 2; 74
  85. (b) is less than the Unit 2 Contracted Capacity, then the Unit 2 Contracted Capacity shall be revised downwards to reflect the actual capacity of the Unit 2 as certified by the Independent Engineer. In the event that the test results of the performance tests conducted no later than sixty (60) days before the fifth (5th), tenth (10th), fifteenth (15th) and twentieth (20th) anniversary of the Unit 2 COD (each a “PPA 2 Performance Test Date”) in accordance with the PPA 2 show that the capacity of the Unit 2 is less than the Unit 2 Contracted Capacity, then the Unit 2 Contracted Capacity shall be revised downwards to reflect the actual capacity of the Unit 2. In the event of a failure by Tadau Energy to comply with the aforesaid obligations, the Unit 2 Contracted Capacity shall be revised downwards to be the lower of (i) seventy five percent (75%) of the then prevailing Unit 2 Contracted Capacity; and (ii) seventy five percent (75%) of the highest load of the Unit 2 as measured by the SESB Metering Equipment during a period of thirty (30) days immediately preceding the PPA 2 Performance Test Date. (xxii) Consequences of Tadau Energy’s Failure to Deliver Net Electrical Output If, otherwise than due to an Emergency Condition, an interruption due to a Force Majeure Event affecting Tadau Energy or any default of omission on the part of SESB, the total Net Electrical Output delivered by the Unit 2 in a Contract Year is less than seventy percent (70%) of the DAQ of such Contract Year, Tadau Energy shall pay SESB the Non-Delivery Payment in accordance with the PPA 2. (xxiii) The SPP Interconnection Facility, the SPP Interconnector and the SPP Works Tadau Energy shall complete the construction, installation and testing of the SPP Interconnection Facility, the SPP Interconnector and the SPP Works not later than thirty (30) days before the PPA 2 Initial Operation Date. Tadau Energy shall at its cost and expense, procure all necessary ownership and all access rights relating to the land on which the SPP Interconnection Facility and the SPP Interconnector shall be construed and located pursuant to the PPA 2. Tadau Energy shall at its cost and expense, acquire all necessary ownership and/or all access rights relating to the land on which the SPP Works shall be constructed and located, if applicable. Tadau Energy shall transfer to SESB and take all actions necessary to effect the transfer of all rights, title and interest to the completed SPP Works, free from encumbrances and defects and without any outstanding works subsisting at least thirty (30) days before the PPA 2 Initial Operation Date so that SESB shall become the owner thereof. SESB may, at its sole discretion, take operational control of the SPP Works by issuing a provisional certificate of taking over of operations. 75
  86. Upon such transfer , all property and title in such completed and transferred SPP Works shall pass to SESB. Tadau Energy warrants that the SPP Works will be free from defects. The obligation to correct any defects shall continue for twenty four (24) months from the date of transfer of the SPP Works to SESB. The period may be extended by an additional twenty four (24) months in respect of any repaired or replaced work, provided that no warranty shall extend beyond a period of forty-eight (48) months from the date of transfer of the SPP Works to SESB. Tadau Energy also provides a warranty against latent defects in the SPP Works for a period of sixty (60) months from the date of transfer. If, as a result of any defect in (a) the SPP Interconnection Facility and/or the SPP Interconnector or (b) the SPP Works, the Grid System is unable to accept Net Electrical Output from the Unit 2, Tadau Energy shall not be entitled to any Energy Payment and/or Non-Acceptance Payment during such period. (xxiv) Insurance Tadau Energy undertakes to SESB that it shall maintain or procure to be maintained in effect the following insurance policies and coverage with respect to the Unit 2 and where applicable, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works: (a) all insurances required by law; (b) such insurance as is appropriate and customary for a prudent PV energy independent power producer; and (c) without prejudice to item (b) above, all insurances as required under the PPA 2 Financing Documents. If any of the insurances referred to above are not available on reasonable commercial terms, Tadau Energy shall provide to SESB detailed information as to the maximum amount of available coverage that it is able to purchase and shall be required to obtain SESB’s consent (which consent shall not be unreasonably withheld or delayed) as to the adequacy of such coverage under the circumstances prevailing at the time. Tadau Energy shall apply the proceeds of any such insurance policies received following a claim by Tadau Energy for loss or damage to the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works in accordance with the requirements of the PPA 2 Financing Documents (so long as they are in effect) and otherwise to repair and/or reinstate the Unit 2, the SPP Interconnection Facility, the SPP Interconnector and the SPP Works. (xxv) Force Majeure For the purposes of the PPA 2, a Force Majeure Event shall mean an event, condition, or circumstance or its effect which: 76
  87. (a) is beyond the reasonable control of and occurs without fault or negligence on the part of the party claiming it as a Force Majeure Event; and (b) causes a delay or disruption in the performance of any obligation under the PPA 2 despite all reasonable efforts of the party claiming it as a Force Majeure Event to prevent it or mitigate its effects. Subject to satisfying the foregoing criteria, Force Majeure Events include without limitation, the following: (a) strikes or lockouts and/or other work stoppages or industrial action (other than those solely affecting the party claiming the same as a Force Majeure Event); (b) acts of public enemies or terrorists or acts of war, whether or not war is declared, acts of force by a foreign nation or embargo; (c) public disorders, insurrection, rebellion, sabotage, riots or violent demonstrations; (d) explosions, fire, earthquakes, landslides, subsidence, sabotage, and/or other natural calamities and acts of God; (e) unusually severe weather conditions; (f) expropriation or compulsory acquisition by any Government Entity; (g) failure to obtain or renew any Government Authorisations; and (h) any force majeure event affecting the performance of any person that is a party to the EPC Contract 2 or other contract between Tadau Energy and such person relating to the construction, operation or maintenance of the Unit 2. (xxvi) Effect of Force Majeure Event and Consequences Subject to the limitations set out in the PPA 2, if either party is rendered unable by reason of a Force Majeure Event to perform any obligation under the PPA 2, then upon that party giving notice of Force Majeure, those obligations of that party shall be suspended or excused to the extent their performance is affected by the Force Majeure Event. The Scheduled COD of Unit 2 shall be extended by one (1) day for each day the Unit 2 COD is delayed by a Force Majeure Event. The PPA 2 Term shall be extended by one (1) day for each day in the event that (i) the Unit 2 is unavailable after the Unit 2 COD due to any Force Majeure Event affecting the Unit 2; and (ii) Tadau Energy is not entitled under its insurance to receive insurance proceeds which 77
  88. replace any Energy Payments not received by Tadau Energy for such period . If a Force Majeure Event affecting Tadau Energy occurs before the Unit 2 COD and delays the occurrence of the Unit 2 COD past the Scheduled First COD, Tadau Energy shall not in any way be entitled to make any claims from SESB during the continuance of such Force Majeure affecting Tadau Energy. If a Force Majeure Event affecting SESB occurs before the Unit 2 COD delays the occurrence of the Unit 2 COD past its Scheduled COD of Unit 2, SESB shall pay Tadau Energy the costs of servicing debt (drawn down and expended by Tadau Energy in accordance with the terms of the PPA 2 Financing Documents) after the date such Force Majeure Event occurred (but not including the Sponsors’ Gross Equity Contribution, the Sponsors’ Equity Repayment (being the aggregate of (i) the sum of all dividend, distribution, interest, profit, fee, premium, charges and other payments in respect of the PPA 2 Sponsors Gross Equity Contribution (as defined below), actually paid by or on behalf of Tadau Energy and (ii) the sum of all re-payment, pre-payment, redemption, re-purchase, return, and other payments in respect of the PPA 2 Sponsors Gross Equity Contribution, actually paid by or on behalf of Tadau Energy) or any cost relating thereto) to the extent Tadau Energy is not entitled under its insurances to receive insurance proceeds which reimburse it for such costs incurred, provided that the total liability of SESB in respect of any payment shall not in any event exceed Ringgit One Hundred and Twenty Eight Thousand One Hundred and Twenty (RM128,120.00) for each day during the continuance of the Force Majeure Event. If a Force Majeure Event affecting Tadau Energy occurs or continues after the Unit 2 COD, such Force Majeure Event does not relieve SESB of its obligation to make Energy Payments to Tadau Energy only to the extent that solar PV energy is delivered in accordance with the PPA 2 unless a Force Majeure Event affecting SESB occurs in which case the consequences described below will apply. If a Force Majeure Event affecting SESB occurs after the Unit 2 COD and for the duration such Force Majeure Event persists, SESB shall continue to pay Non-Acceptance Payments to Tadau Energy only to the extent that solar PV energy is delivered in accordance with the PPA 2. (xxvii) Right to Terminate under Force Majeure Either party may terminate the PPA 2 if a Force Majeure Event prevents either party from substantially performing any material obligation under the PPA 2 for a period which exceeds one hundred and eighty (180) days. While there is a right of termination as a result of a Force Majeure Event provided under the PPA 2, the right is only exercisable upon giving thirty (30) days’ written notice if a Force Majeure Event is preventing either party from substantially performing any material 78
  89. obligation under the PPA 2 for a period exceeding one hundred and eighty (180) days, subject to the following: (a) if an Force Majeure Event cannot be remedied within one hundred and eighty (180) days with the use of reasonable diligence then the one hundred and eighty (180) days period shall be extended by a further period of one hundred and eighty (180) days; and (b) if the party affected is unable to remedy the Force Majeure Event by the end of the further period of one hundred and eighty (180) days, then the parties shall consult as to what steps shall be taken with a view to mitigating or remedying the consequences of a Force Majeure Event. If the parties agree to extend the second period, then the above provisions apply with regards to the remedy and mitigation of the Force Majeure Event. If the parties are unable to agree to extend the further period of one hundred and eighty (180) days, then either party may terminate the PPA 2 by giving thirty (30) days’ written notice of termination. (xxviii) Events of Default, Walk Away Events and Termination Each of the following events shall constitute an event of default by Tadau Energy, unless excused under another provision of the PPA 2: (a) Tadau Energy fails to make a payment of any amount of a substantial nature which is due and payable under the PPA 2 within sixty (60) days after receipt of notice of non-payment from SESB; (b) Tadau Energy fails to comply with or operate in conformity with any obligation of the PPA 2 (other than a payment obligation) and such failure, if capable of remedy, continues uncured for a period of ninety (90) days, after receipt of notice of such failure from SESB; (c) (i) Tadau Energy is dissolved or liquidated, other than for the purpose of a voluntary dissolution or liquidation as part of a reorganisation or reincorporation; (ii) Tadau Energy applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) Tadau Energy admits in writing its inability to pay its debts as they fall due; (iv) Tadau Energy makes a general assignment or an arrangement or composition with or for the benefit of its creditors; 79
  90. (v) Tadau Energy commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) Tadau Energy fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; (vii) Tadau Energy takes any action for the purpose of effecting any of the events described in paragraphs (c)(i) through (v) above; (d) any of the solar PV plants under Unit 2 delivers to SESB Net Electrical Output which is not solely driven by solar PV technology or any of the Unit 2 and/or the 48 MWac Project comprises energy storage devices; (e) the Unit 2 COD fails to occur within one hundred and eighty (180) days from the Scheduled COD of Unit 2; (f) Tadau Energy abandons the 48 MWac Project within the meaning set out in the PPA 1 after the PPA 2 Effective Date and fails to resume activities within a period of time agreeable to SESB; (g) the PPA 2 Sites Agreement is terminated; (h) the SPP Licence is suspended or revoked or terminated or expired due to Tadau Energy’s default, and Tadau Energy has not caused the SPP Licence to be reinstated or renewed either (i) within the shorter of three hundred and sixty-five (365) days and the legally permissible period for such reinstatement or renewal or (ii) after having exhausted all available administrative or legal appeals and applications for such reinstatement or renewal; or (i) any of the following events occur prior to the fifth (5th) anniversary of the Unit 2 COD, without the prior written approval of the Federal Government of Malaysia: (i) Tadau Energy sells, conveys, transfers or otherwise disposes of the 48 MWac Project or any material part or any interest in the 48 MWac Project to any other Person or enters into an agreement to do so; or (ii) any Shareholder sells, transfers or otherwise disposes of any share of Tadau Energy, Kagayaki Energy or Edra Solar (including for this purpose the assignment of the beneficial interest therein the creation of any charge or other security interest over, such share or the renunciation or assignment of any right to receive or to subscribe for such share) or any interest in such share or enters into an agreement to do so; or 80
  91. (iii) there is a change in Control of Tadau Energy, and for the purposes of this paragraph (i): (i) “interest in a share” shall have the meaning assigned to such phrase in Section 6A of the Companies Act 1965; (ii) “Shareholder” means a person who, legally or beneficially, owns or Controls any share of Tadau Energy, Kagayaki Energy or Edra Solar or any interest in such share; and (iii) “Control” means the power (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract or otherwise) to appoint and/or remove all or such of the members of the board of directors or other governing body of a person as are able to cast a majority of the votes capable of being cast by the members of that board or otherwise to control or have the power to control the policies and affairs of that person; and for the purposes of this definition, a person (the “relevant person”) “Controls” a person if (i) it can exercise the requisite power by acting in concert with one or more other persons pursuant to an agreement or understanding (whether formal or informal) and (ii) the relevant person owns twenty percent (20%) or more of the securities of the person who is Controlled having ordinary voting power for the election of the members of the board of directors or other governing body of that person, or if that person has no such board of directors or other governing body, twenty percent (20%) or more of the ownership interests in that person; and “Controls”, “Controlling” and “Controlled” shall be construed accordingly. Each of the following events shall constitute an event of default by SESB, unless excused under another provision of the PPA 2: (a) SESB fails to make a payment of any amount of substantial nature which is due and payable under the PPA 2 within sixty (60) days after receipt of notice of non-payment from Tadau Energy; (b) SESB fails to comply with or operate in conformity with any obligation of the PPA 2 (other than a payment obligation) and such failure, if capable of remedy, continues uncured for a period of ninety (90) days, after receipt of notice of such failure from Tadau Energy; or (c) (i) SESB is dissolved or liquidated, other than voluntary dissolution or liquidation as part of a reorganisation or reincorporation; 81
  92. (ii) SESB applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) SESB admits in writing its inability to pay its debts as they fall due; (iv) SESB makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (v) SESB commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) SESB fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; (vii) SESB takes any action for the purpose of effecting any of the events described in paragraphs (c)(i) through (v) above. If an event of default described above (other than that described in paragraph (b) Tadau Energy’s Events of Default and the SESB’s Events of Default above respectively) that cannot be cured with the exercise of reasonable diligence within the period of ninety (90) days therein) occurs, the non-defaulting party may terminate the PPA 2 by giving fourteen (14) days’ written notice to the other party. If the event of default described in paragraphs (b) of Tadau Energy’s Events of Default and SESB’s Events of Default above occurs and cannot be cured with the exercise of reasonable diligence within the period of ninety (90) days specified therein, the cure period shall be extended by a further one hundred and eighty (180) days and the default continues uncured at the end of such further period, the non-defaulting party may terminate the PPA 2 immediately by giving written notice to the defaulting party. In the event a Walk Away Event (as described below) is not satisfied by Tadau Energy by the relevant Walk Away Date, for whatever reason (including a Force Majeure Event), SESB shall, notwithstanding any provision to the contrary in the PPA 2, be entitled, at any time, to terminate the PPA 2 by delivering to Tadau Energy fourteen (14) days’ notice in writing. In the event of such termination, neither party shall have any obligation or liability (save for antecedent breach) to the other whether at law, under the PPA 2 or otherwise and the rights of the parties under the PPA 2 shall terminate and be of no force or effect. The Walk Away Events and the relevant Walk Away Dates are as follows: Occurrence of PPA 2 Financial Closing Date : 10 May 2017* PPA 2 Commencement Date : 10 April 2017** 82
  93. * This date has been extended to 30 June 2017 vide the letter dated 5 April 2017 from SESB. ** This date has been extended to 30 June 2017 vide the letter dated 11 April 2017 from SESB. (xxix) Consequences of Termination Event of default by Tadau Energy If SESB terminates the PPA 2 as a result of an event of default by Tadau Energy, SESB shall have the option but not the obligation, exercisable by prior notice in writing within sixty (60) days of the termination of the PPA 2, to purchase the 48 MWac Project in the manner and for the purchase price determined in accordance with the provisions of the PPA 2. Such purchase price is essentially an amount equal to: (i) the PPA 2 Outstanding Indebtedness (as defined below), if the PPA 2 Sponsors Gross Equity Contribution (as defined below) amounts to twenty percent (20%) or more of the PPA 2 Total Project Costs (as defined below) and ninety five per cent (95%) of the PPA 2 Outstanding Indebtedness if the PPA 2 Sponsors Gross Equity Contribution is less than twenty per cent (20%) of the PPA 2 Total Project Costs; plus (ii) the “A” Purchase Price, which is Ringgit Ten (RM10.00); plus (iii) the Transfer Costs, being all reasonable costs and expenses of Tadau Energy incurred or suffered as a result of the purchase of the 48 MWac Project by SESB, including any reasonable and customary termination payments or novation fees on contracts in connection with the 48 MWac Project, all Taxes, any reasonable breakage costs and other reasonable and necessary termination costs, but excluding the PPA 2 Outstanding Indebtedness; less (iv) the Retained Sum, being the aggregate of all cash balances at bank and in hand and liquid securities held by Tadau Energy and to be retained by Tadau Energy after the date of termination of the PPA 2. “PPA 2 Outstanding Indebtedness” shall mean the lesser of: (a) the aggregate amount owing to the Financing Parties (excluding shareholders of Tadau Energy and their respective affiliates) as of the termination date as incurred under the PPA 2 Initial Financing Documents and as amortised in accordance thereunder and reflected in the PPA 2 Initial Financial Model; and (b) the aggregate amounts owing to the Financing Parties (excluding shareholders of Tadau Energy and their respective 83
  94. affiliates ) as of the termination date the PPA 2 Financing Documents; including any reasonable costs and fees related to accelerated repayment and other financing termination costs, but excluding any costs and fees relating to the Sponsors Gross Equity Contribution. “PPA 2 Sponsors Gross Equity Contribution” shall mean an amount as certified by the Auditor as at the termination date as being the lesser of: (a) total capital contributed by shareholders of Tadau Energy and their affiliates (including share capital, loan, loan stocks, bonds and redeemable shares) for financing of the Unit 2 as committed by Tadau Energy, its shareholders and their affiliates at the PPA 2 Financial Closing Date in accordance with the PPA 2 Initial Financing Documents; and (b) total capital contributed by shareholders of Tadau Energy and their affiliates (including share capital, loan, loan stocks, bonds and redeemable shares) for financing of the Unit 2, as outstanding as at the termination date. “PPA 1 Total Project Costs” shall mean the aggregate amount of the expenditure incurred and paid by Tadau Energy in connection with the 48 MWac Project up to the first anniversary of the Unit 2 COD. (xxx) Event of default by SESB If Tadau Energy terminates the PPA 2 as a result of an event of default by SESB, Tadau Energy shall have the option but not the obligation, (exercisable by prior notice in writing within sixty (60) days of the termination of the PPA 2), to sell the 48 MWac Project to SESB, in the manner and for the purchase price determined in accordance with the PPA 2. In the event this option is exercised by Tadau Energy, SESB shall be required to purchase the 48 MWac Project from Tadau Energy. Such purchase price is essentially an amount equal to: If termination occurs pre-COD (i) the PPA 2 Outstanding Indebtedness; plus (ii) the PPA 2 Sponsors Gross Equity Contribution; plus (iii) the aggregate amount determined by applying the Default Rate to each amount comprising the Sponsors’ Gross Equity Contribution from the date of injection of such amount to the date of termination of the PPA 2 (“Interest on the Sponsors’ Gross Equity Contribution”); plus (iv) the Transfer Costs; less (v) the Retained Sum. 84
  95. If termination occurs post-COD (i) the PPA 2 Outstanding Indebtedness; plus (ii) the “B” Purchase Price, which is determined in accordance with Attachment A of Appendix J of the PPA 2 and consists of equity contributions, plus a return on equity, less any dividends /distribution/ profit/ / equity repayments/ redemption and other payments in respect of the PPA 2 Sponsors Gross Equity Contribution actually paid by or on behalf of Tadau Energy; plus (iii) the Transfer Costs; less (iv) the Retained Sum. Once payment in full has been made by SESB of the amount set out above, all Tadau Energy’s rights, title and interest in the 48 MWac Project and Site Yong East, Site Yong West and Site Bak Bak (including the Access Rights) shall simultaneously be transferred by Tadau Energy to SESB (or its nominees) free from any encumbrance whatsoever. Where the PPA 2 Outstanding Indebtedness is payable by SESB above, it shall be paid by SESB directly to the Financing Parties (other than the shareholders of Tadau Energy and their respective affiliates) whose receipt shall be a good discharge for SESB and the PPA 2 Outstanding Indebtedness shall thereby be deemed to have been paid to Tadau Energy. Payment of the PPA 2 Outstanding Indebtedness shall, where required by SESB, be in exchange for a transfer or assignment to SESB (or its nominees) of all rights, title and interests in the PPA 2 Initial Financing Documents (other than those in respect of the PPA 2 Sponsors’ Gross Equity Contribution), documented and evidenced to the satisfaction of SESB. Where required by SESB, Tadau Energy shall procure that the Financing Parties discharge all securities and other encumbrances given on or over the 48 MWac Project and Site Yong East, Site Yong West and Site Bak Bak (including the Access Rights) in exchange for the payment of the PPA 2 Outstanding Indebtedness. For this purpose, Tadau Energy shall procure that the Financing Parties sign all reassignments, discharge of charge, agreements, and other documents in a form required by SESB so as to transfer all rights, title and interest in the 48 MWac Project and Site Yong East, Site Yong West and Site Bak Bak (including the Access Rights) to SESB (or its nominees) free of encumbrances and Tadau Energy shall procure that the Financing Parties shall take all steps and actions considered by SESB to be necessary or desirable to procure that all rights, title and interest in the 48 MWac Project and Site Yong East, Site Yong West and Site Bak Bak (including the Access Rights) are transferred to SESB (or its nominees) free of encumbrances. 85
  96. (xxxi) Walk Away Events In the event of termination of the PPA 2 by SESB following the failure of Tadau Energy to achieve a Walk Away Event by the relevant Walk Away Date, neither party shall have any obligation or liability (save in respect of any antecedent breach) to the other whether at law, hereunder or otherwise and the rights of the parties hereunder shall terminate and be of no force or effect. (xxxii) Step-In Rights SESB SESB shall have the right, but under no circumstances the obligation to assume partial or complete (as SESB may decide) operational responsibility for the Unit 2 (in the capacity of an operator only) in the place and instead of Tadau Energy in order to continue operation of the Unit 2 or complete any necessary repairs so as to assure uninterrupted availability of solar PV energy from the Unit 2. Such step-in rights shall arise upon the occurrence and continuance of an event of default under the PPA 2 with respect to Tadau Energy which could reasonably be expected to materially adversely affect Tadau Energy’s ability to operate and maintain the Unit 2 in accordance with the PPA 2. SESB shall not exercise such step-in rights until any applicable cure period has expired, unless at any earlier time the Financing Parties request SESB to step-in under any right that has arisen under the PPA 2 Financing Documents. For so long as the PPA 2 Financing Documents remain in effect, SESB shall not exercise step-in rights hereunder if the operation of the Unit 2 has been assumed by any Financing Party or any approved assignee or designee within the applicable cure period. Tadau Energy shall ensure that the Financing Parties specifically acknowledge and are bound by such step-in rights of SESB. SESB shall have the right at any time, but not exceeding six (6) months from the time SESB exercises its step-in rights, to return the operational responsibility for the Unit 2 to Tadau Energy, provided that SESB shall return the Unit 2 to Tadau Energy in a condition no worse than that immediately prior to the assumption of the operational responsibility for the Unit 2 by SESB, ordinary wear and tear excepted. The Suruhanjaya Tenaga So long as consistent with the terms of the PPA 2 Financing Documents or the rights of the Financing Parties thereunder, if the Suruhanjaya Tenaga exercises its statutory right to operate the Unit 2, SESB shall continue to make Energy Payments and/or NonAcceptance Payments (if any) to Tadau Energy for Net Electrical Output in accordance with the PPA 2 to the extent that the Unit 2 are capable of delivering solar PV energy and to the extent such 86
  97. payments to Tadau Energy are permitted by law . Any payment made by SESB to the Suruhanjaya Tenaga or at the Suruhanjaya Tenaga’s direction pursuant to any applicable law shall for the purposes of the PPA 2 be deemed to be a payment made to Tadau Energy in accordance with the terms of the PPA 2 and to that extent in full discharge of SESB’s obligation to Tadau Energy thereunder. (xxxiii) Indemnification and Liability Each party (the liable party) is liable to the other party (the injured party) for property damage or personal injury suffered by the third parties as a consequence of any act or omission by the liable party or its officer, directors, agents or employees arising in connection with the performance of the PPA 2, except (i) workers compensation claims by any officers, directors, agents, employees, contractors and subcontractors of the injured party; and (ii) to the extent such injury, death or damage is attributable to the negligence or misconduct of, or breach of the PPA 2, by the injured party. Tadau Energy shall defend, indemnify and hold SESB, and its officers, directors, agents, employees, contractors and subcontractors, harmless from and against any and all claims, judgments, liabilities, losses, costs, expenses (including reasonable lawyers' fees) and damages under all applicable environmental laws or regulations arising out of the condition of Site Yong East, Site Yong West and Site Bak Bak, Tadau Energy’s construction, ownership or operation of the Unit 2, the SPP Interconnection Facility and the SPP Interconnector or the construction of the SPP Works, except to the extent such damages are attributable to the negligence or misconduct of, or breach of the PPA 2 by SESB, its officers, directors, agents, employees, contractors or subcontractors. Likewise, SESB indemnifies Tadau Energy against all such claims under all applicable environmental laws or regulations arising out of SESB’s ownership or operation of the SPP Works. (xxxiv) Change in Law Adjustment If there is a Change-in-Law which requires Tadau Energy to make any material capital improvement or other material modification to the Unit 2, the cost of which is in excess of the capital improvement threshold of Ringgit One Million (RM1,000,000.00) (“Capital Improvement Threshold”) in any calendar year, which material capital improvement or other material modification is required for the purpose of enabling Tadau Energy to fulfil its obligations under the PPA 2 in compliance with such Change-in-Law, SESB and Tadau Energy shall determine, in good faith, any adjustment to the Energy Rate to reflect such cost in excess of the Capital Improvement Threshold as may be reasonably incurred by Tadau Energy in making such material capital improvement or other material modification and the date from which such adjustment is to be effective. After receipt by SESB of the Suruhanjaya Tenaga’s written approval of: 87
  98. (a) the costs of the material capital improvement or material modification to the Unit 2; (b) such adjustment to the Energy Rate; and (c) the inclusion of any adjustments to the Energy Rate as part of SESB’s tariff rates to its customers in a manner consistent with such adjustments, the Energy Rate shall be adjusted in a manner approved by the Suruhanjaya Tenaga provided always that any adjustments to the Energy Rate shall only be effective from the date SESB’s tariff rates to its customers as aforesaid are effective. (xxxv) Transfers and Assignment Except as required by the Financing Parties under the PPA 2 Financing Documents or as provided in the PPA 2, Tadau Energy shall not sell, convey, transfer or otherwise dispose of the 48 MWac Project or any material part or any interest in it to any other Person without the prior written consent of SESB and the Suruhanjaya Tenaga. If the PPA 2 Financing Documents so require, SESB shall: (a) provide its consent to assignments and acknowledgement of rights of the Financing Parties (including cure rights and the rights of the Financing Parties under the PPA 2 Financing Documents to be substituted for Tadau Energy upon the occurrence of any default provided that the Financing Parties shall notify SESB in writing before exercising such rights) as shall be necessary or reasonably appropriate in order to obtain financing for the 48 MWac Project in a timely manner provided that such rights shall be subject to the terms of the PPA 2 and not inconsistent with SESB’s rights under the PPA 2; (b) make payments to Tadau Energy directly into a collateral security account established under the PPA 2 Financing Documents (subject to any claims or rights SESB may have against Tadau Energy under the PPA 2); (c) in the event of a default and provided that a prior written notice has been given to SESB, accept as a substitute for Tadau Energy under the PPA 2, the agent for the Financing Parties, any designee or transferee of such agent or any purchaser of Tadau Energy or the 48 MWac Project upon a foreclosure sale conducted on behalf of the Financing Parties of Tadau Energy’s interest in the 48 MWac Project or of the issued share capital of Tadau Energy; and (d) subject to prior written notice already being given to SESB, afford the Financing Parties an opportunity to remedy any event of default by Tadau Energy within the relevant cure period hereunder before terminating the PPA 2. 88
  99. Tadau Energy acknowledges : (a) that any assignment or transfer to a secured party pursuant to the PPA 2 Financing Documents shall not relieve Tadau Energy of its obligations to SESB under the PPA 2; (b) no such assignee or transferee shall be liable for the performance of Tadau Energy’s obligations under the PPA 2; and (c) any exercise by any such assignee or transferee shall be subject to the terms of the PPA 2. (xxxvi) Governing Law and Dispute Resolution The PPA 2 is be governed by, and shall be construed in accordance with the laws of Malaysia. If any dispute in relation to the PPA 2 cannot be resolved between the parties by mutual agreement in the manner provided thereunder, then such dispute shall be settled exclusively and finally by arbitration conducted in accordance with the Rules for Arbitration of the Regional Centre for Arbitration at Kuala Lumpur. Subject to the arbitration provisions in the PPA 2, the parties hereby submit to the exclusive jurisdiction of courts located in Kota Kinabalu, Sabah. (xxxvii) Goods and Services Tax All amounts stated in the PPA 2 are exclusive of the goods and services tax, unless otherwise clearly stated otherwise. The parties acknowledge and agree that if the goods and services tax is imposed on any supplies made by any party under the PPA 2, such party shall have the right to increase the consideration payable on the supply by an amount equal to the goods and services tax imposed. Such party shall be entitled to recover the increased amount from the other party as if the same were part of the consideration of the supply. Notwithstanding the imposition of goods and services tax on either party, the Energy Rate shall not be subject to any adjustment whatsoever. 4.5.2 EPC Contracts 4.5.2.1 EPC Contract 1 In respect of defined terms in this Section 4.5.2.1 only, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the EPC Contract 1. (i) Overview Tadau Energy has awarded the contract for the undertaking of the EPC 1 Works (as defined below) to CPI Power Engineering Co. Ltd. (Company Registration No. 91310112792736752K), the parent 89
  100. company of the EPC Contractor (“Contractor’s Parent”), via a conditional letter of award dated 10 January 2017 (“Letter of Award 1”). The Contractor’s Parent has novated all its rights and liabilities under the Letter of Award 1 to the EPC Contractor (the “Letter of Award 1 Novation”). The EPC Contract 1 was entered into between Tadau Energy and the EPC Contractor on 24 January 2017, for the design, engineering, construction, procurement, installation, testing and commissioning of all works required to be performed and completed in connection with the Unit 1on an all-inclusive turnkey basis in accordance with the terms and conditions contained therein (“EPC 1 Works”). (ii) Contract Price and Payment Tadau Energy shall pay the EPC Contractor an all-inclusive, nonescalating fixed lump-sum price of RM8,893,239.19 (“EPC 1 Contract Price”). Payments under the EPC Contract 1 are based on specified milestone achievements. The EPC 1 Contract Price and all payments to be made to the EPC Contractor in respect thereof shall be (i) in Ringgit for a portion equivalent to twenty percent (20%) of the EPC 1 Contract Price and which shall not exceed RM1,778,647.84; and (ii) in Renminbi for a portion equivalent to eighty percent (80%) of the EPC 1 Contract Price and which shall not exceed RMB11,057,497.88. Payment of the EPC 1 Contract Price shall be made for each payment milestone in accordance with Annex 8 of the EPC Contract 1 (“EPC 1 Payment Milestones”) provided that any EPC 1 Payment Milestones corresponding to a particular EPC 1 Milestones Payment Date have been achieved on or before the date set forth in Annex 8 of the EPC Contract 1. In the event any applicable EPC 1 Payment Milestone has not been achieved, the EPC Contractor shall not be entitled to receive the applicable EPC 1 Milestones Payment Amount until the applicable EPC 1 Payment Milestone is achieved. Notwithstanding the above, as security for the due performance of the EPC Contractor’s obligations under the EPC Contract 1, Tadau Energy shall be entitled to deduct and retain from such amount due to the EPC Contractor an amount equal to five percent (5%) of the total sum from each applicable EPC 1 Milestones Payment Amount in accordance with the EPC Contract 1 until the total sum deducted and retained is equivalent to five percent (5%) of the EPC 1 Contract Price (“EPC 1 Retention Money”). Tadau Energy shall at all times be entitled to retain the EPC 1 Retention Money until the Final Acceptance of the EPC 1 Works two (2) years from the EPC 1 Taking Over (as described below), and shall within twenty one (21) days after the issuance of the Final Acceptance Certificate release to the EPC Contractor the EPC 1 Retention Money (after deducting such amount utilised by Tadau Energy for the purposes of completing any remaining EPC 1 Works which the EPC Contractor has failed to undertake or complete in accordance with its obligations under the EPC Contract 1). 90
  101. The EPC Contractor shall acquire all Access Rights necessary to construct and install the EPC 1 Works . The EPC Contractor is responsible for the assignment of the warranties over all equipment, machinery, plant, apparatus, materials, facilities and all things to be provided under the EPC Contract 1 for incorporation in the EPC 1 Works as detailed in the EPC Contract 1 (“Plant 1”) (“Plant 1 Warranties”) to Tadau Energy and/or the Financing Parties in accordance with the EPC Contract 1. (iii) Variation Tadau Energy may at any time before the EPC 1 Works are taken over, instruct the EPC Contractor to alter, amend, omit, add to or otherwise vary any part of the EPC 1 Works by way of a written order to the EPC Contractor (“EPC 2 Variation Order”). The EPC Contractor shall not vary or alter any part of the EPC 1 Works, except in accordance with an EPC 1 Variation Order. The EPC Contractor may, however, propose variations of the EPC 1 Works to Tadau Energy provided always that if Tadau Energy agrees that such proposed variations of the EPC 1 Works should be carried out by the issuance of a EPC 1 Variation Order, any reduced or additional cost resulting from such variations of the EPC 1 Works shall be deducted from or added to the EPC 1 Contract Price. An EPC 1 Variation Order shall not be issued if the proposed variation will result in the completion of the EPC 1 Works being delayed one (1) month beyond the EPC 1 Guaranteed Completion Date (as defined below). (iv) Commencement and Milestones Following satisfaction of the EPC 1 NTP Conditions (as described below), Tadau Energy shall issue to the EPC Contractor a notice confirming that the EPC Contractor has satisfied the EPC 1 NTP Conditions and the EPC Contractor is to commence the EPC 1 Works (the “EPC 1 NTP Notice”). Upon the issuance of the EPC 1 NTP Notice by Tadau Energy, the EPC Contractor shall commence the EPC 1 Works immediately and shall thereafter proceed with the EPC 1 Works regularly and diligently in accordance with the requirements of the EPC Contract 1. The commencement date under the EPC Contract 1 shall be the date of receipt of the EPC 1 NTP by the EPC Contractor (“EPC 1 Commencement Date”). The conditions which are required to be fulfilled before a valid EPC 1 NTP Notice may be issued by the Issuer (“EPC 1 NTP Conditions”) include but are not limited to: (a) in respect of the conditions which are required to be fulfilled by the EPC Contractor and/or the Contractor’s Parent, these conditions shall be fulfilled no later than seven (7) days from the date of execution of the EPC Contract 1: (i) true and complete copies of the EPC Contractor’s organisational documents and all necessary authorisations of the execution and delivery and 91
  102. performance by the EPC Contractor of the EPC Contract 1 in the form and substance satisfactory to Tadau Energy , certified by the corporate company secretary of the EPC Contractor; (b) (ii) receipt by Tadau Energy of the evidence that the insurances that the EPC Contractor is obliged to procure under the EPC Contract 1 and as detailed therein have been effected; (iii) receipt by Tadau Energy of a written confirmation from the EPC Contractor that the EPC Contractor has complied with its obligations under the EPC Contract 1 to the extent that any Contractor Authorisations therein referred to which are required prior to a notice to proceed (“EPC 1 NTP”) and for performance of the EPC 1 Works have been obtained; (iv) receipt by Tadau Energy of the EPC 1 Advance Payment Bond (as defined below), EPC 1 Performance Bond (as defined below) and EPC 1 Parent Company Guarantee (as defined below); and (v) receipt by Tadau Energy of a favourable legal opinion, in a form acceptable to Tadau Energy, issued by a reputable law firm in the People’s Republic of China, confirming on the validity and enforceability of the EPC 1 Parent Company Guarantee; and In respect of the conditions which are required to be fulfilled by Tadau Energy: (i) Tadau Energy has obtained the relevant planning permission from the Competent Authority in respect of the 2 MWac Project at Site Yong East; (ii) Tadau Energy’s insurances as specified in the EPC Contract 1 are in place. If the EPC 1 NTP Notice is not delivered by Tadau Energy by 31 January 2017 (“EPC 1 NTP Deadline Date”) not due to the EPC Contractor’s fault, the EPC Contractor shall be entitled to a day for day extension in the Guaranteed Completion Date under the EPC Contract 1, which shall be 28 May 2017 or such other date determined in accordance with the EPC Contract 1 (“EPC 1 Guaranteed Completion Date”). (v) Limited Notice to Proceed Prior to the issuance of the EPC 1 NTP, Tadau Energy may at its sole option and discretion issue a Limited Notice to Proceed to the EPC Contractor for the undertaking of certain preliminary works as specified in the EPC Contract 1 and on terms and conditions as prescribed by Tadau Energy. 92
  103. (vi) Extension of time The EPC Contractor may apply for an extension of time if the EPC Contractor is or will be delayed in completing the EPC 1 Works by any of the following circumstances, subject always to the provisions in the EPC Contract 1: (vii) (a) extra or additional work ordered in writing by way of an EPC 1 Variation Order in accordance with the EPC Contract 1; or (b) the occurrence of a Force Majeure Event in accordance with the EPC Contract 1; or (c) an act of prevention or omission by Tadau Energy or SESB which directly interferes with or prevents the EPC Contractor from performing the EPC 1 Works but shall not include an act or omission which is expressly permitted by the EPC Contract 1 or in respect of which the EPC Contractor has expressly accepted the risk or responsibility under the EPC Contract 1; or (d) any breach of the EPC Contract 1 by Tadau Energy (save and except where any sums payable under the EPC Contract 1 which are overdue from Tadau Energy); or (e) where Tadau Energy suspends the EPC 1 Works in accordance with EPC Contract 1, except where the suspension arises as a result of the breach or negligence of the EPC Contractor (including its subcontractor) under the EPC Contract 1 or act, omission or default by the EPC Contractor (including its Subcontractor); or (f) the compliance with any Change-In-Law which could reasonably be expected to affect and result in delay to the EPC 1 Guaranteed Completion Date. Taking Over Subject to the terms of the EPC Contract 1, the EPC 1 Works shall be taken over by Tadau Energy (“EPC 1 Taking Over”), when the EPC 1 Works has been completed, tested and commissioned in accordance with the EPC Contract 1 except for the Punch List items (being the minor items of EPC 1 Works that remain to be completed or defects that remain to be corrected which will not affect the operation of the Unit 1 and that in aggregate do not require an amount equal to one percent (1%) of the EPC 1 Contract Price to complete and/or correct) that do not affect the use of the EPC 1 Works for its intended purpose when the following conditions are satisfied: (a) all equipment and facilities necessary for the full, safe and reliable operation of the EPC 1 Works have been properly constructed, installed, insulated and protected where required, and correctly adjusted, and can be safely used for the intended purposes; 93
  104. (b) the EPC Contractor has completed a successful precommissioning and inspection and has passed the required tests and the required audits and verifications in accordance with the EPC Contract 1; (c) the EPC 1 Works are able to generate solar PV energy for commercial sale and are fully and properly interconnected with the Distribution Network in accordance with Prudent Utility Practices, the Electrical Interconnection Requirements and all features and equipment of the EPC 1 Works are capable of operating satisfactorily; (d) the EPC Contractor has caused to be completed Performance Guarantee Test, being the tests to be performed in accordance with the EPC Contract 1 to test for compliance with the Performance Guarantee, to be conducted on the EPC 1 Works to achieve Provisional Acceptance in accordance with the EPC Contract 1 during which the EPC 1 Works and/or the Unit 1 shall be demonstrated to have achieved the Performance Guarantee. The EPC Contractor shall submit to Tadau Energy within seven (7) days from carrying out the Performance Guarantee Test, a certificate from the Independent Engineer confirming that the completed EPC 1 Works including the Unit 1 has the capacity and capability to meet the Unit 1 Contracted Capacity of 2 MWac and the test results which show that the completed EPC 1 Works including the Unit 1 can meet the Contracted Capacity as certified by the Independent Engineer; (e) the Unit 1 COD under the PPA 1 has occurred; (f) the EPC Contractor and Tadau Energy have mutually agreed on the Punch List items or defects that remain to be completed or corrected by the EPC Contractor at the time of EPC 1 Taking Over; (g) any liquidated damages including the EPC 1 Delay Liquidated Damages (as defined below) which are payable by the EPC Contractor to Tadau Energy have been paid and/or satisfied in full; (h) the EPC Contractor shall provide to Tadau Energy and/or operator of the Unit 1’s personnel such training programmes in respect of the operation and maintenance of the EPC 1 Works; (i) the EPC Contractor has submitted the draft operations and maintenance manual to Tadau Energy for review and Tadau Energy has agreed with the contents of the same; (j) the completed EPC 1 Works including the Unit 1 fully complies with the terms of the Plant 1 Warranties and any warranties provided by the subcontractor; (k) upon receipt by Tadau Energy from the EPC Contractor of a certificate issued by the Independent Engineer confirming that all tests required under the EPC Contract 1 including and in 94
  105. accordance with Prudent Utility Practices have been carried out and that the EPC 1 Works can be safely operated in parallel with the Distribution Network ; (viii) (l) upon receipt by Tadau Energy from the EPC Contractor of a certificate of completion and compliance issued by the relevant Government Entity in respect of the EPC 1 Works; (m) all Spares, being the spare parts as listed in the EPC Contract 1 to be provided to Tadau Energy by the EPC Contractor, have been and/or are delivered to Site Yong East and/or such other locations as may be designated by Tadau Energy; and (n) a Taking-Over Certificate has been issued by Tadau Energy when it received an application from the EPC Contractor after the EPC 1 Works have been completed and ready for Taking Over in accordance with the EPC Contract 1. Intermediate Acceptance and Final Acceptance Notwithstanding the EPC 1 Taking Over of the completed EPC 1 Works, the EPC Contractor shall be and remain responsible to collect the relevant data which shall include all information relating to the capacity, capability and the solar PV energy generated and delivered from the Unit 1 for a continuous period of two (2) calendar years from the date of issuance of the Taking-Over Certificate (“EPC 1 Test Period”). At the end of the first (1st) calendar year of the EPC 1 Test Period, a test to ascertain the Performance Ratio under the EPC Contract 1, generation capacity, stability and reliability shall be performed on the completed EPC 1 Works (“EPC 1 Intermediate Acceptance Test”) in accordance with the requirements set out in the EPC Contract 1. At the end of the second (2nd) year of the EPC 1 Test Period, the Final Acceptance Test shall be performed on the completed EPC 1 Works in accordance with the requirements set out in the EPC Contract 1. Tadau Energy shall issue the Final Acceptance Certificate subject to the following conditions being fulfilled: (a) the EPC 1 Works has been fully completed in accordance with the EPC Contract 1 in all respects; (b) the EPC 1 PR Warranty Liquidated Damages (if any) (as described below) have been paid in full by the EPC Contractor to Tadau Energy due to any non-achievement of the guaranteed performance ratio in accordance with the EPC Contract 1; (c) the Spares are and/or have been replenished in accordance with the EPC Contract 1; (d) thermographic analyses have been performed with IR camera for all PV modules and electrical connections in order to detect 95
  106. any possible hot spots . Any PV modules with temperature anomalies shall have been replaced and electrical connections with temperature anomalies have been renewed, at the EPC Contractor’s sole expense; and (e) (ix) the Unit 1 has achieved the respective criteria specified for the EPC 1 Intermediate Acceptance Test and Final Acceptance Test. Parent Company Guarantee In consideration of and as a precondition to Tadau Energy agreeing to the Letter of Award 1 Novation, the Contractor’s Parent shall provide a guarantee for the performance of the EPC Contract 1 (“EPC 1 Parent Company Guarantee”) to Tadau Energy. The EPC Contractor and Contractor’s Parent shall be jointly and severally liable in respect of the obligations and liabilities under the EPC Contract 1. During the term of the EPC Contract 1 until the expiry of the EPC 1 Warranty Period (as defined below), the Contractor’s Parent undertakes that there shall be no change in the shareholder and/or the shareholding structure of the EPC Contractor, which is wholly-owned by the Contractor’s Parent. (x) Performance Security EPC 1 Advance Payment Bond In consideration of the advance payments made by Tadau Energy to the EPC Contractor to enable the EPC Contractor to commence the EPC 1 Works (the total of which shall be a sum equivalent to ten percent (10%) of the EPC 1 Contract Price) (“EPC 1 Advance Payment”), the EPC Contractor shall provide Tadau Energy with an unconditional and irrevocable on-demand bank guarantee for the equivalent of the sum of the EPC 1 Advance Payment (the "EPC 1 Advance Payment Bond"). The EPC 1 Advance Payment Bond shall be issued by a commercial bank operating in Malaysia (excluding Labuan Offshore banks) and shall be effective for a period of six (6) months from the date on which the EPC 1 Advance Payment is made. If by thirty (30) days prior to the expiry date of the EPC 1 Advance Payment Bond, the EPC 1 Advance Payment has yet to be fully recouped in accordance with the provisions of the EPC Contract 1, Tadau Energy shall be entitled to instruct the EPC Contractor to extend the validity period of the EPC 1 Advance Payment Bond for such further period as shall be determined by Tadau Energy taking into account the progress of the EPC 1 Works at such time and in accordance with the EPC Contract 1. The EPC 1 Advance Payment shall be repaid through percentage deductions in invoices, which shall commence in the invoice in which the total of all certified EPC 1 Payment Milestones (excluding the EPC 1 Advance Payment and withholdings or deductions towards the EPC 1 Retention Money) exceeds ten (10%) percent of the EPC 1 Contract Price. The deductions shall be made at the amortisation rate of one 96
  107. quarter (25%) of the amount of all invoices of the EPC 1 Payment Milestones (excluding the EPC 1 Advance Payment and withholdings or deductions towards the EPC 1 Retention Money), until such time as the EPC 1 Advance Payment have been repaid. If the EPC 1 Advance Payment has not been repaid prior to the issuance of the Taking-Over Certificate for the EPC 1 Works or prior to termination under the EPC Contract 1, the whole of the balance then outstanding shall immediately become due and payable by the EPC Contractor to Tadau Energy. EPC 1 Performance bond The EPC Contractor shall deliver to Tadau Energy an unconditional and irrevocable on-demand bank guarantee in the value equivalent to ten percent (10%) of the total EPC 1 Contract Price (“EPC 1 Performance Bond”) within ten (10) working days from the date on which the EPC Contractor has acknowledged its receipt and acceptance of the Letter of Award 1 as security for the due performance by the EPC Contractor of its obligations under the EPC Contract 1. The EPC 1 Performance Bond shall be issued by a commercial bank operating in Malaysia (excluding Labuan Offshore banks) and shall remain in full force and effect until the expiry of thirty (30) days after the Final Acceptance Date. Tadau Energy shall be entitled to instruct the EPC Contractor to extend the validity period of the EPC 1 Performance Bond for such further period as may be determined by Tadau Energy, failing which Tadau Energy shall be entitled to make a claim on the EPC 1 Performance Bond prior to its expiry. EPC 1 Warranty bond Upon achieving EPC 1 Taking Over of the EPC 1 Works, the EPC Contractor shall provide Tadau Energy with an unconditional and irrevocable on-demand bank guarantee (“EPC 1 Warranty Bond”) for the value equivalent to ten percent (10%) of the total EPC 1 Contract Price, as a EPC 1 Warranty for Defects (as defined below) during the EPC 1 Warranty Period. The EPC 1 Warranty Bond shall be issued by a first class commercial bank operating in Malaysia. If by thirty (30) days prior to the expiry of the EPC 1 Warranty Period, there still remain substantial defects that have yet to be repaired, replaced or rectified in accordance with the EPC Contract 1, Tadau Energy shall be entitled to instruct the EPC Contractor to extend the validity period of the EPC 1 Warranty Bond for such further period as may be determined mutual agreement of the parties, failing which Tadau Energy shall be entitled to make a claim on the EPC 1 Warranty Bond prior to its expiry. (xi) Warranties The EPC Contractor warrants to Tadau Energy that: (a) the EPC 1 Works shall be designed, specified and constructed with due care and skill in accordance with Prudent Utility 97
  108. Practices , the specifications as set out in the EPC Contract 1 and in a good and workmanlike manner and shall be free from defects in design, materials and workmanship; (b) all equipment and items installed in the EPC 1 Works shall be installed and all work shall be performed in accordance with Prudent Utility Practices and the specifications as set out in the EPC Contract 1; (c) title to the EPC 1 Works and any portions thereof conveyed to Tadau Energy (or its designee) by the EPC Contractor shall be of good title, free from any and all liens created by the EPC Contractor or its subcontractors; (d) the design, the components and the assembly of the EPC 1 Works shall be free of defects (both hidden or evident) during the EPC 1 Warranty Period (“EPC 1 Warranty for Defects”). The EPC 1 Warranty for Defects also includes a guarantee by the EPC Contractor to Tadau Energy that the PV modules and inverters included as part of the Unit 1 shall perform in accordance with the Plant 1 Warranties and any claim that is able to be made under such Plant 1 Warranties shall be a defect that Tadau Energy can directly claim against the EPC Contractor under the EPC 1 Warranty for Defects during the EPC 1 Warranty Period; (e) to the extent that the EPC Contractor has received the benefit of any Plant 1 Warranties or any warranties from any subcontractor which extends beyond the EPC 1 Warranty Period, the EPC Contractor shall assign the Plant 1 Warranties and warranties from any subcontractor to Tadau Energy and/or the Financing Parties; (f) the EPC 1 Works will comprise only materials and goods which are new and of sound quality; (g) a useful life of not less than twenty-one (21) years has been used as the basis of the design of the EPC 1 Works; (h) the operation and maintenance manuals provided by the EPC Contractor to Tadau Energy are fit for the purposes reasonably required by a person with adequate skill to operate, maintain, adjust and repair all parts of the EPC 1 Works; (i) the EPC 1 Works shall comply with all applicable laws and the provision of any applicable statute, ordinance or other law, or any regulation or bye-law of any local or other duly constituted authority, having the force of law made thereunder or deriving validity therefrom and any amendment or re-enactment of the same from time to time in force, provided always that the EPC 1 Works shall comply with the EIA Approval and such other environmental requirement issued by the relevant Department of Environment in Malaysia; and 98
  109. (j) the whole and each and every part or parts of the EPC 1 Works shall be fit for the purposes for which it is intended as set out in the specifications as set out in the EPC Contract 1. The EPC Contractor further represents and warrants that the EPC 1 Works shall be free from latent engineering or design defects and in the event any latent engineering or design defect, the EPC Contractor shall without charge to Tadau Energy take such remedial action as may be necessary to rectify the defect. The warranties given in under this provision shall continue for a period of sixty (60) months from the date of EPC 1 Taking-Over (“EPC 1 Warranty Period”). The EPC Contractor undertakes that it shall take such actions as Tadau Energy may reasonably require to enforce any warranties given to the EPC Contractor by its subcontractor in respect of the EPC 1 Works. (xii) Defects Liability Period During the EPC 1 Defects Liability Period, being the period of twenty four (24) months following the issuance of the Taking-Over Certificate, subject to such other period as prescribed in the EPC Contract 1, the EPC Contractor shall, at its sole expense, be responsible for repairing or replacing any defective or damaged part of the EPC 1 Works which may appear or occur during the EPC 1 Defects Liability Period. The EPC 1 Defects Liability Period: (a) in respect of the completed EPC 1 Works comprising the SPP Interconnection Facility and SPP Interconnector, shall commence on the date of the taking over of the SPP Interconnection Facility and SPP Interconnector by Tadau Energy in accordance with the EPC Contract 1; (b) in respect of the completed EPC 1 Works comprising the SPP Works, shall commence on the date the EPC Contractor has handed over and effected the transfer of all rights, title and interest to the SPP Works to Tadau Energy in accordance with the EPC Contract 1; and (c) for the remaining completed EPC 1 Works, shall only commence on the date of EPC 1 Taking Over of the EPC 1 Works by Tadau Energy. The EPC 1 Defects Liability Period for the EPC 1 Works or such part(s) thereof shall be extended for a period of twenty four (24) months from the date of the completion of such replacement or repair, provided always that the EPC 1 Defects Liability Period shall not extend beyond a period of forty-eight (48) months from the date of the Taking-Over Certificate. If only part of the EPC 1 Works is affected, the EPC 1 Defects Liability Period shall be extended only for that part of the EPC 1 Works. 99
  110. (xiii) Liquidated damages EPC 1 Delay Liquidated Damages For each day of delay of the EPC 1 Works in achieving the EPC 1 Taking Over of the EPC 1 Works by the beyond the EPC 1 Guaranteed Completion Date that is not the result of a Force Majeure Event or a situation pursuant to which an extension of time may be granted in accordance with the provisions of EPC Contract 1, the EPC Contractor shall pay to Tadau Energy by way of liquidated damages the sum of Ringgit Malaysia Six Thousand (RM6,000.00) only for each day of delay of the EPC 1 Works. Notwithstanding anything else to the contrary which may be contained or implied in the EPC Contract 1, the total of the liquidated damages for delay in EPC 1 Taking Over payable by the EPC Contractor under the EPC Contract 1 shall not exceed fifteen percent (15%) of the EPC 1 Contract Price. EPC 1 PR Warranty Liquidated Damages If the Unit 1 fails to meet the performance ratio set out in the EPC Contract 1 during the first two (2) years of the EPC 1 Warranty Period, the EPC Contractor shall pay Tadau Energy, as liquidated damages, an amount equal to one percent (1%) of the EPC 1 Contract Price for each one percent (1%) in shortfall of the performance ratio for the Unit 1, subject to a maximum of ten percent (10%) of the EPC 1 Contract Price. Limit of Liquidated Damages The total amount of liquidated damages payable by the EPC Contractor for EPC 1 Delay Liquidated Damages and/or EPC 1 P*-R Warranty Liquidated Damages shall not exceed twenty five percent (25%) of the EPC 1 Contract Price. (xiv) Indemnification and Liability Each party (the liable party) is liable to the other party (the injured party) for personal injury, death or property damage suffered by the injured party and/or third parties as a consequence of any act or omission by the liable party or its officer, directors, agents or employees arising in connection with the performance of the EPC Contract 1, except (i) workers compensation claims by any officers, directors, agents, employees, contractors and subcontractors of the injured party; and (ii) to the extent such injury, death or damage is attributable to the negligence or misconduct of, or breach of the EPC Contract 1, by the injured party. (xv) Force majeure For the purpose of the EPC Contract 1, a Force Majeure Event shall mean an event, condition, circumstance or its effect which: 100
  111. (a) is beyond the reasonable control of and occurs without fault or negligence on the part of the party claiming it as a Force Majeure Event; and (b) causes a delay or disruption in the performance of any obligation under the EPC Contract 1 despite all reasonable efforts of the party claiming it as a Force Majeure Event to prevent it or mitigate its effects. Subject to satisfying the foregoing criteria, Force Majeure Events include without limitation, the following: (xvi) (i) strikes or lockouts and/or other work stoppages or industrial action (other than those solely affecting the party claiming the same as a Force Majeure Event); (ii) acts of public enemies or terrorists or acts of, whether or not war is declared, invasion, acts of force by a foreign nation or embargo; (iii) public disorders, insurrection, rebellion, sabotage, riots or violent demonstrations; (iv) explosions, fire, earthquakes, landslides, subsidence, sabotage and/or other natural calamities and acts of God; (v) unusually severe weather conditions; (vi) expropriation or compulsory acquisition by any Government Entity; (vii) failure to obtain or renew any Government Authorisation; and (viii) any Force Majeure Event affecting the performance of any person that is a party to the Project Documents or other contract between Tadau Energy and such person relating to the operation or maintenance of the Unit 1. Effect of Force Majeure Event and Consequences Subject to the limitations set out in the EPC Contract 1, if either party is rendered unable by reason of a Force Majeure Event to perform any obligation under the EPC Contract 1, then upon that party giving notice of Force Majeure, those obligations of that party shall be suspended or excused to the extent their performance is affected by the Force Majeure Event. The EPC 1 Guaranteed Completion Date shall be extended by one (1) day for each day the EPC 1 Taking Over is delayed by a Force Majeure Event. (xvii) Right to Terminate under Force Majeure Either party may terminate the EPC Contract 1 with not less than thirty (30) days’ notice if a force majeure event prevents either party from 101
  112. substantially performing any material obligations under the EPC Contract for a period which exceeds one hundred and eighty (180) days. While there is a right of termination as a result of a Force Majeure Event provided under the EPC Contract 1, the right is only exercisable upon giving thirty (30) days’ written notice if a Force Majeure Event is preventing either party from substantially performing any material obligation under the EPC Contract 1 for a period exceeding one hundred and eighty (180) days, subject to the following: (a) if a Force Majeure Event cannot be remedied within one hundred and eighty (180) days with the use of reasonable diligence then the one hundred and eighty (180) days period shall be extended by a further period of one hundred and eighty (180) days; and (b) if the party affected is unable to remedy the Force Majeure Event by the end of the further period of one hundred and eighty (180) days, then the parties shall consult as to what steps shall be taken with a view to mitigating or remedying the consequences of a Force Majeure Event. If the parties agree to extend the second period, then the above provisions apply with regards to the remedy and mitigation of the Force Majeure Event. If the parties are unable to agree to extend the further period of one hundred and eighty (180) days, then either party may terminate the EPC Contract 1 by giving thirty (30) days’ written notice of termination. (xviii) Insurance Tadau Energy shall at its own cost and expense procure and maintain in full force throughout the duration of the EPC Contract 1 such insurance(s) that is adequate and/or which may be required by law which Tadau Energy is subject to. (xix) Suspension and Termination Tadau Energy may at any time, via an EPC 1 Variation Order, instruct the EPC Contractor to (i) suspend completion of any or all the EPC 1 Works; or (ii) suspend the delivery of the Plant 1 or Contractor’s Equipment or other material which is ready for shipment to Site Yong East; or (iii) suspend the erection of the Plant 1 which has been delivered to Site Yong East. In the event of a prolonged suspension, Tadau Energy may terminate the EPC Contract 1 upon giving twenty one (21) days’ written notice to the EPC Contractor. Tadau Energy may for its convenience, terminate any part of the EPC 1 Works or all remaining EPC 1 Works or the EPC Contract 1 by giving thirty (30) days prior notice in writing to the EPC Contractor. In the event of partial termination of the EPC 1 Works, Tadau Energy shall authorise an EPC 1 Variation Order, making reasonable adjustments to one or more of the EPC 1 Contract Price, the EPC 1 Guaranteed Completion Date, the Milestones, the Program, the 102
  113. Milestones Payment Schedule and such other provisions of the EPC Contract 1 which may be affected thereby , as appropriate. If the EPC 1 NTP has not occurred by the EPC 1 NTP Deadline Date, and the parties are not able to reach agreement as to how to proceed within thirty (30) days after the EPC 1 NTP Deadline Date, either party shall be entitled to terminate the EPC Contract 1 immediately by written notice to the other party. Each of the following events shall constitute an event of default by the EPC Contractor, subject to the provisions of the EPC Contract 1: (a) the EPC Contractor fails to provide the Performance Security in accordance with the terms of the EPC Contract 1; (b) the EPC Contractor fails to pay Tadau Energy any amount which is due and payable under the EPC Contract 1 within sixty (60) days after receipt of notice of non-payment from Tadau Energy; (c) the EPC Contractor fails to comply with or operate in conformity with any material obligations of the EPC Contract 1 (other than a payment obligation) and such failure continues uncured for a period of thirty (30) days, after receipt of notice of such failure from Tadau Energy; (d) (i) the EPC Contractor is dissolved or liquidated, other than for the purpose of a voluntary dissolution or liquidation as part of a reorganisation or reincorporation; (ii) the EPC Contractor applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) the EPC Contractor admits in writing its inability to pay its debts as they fall due; (iv) the EPC Contractor makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (v) the EPC Contractor commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) the EPC Contractor fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; 103
  114. (vii) the EPC Contractor takes any action for the purpose of effecting any of the events described in items (i) through (v) above; (e) the Unit 1 delivers energy which is not solely driven by solar PV technology or the EPC 1 Works and/or the 2 MWac Project comprises energy storage devices; (f) the EPC 1 Works fail to achieve the Unit 1 COD within one hundred and twenty (120) days after the EPC 1 Guaranteed Completion Date; (g) the EPC Contractor Abandons the EPC 1 Works, after the EPC 1 Commencement Date and fails to resume activities within a period of time agreeable to Tadau Energy; (h) any representation made by the EPC Contractor herein shall be proved to have been false or misleading in any respect when made; (i) the PPA 1 is terminated by SESB due to an event of default or negligence of the EPC Contractor in the performance of its obligations and undertakings under the EPC Contract 1; (j) the liquidated damages payable in relation to EPC 1 Delay Liquidated Damages and/or EPC 1 PR Warranty Liquidated Damages have reached the maximum liquidated damages payable; (k) the EPC Contractor subcontracts the whole of the EPC 1 Works or assigns or transfers the EPC Contract 1 (or any right or interest herein) without the express written consent of Tadau Energy; or (l) the EPC Contractor fails to comply with the health, safety, environment and security requirements under the EPC Contract 1. Each of the following events shall constitute an event of default by Tadau Energy, subject to the provisions of the EPC Contract 1: (a) Tadau Energy fails to pay the EPC Contractor any amount of substantial nature which is due and payable under the EPC Contract 1 within sixty (60) days after receipt of notice of nonpayment from the EPC Contractor; (b) Tadau Energy fails to comply with or operate in conformity with any material obligations of the EPC Contract 1 (other than a payment obligation) and such failure, if capable of remedy, continues uncured for a period of ninety (90) days after receipt of notice of such failure from the EPC Contractor; 104
  115. (c) (d) (i) Tadau Energy is dissolved or liquidated, other than voluntary dissolution or liquidation as part of a reorganisation or reincorporation; (ii) Tadau Energy applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) Tadau Energy admits in writing its inability to pay its debts as they fall due; (iv) Tadau Energy makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (v) Tadau Energy commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) Tadau Energy fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; (vii) Tadau Energy takes any action for the purpose of effecting any of the events described in items (i) through (v) above; or the PPA 1 is terminated by SESB due to a default solely caused by Tadau Energy and which is not attributable to the EPC Contractor. If an event of default described above occurs (other than that described in paragraph (c) of the EPC Contractor’s events of default and paragraph (b) of Tadau Energy’s events of default above) that cannot be cured with the exercise of reasonable diligence within the period of thirty (30) days therein occurs, the non-defaulting party may terminate the EPC Contract 1 by giving seven (7) days’ written notice to the other party. If the event of default described in paragraph (c) of the EPC Contractor’s events of default or paragraph (b) of Tadau Energy’s events of default above occurs and cannot be cured with the exercise of reasonable diligence within the period of thirty (30) days specified therein, the cure period shall be extended by a further thirty (30) days and the default continues uncured at the end of such further period, the non-defaulting party may terminate the EPC Contract 1 immediately by giving written notice to the defaulting party. (xx) Consequences of Termination Event of default by the EPC Contractor Upon termination of the EPC Contract 1 by Tadau Energy: 105
  116. (a) Tadau Energy may proceed to complete the EPC 1 Works by the use of such other contractor or by such other methods as Tadau Energy may consider necessary or appropriate. (b) Tadau Energy may utilise and take possession of, free and clear of all liens, encumbrances, rights, title and interest in any materials, Plant 1, tools, equipment, design specific to the EPC 1 Works, work in progress, permits and records furnished by the EPC Contractor and paid for by Tadau Energy or reasonably necessary to complete the EPC 1 Works. (c) The EPC Contractor shall be liable for the amount by which the sum of all costs incurred by Tadau Energy in the completion of each portion of the EPC 1 Works to be paid to the new contractor appointed by Tadau Energy to complete the EPC 1 Works. (d) The EPC Contractor shall also assign to Tadau Energy all leases, contracts and applicable permits relating to the Unit 1 and the EPC 1 Works which Tadau Energy shall so request within fourteen (14) days of the termination. (e) Tadau Energy is entitled to make use of all parts, equipment and components belonging to the EPC Contractor but not within the scope of EPC 1 Works, which have been delivered and/or installed which are intended for the EPC 1 Works. (f) Tadau Energy may exercise any other remedy it may have hereunder or at law or in equity, including seeking the recovery of any other damages. (g) Save as provided for in the EPC Contract 1, Tadau Energy shall not be entitled to any consequential loss whatsoever including the reimbursement of any loss, expense, compensation, profit or damages as a result of or arising from the termination by the EPC Contractor of the EPC Contract 1. (h) Tadau Energy shall not be liable to make any further payments to the EPC Contractor until the cost of execution and all other costs incurred and losses sustained by Tadau Energy in the nature of those which Tadau Energy is entitled to recover and all other sums to which Tadau Energy is entitled under or by virtue of the EPC Contract have been ascertained and the amount payable approved by Tadau Energy. (i) If Tadau Energy terminates the EPC Contract 1 arising from or due to the EPC Contractor’s event of default due to a failure to achieve the Unit 1 COD within one hundred and twenty (120) days after the EPC 1 Guaranteed Completion Date or termination of the PPA 1 by SESB in accordance with the EPC Contract 1, Tadau Energy is and shall be entitled, but not obliged, to reject the whole or any part of the EPC 1 Works that has been performed by the EPC Contractor prior to the 106
  117. date that Tadau Energy issues the notice of such termination , and the EPC Contractor shall: (i) repay to Tadau Energy all amounts paid by Tadau Energy to the EPC Contractor in respect of the EPC 1 Works (or part of the EPC 1 Works that has been rejected); and (ii) at the EPC Contractor’s own cost, dismantle and remove the EPC 1 Works (or the rejected part of the EPC 1 Works) and its personnel, employees, labour and subcontractors from Site Yong East, and restore Site Yong East to its original condition as at the EPC 1 Commencement Date, provided that if Tadau Energy elects to exercise its right, relief and remedy under this provision, and upon the EPC Contractor complying with its obligations under this provision, the title in and to any EPC 1 Works dismantled and removed from Site Yong East will vest in the EPC Contractor. Event of default by the EPC Contractor Upon termination of the EPC Contract 1 by the EPC Contractor: (a) If the EPC Contractor terminates the EPC Contract 1 as a result of an event of default by Tadau Energy, Tadau Energy shall pay the EPC Contractor, in so far as such amount or items shall not have already been paid by Tadau Energy in accordance with the provisions of the EPC Contract 1, for the EPC 1 Works, which have been carried out and completed prior to the date of termination and in addition: (i) the amounts payable in respect of any preliminary items so far as the work or service comprised therein has been carried out and a proper proportion of any such item in which the work or service comprised has only been partially carried out; (ii) the cost of the Plant 1, materials or goods reasonably ordered for the EPC 1 Works which have been delivered to Tadau Energy or of which Tadau Energy is legally liable to accept delivery; and (iii) the reasonable cost of removal of the Contractor’s Equipment from Site Yong East and the return thereof to its original location, where any amount payable under this provision shall be paid by Tadau Energy within one hundred and eighty (180) days or such longer period as may be mutually agreed by the parties after the receipt of the EPC Contractor’s notice of termination. (b) Upon payment being made by Tadau Energy in accordance with paragraph (a)(i) above, the EPC Contractor shall forthwith 107
  118. transfer the such of the Plant 1 and EPC 1 Works as is on Site Yong East to Tadau Energy and take all actions necessary to handover possession of Site Yong East to Tadau Energy (or its designee), free from encumbrances and any materials or goods ordered for the EPC 1 Works which have been delivered to the EPC Contractor or of which the EPC Contractor is legally liable to accept delivery including the benefits of any work or services in relation to the EPC 1 Works shall become the property of Tadau Energy and the EPC Contractor shall place the same at Tadau Energy’s disposal. (xxi) (c) Save as provided in the EPC Contract 1, the EPC Contractor shall not be entitled to any consequential loss whatsoever including the reimbursement of any loss, expense, compensation, profit or damages as a result of or arising from the termination by Tadau Energy of the EPC Contract 1. (d) Upon termination of the EPC Contract 1 under this provision, the EPC Contractor shall be entitled to remove immediately all of the Contractor’s Equipment which is on Site Yong East subject to the EPC Contractor having paid and settled in full all of the outstanding amounts which are owing by the EPC Contractor to Tadau Energy. Prolonged Suspension, Termination Prolonged Force Majeure Event for Convenience and In the event of termination pursuant to a suspension, for convenience or due to a Force Majeure Event, the EPC Contractor shall be entitled to be paid an amount (the “Termination Payment”) equal to the sum of: (a) any scheduled payment due and owing to the EPC Contractor on or prior to the date of termination; (b) a pro-rata payment for the EPC 1 Works properly performed by the EPC Contractor and its subcontractors prior to the date of termination and not covered by paragraph (a) above; and (c) all actual and reasonable costs incurred by the EPC Contractor as a direct result of terminating and demobilizing all aspects of the EPC 1 Works properly performed by the EPC Contractor and its subcontractors under the EPC Contract 1 on or prior to the date of termination or such other works as may be instructed by Tadau Energy, but only to the extent such costs are not covered by payments previously made under this paragraph or under paragraphs (a) or (b) above. Tadau Energy shall pay the Termination Payment to the Contractor within ninety (90) days of Tadau Energy’s receipt of the relevant documentation required under the EPC Contract 1. The payment of the Termination Payment shall be the sole and exclusive remedy of the EPC Contractor with respect to termination pursuant to a suspension, for convenience or due to a Force Majeure Event. 108
  119. (xxii) Equivalent Project Relief Notwithstanding anything else to the contrary in the EPC Contract 1, where and to the extent that the circumstances or events giving rise to a claim for any form of relief or compensation by the EPC Contractor also gives rise to a claim for such relief or compensation by Tadau Energy under the PPA 1, the EPC Contractor shall only be entitled to such relief or compensation to the extent that Tadau Energy has been allowed equivalent relief or has been paid compensation under the PPA 1. (xxiii) Assignment The EPC Contractor shall not assign and shall not permit the creation of security interest in the EPC Contract 1 without the prior written consent of Tadau Energy. Subject to the provisions in the following paragraph, Tadau Energy may assign its rights and obligations under the EPC Contract 1 provided that Tadau Energy shall notify the EPC Contractor of the assignment. Any transfer of the controlling interest in the EPC Contractor to any person who is not a shareholder of the EPC Contractor on the date of execution of the EPC Contract 1 shall be deemed to be a transfer subject to this provision. The EPC Contractor acknowledges and agrees that Tadau Energy may assign the EPC Contract 1, all of its rights, benefits and obligations under the EPC Contract 1 including all warranties to the Financing Parties by way of security for the performance of obligations to the Financing Parties. The EPC Contractor further accepts that in the event of a default under the Financing Documents it shall accept as substitute for Tadau Energy, under the EPC Contract 1, the agent, trustee or nominee of the Financing Parties and notwithstanding any provisions of this contract which entitles the EPC Contractor to terminate the EPC Contract 1 for the default of Tadau Energy, shall afford the Financing Parties an opportunity to remedy the default by Tadau Energy and/or to provide a substitute for Tadau Energy under the EPC Contract 1, within such reasonable time, before giving effect to any termination under the EPC Contract 1. If any Financing Party requests the EPC Contractor to consent in writing to such assignment (even though such consent is not required under the EPC Contract 1), the EPC Contractor shall do so promptly with such acknowledgement and agreement to include such terms and conditions as required by the Financing Parties. At Tadau Energy’s request, the EPC Contractor shall provide to any Financing Party a certificate from the EPC Contractor and/or an opinion of legal counsel addressed to such Financing Party concerning such matters as such Financing Party reasonably requests from the EPC Contractor. (xxiv) Dispute resolution The EPC Contract 1 is governed by, and shall be construed in accordance with the laws of Malaysia. 109
  120. If any dispute in relation to the EPC Contract 1 cannot be resolved between the parties by mutual agreement in the manner provided thereunder , then such dispute shall be settled exclusively and finally by arbitration conducted in accordance with the Rules for Arbitration of the Regional Centre for Arbitration at Kuala Lumpur. Each arbitration shall be conducted in Kuala Lumpur, Malaysia. (xxv) Change in Law Adjustment If there is a Change-in-Law which requires the EPC Contractor to make any material capital improvement or other material modification to the EPC 1 Works, the cost of which is in excess of the capital improvement threshold of Ringgit Two Hundred and Fifty Thousand (RM250,000.00) in any calendar year, which material capital improvement or other material modification is required for the purpose of enabling the EPC Contractor to fulfil its obligations under the Project Documents in compliance with such Change-in-Law, the EPC Contractor and Tadau Energy shall determine, in good faith, any extension to the EPC 1 Guaranteed Completion Date or any adjustments to be made to the EPC 1 Contract Price. The parties shall use their respective best efforts to limit the remedy to an extension of the EPC 1 Guaranteed Completion Date only, and only in the event it is not commercially and reasonably feasible to do so, resort to an adjustment to the EPC 1 Contract Price. (xxvi) Goods and Services Tax The price quoted by the EPC Contractor for any taxable supplies to be made under the EPC Contract 1 is exclusive of goods and services tax. The parties acknowledge and agree that if the goods and services tax is imposed on any supplies made by the EPC Contractor under the EPC Contract 1, the EPC Contractor is entitled to charge goods and services tax on Tadau Energy for the payment of the supply. 4.5.2.2 EPC Contract 2 In respect of defined terms in this Section 4.5.2.2 only, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the EPC Contract 2. (i) Overview Tadau Energy has awarded the contract for the undertaking of the EPC 2 Works (as defined below) to CPI Power Engineering Co. Ltd. (Company Registration No. 91310112792736752K), (the “Contractor’s Parent”), via a conditional letter of award dated 10 January 2017 (“Letter of Award 2”). The Contractor’s Parent has novated all its rights and liabilities under the Letter of Award 2 to the EPC Contractor (the “Letter of Award 2 Novation”). The EPC Contract 2 was entered into between Tadau Energy and the EPC Contractor on 24 January 2017, for the design, engineering, construction, procurement, installation, testing and commissioning of all works required to be performed and completed in connection with 110
  121. the Unit 2 on an all-inclusive turnkey basis in accordance with the terms and conditions contained therein (“EPC 2 Works”). (ii) Contract Price and Payment Tadau Energy shall pay the EPC Contractor an all-inclusive, nonescalating fixed lump-sum price of RM213,437,740.56 (“EPC 2 Contract Price”). Payments under the EPC Contract 2 are based on specified milestone achievements. The EPC 2 Contract Price and all payments to be made to the EPC Contractor in respect thereof shall be (i) in Ringgit for a portion equivalent to twenty percent (20%) of the EPC 2 Contract Price and which shall not exceed RM42,687,548.11; and (ii) in Renminbi for a portion equivalent to eighty percent (80%) of the EPC 2 Contract Price and which shall not exceed RMB265,379,949.10. Payment of the EPC 2 Contract Price shall be made for each payment milestone in accordance with Annex 8 of the EPC Contract 2 (“EPC 2 Payment Milestones”) provided that any EPC 2 Payment Milestones corresponding to a particular EPC 2 Milestones Payment Date have been achieved on or before the date set forth in Annex 8 of the EPC Contract 2. In the event any applicable EPC 2 Payment Milestone has not been achieved, the EPC Contractor shall not be entitled to receive the applicable EPC 2 Milestones Payment Amount until the applicable EPC 2 Payment Milestone is achieved. Notwithstanding the above, as security for the due performance of the EPC Contractor’s obligations under the EPC Contract 2, Tadau Energy shall be entitled to deduct and retain from such amount due to the EPC Contractor an amount equal to five percent (5%) of the total sum from each applicable EPC 2 Milestones Payment Amount in accordance with the EPC Contract 2 until the total sum deducted and retained is equivalent to five percent (5%) of the EPC 2 Contract Price (“EPC 2 Retention Money”). Tadau Energy shall at all times be entitled to retain the EPC 2 Retention Money until the Final Acceptance of the EPC 2 Works two (2) years from the EPC 2 Taking Over (as described below), and shall within twenty one (21) days after the issuance of the Final Acceptance Certificate release to the EPC Contractor the EPC 2 Retention Money (after deducting such amount utilised by Tadau Energy for the purposes of completing any remaining EPC 2 Works which the EPC Contractor has failed to undertake or complete in accordance with its obligations under the EPC Contract 2). The EPC Contractor shall acquire all Access Rights necessary to construct and install the EPC 2 Works. The EPC Contractor is responsible for the assignment of the warranties over all equipment, machinery, plant, apparatus, materials, facilities and all things to be provided under the EPC Contract 2 for incorporation in the EPC 2 Works as detailed in the EPC Contract 2 (“Plant 2”) (“Plant 2 Warranties”) to Tadau Energy and/or the Financing Parties in accordance with the EPC Contract 2. 111
  122. (iii) Variation Tadau Energy may at any time before the EPC 2 Works are taken over, instruct the EPC Contractor to alter, amend, omit, add to or otherwise vary any part of the EPC 2 Works by way of a written order to the EPC Contractor (“EPC 2 Variation Order”). The EPC Contractor shall not vary or alter any part of the EPC 2 Works, except in accordance with an EPC 2 Variation Order. The EPC Contractor may, however, propose variations of the EPC 2 Works to Tadau Energy provided always that if Tadau Energy agrees that such proposed variations of the EPC 2 Works should be carried out by the issuance of an EPC 2 Variation Order, any reduced or additional cost resulting from such variations of the EPC 2 Works shall be deducted from or added to the EPC 2 Contract Price. A EPC 2 Variation Order shall not be issued if the proposed variation will result in the completion of the EPC 2 Works being delayed one (1) month beyond the EPC 2 Guaranteed Completion Date (as defined below). (iv) Commencement and Milestones Following satisfaction of the EPC 2 NTP Conditions (as described below), Tadau Energy shall issue to the EPC Contractor a notice confirming that the EPC Contractor has satisfied the EPC 2 NTP Conditions and the EPC Contractor is to commence the EPC 2 Works (the “EPC 2 NTP Notice”). Upon the issuance of the EPC 2 NTP Notice by Tadau Energy, the EPC Contractor shall commence the EPC 2 Works immediately and shall thereafter proceed with the EPC 2 Works regularly and diligently in accordance with the requirements of the EPC Contract 2. The commencement date under the EPC Contract 2 shall be the date of receipt of the EPC 2 NTP by the EPC Contractor (“EPC 2 Commencement Date”). The conditions which are required to be fulfilled before a valid EPC 2 NTP Notice may be issued by Tadau Energy (“EPC 2 NTP Conditions”) include but are not limited to: (a) in respect of the conditions which are required to be fulfilled by the EPC Contractor and/or the Contractor’s Parent, these conditions shall be fulfilled no later than thirty (30) days from the date of execution of the EPC Contract 2: (i) true and complete copies of the EPC Contractor’s organisational documents and all necessary authorisations of the execution and delivery and performance by the EPC Contractor of the EPC Contract 2 in the form and substance satisfactory to Tadau Energy, certified by the corporate company secretary of the EPC Contractor; (ii) receipt by Tadau Energy of the evidence that the insurances that the EPC Contractor is obliged to procure under the EPC Contract 2 and as detailed therein have been effected; 112
  123. (b) (iii) receipt by Tadau Energy of a written confirmation from the EPC Contractor that the EPC Contractor has complied with its obligations under the EPC Contract 2 to the extent that any Contractor Authorisations therein referred to which are required prior to a notice to proceed (“EPC 2 NTP”) and for performance of the EPC 2 Works have been obtained; (iv) receipt by Tadau Energy of the EPC 2 Advance Payment Bond (as defined below), EPC 2 Performance Bond (as defined below) and EPC 2 Parent Company Guarantee (as defined below); and (v) receipt by Tadau Energy of a favourable legal opinion, in a form acceptable to Tadau Energy, issued by a reputable law firm in the People’s Republic of China, confirming on the validity and enforceability of the EPC 2 Parent Company Guarantee; and In respect of the conditions which are required to be fulfilled by Tadau Energy: (i) Tadau Energy has obtained the relevant planning permission from the Competent Authority in respect of the 48 MWac Project at Site Bak Bak, Site Yong East and Site Yong West; (ii) Tadau Energy achieves financial close under the Financing Documents, if applicable and where required; and (iii) Tadau Energy’s insurances as specified in the EPC Contract 2 are in place. If the EPC 2 NTP Notice is not delivered by Tadau Energy by 28 February 2017 (“EPC 2 NTP Deadline Date”) not due to the EPC Contractor’s fault, the EPC Contractor shall be entitled to a day for day extension in the Guaranteed Completion Date under the EPC Contract 2, which shall be 6 November 2017 or such other date determined in accordance with the EPC Contract 2 (“EPC 2 Guaranteed Completion Date”). (v) Limited Notice to Proceed (LNTP) Prior to the issuance of the EPC 2 NTP, Tadau Energy may at its sole option and discretion issue a Limited Notice to Proceed to the EPC Contractor for the undertaking of certain preliminary works as specified in the EPC Contract 2 and on terms and conditions as prescribed by Tadau Energy. (vi) Extension of time The EPC Contractor may apply for an extension of time if the EPC Contractor is or will be delayed in completing the EPC 2 Works by any 113
  124. of the following circumstances , subject always to the provisions in the EPC Contract 2: (vii) (i) extra or additional work ordered in writing by way of a EPC 2 Variation Order in accordance with the EPC Contract 2; or (ii) the occurrence of a Force Majeure Event in accordance with the EPC Contract 2; or (iii) an act of prevention or omission by Tadau Energy or SESB which directly interferes with or prevents the EPC Contractor from performing the EPC 2 Works but shall not include an act or omission which is expressly permitted by the EPC Contract 2 or in respect of which the EPC Contractor has expressly accepted the risk or responsibility under the EPC Contract 2; or (iv) any breach of the EPC Contract 2 by Tadau Energy (save and except where any sums payable under the EPC Contract 2 which are overdue from Tadau Energy); or (v) where Tadau Energy suspends the EPC 2 Works in accordance with EPC Contract 2, except where the suspension arises as a result of the breach or negligence of the EPC Contractor (including its Subcontractor) under the EPC Contract 2 or act, omission or default by the EPC Contractor (including its Subcontractor); or (vi) the compliance with any Change-In-Law which could reasonably be expected to affect and result in delay to the EPC 2 Guaranteed Completion Date. Taking Over Subject to the terms of the EPC Contract 2, the EPC 2 Works shall be taken over by Tadau Energy (“EPC 2 Taking Over”), when the EPC 2 Works has been completed, tested and commissioned in accordance with the EPC Contract 2 except for the Punch List items (being the minor items of EPC 2 Works that remain to be completed or defects that remain to be corrected which will not affect the operation of the Unit 2 and that in aggregate do not require an amount equal to one percent (1%) of the EPC 2 Contract Price to complete and/or correct) that do not affect the use of the EPC 2 Works for its intended purpose when the following conditions are satisfied: (a) all equipment and facilities necessary for the full, safe and reliable operation of the EPC 2 Works have been properly constructed, installed, insulated and protected where required, and correctly adjusted, and can be safely used for the intended purposes; (b) the EPC Contractor has completed a successful precommissioning and inspection and has passed the required tests and the required audits and verifications in accordance with the EPC Contract 2; 114
  125. (c) the EPC 2 Works are able to generate solar PV energy for commercial sale and are fully and properly interconnected with the Grid System in accordance with Prudent Utility Practices, the Electrical Interconnection Requirements and all features and equipment of the EPC 2 Works are capable of operating satisfactorily; (d) the EPC Contractor has caused to be completed Performance Guarantee Test, being the tests to be performed in accordance with the EPC Contract 2 to be test for compliance with the Performance Guarantee to be conducted on the EPC 2 Works to achieve Provisional Acceptance in accordance with the EPC Contract 2 during which the EPC 2 Works and/or the Unit 2 shall be demonstrated to have achieved the Performance Guarantee. The EPC Contractor shall submit to Tadau Energy within seven (7) days from carrying out the Performance Guarantee Test, a certificate from the Independent Engineer confirming that the completed EPC 2 Works including the Unit 2 has the capacity and capability to meet the Unit 2 Contracted Capacity of 48 MWac and the test results which show that the completed EPC 2 Works including the Unit 2 can meet the Contracted Capacity as certified by the Independent Engineer; (e) the Unit 2 COD under the PPA 2 has occurred; (f) the EPC Contractor and Tadau Energy have mutually agreed on the Punch List items or defects that remain to be completed or corrected by the EPC Contractor at the time of EPC 2 Taking Over; (g) any liquidated damages including the EPC 2 Delay Liquidated Damages (as defined below) which are payable by the EPC Contractor to Tadau Energy have been paid and/or satisfied in full; (h) the EPC Contractor shall provide to Tadau Energy and/or operator of the Unit 2’s personnel such training programmes in respect of the operation and maintenance of the EPC 2 Works; (i) the EPC Contractor has submitted the draft operations and maintenance manual to Tadau Energy for review and Tadau Energy has agreed with the contents of the same; (j) the completed EPC 2 Works including the Unit 2 fully complies with the terms of the Plant 2 Warranties and any warranties provided by the subcontractor; (k) upon receipt by Tadau Energy from the EPC Contractor of a certificate issued by the Independent Engineer confirming that all tests required under the EPC Contract 2 including and in accordance with Prudent Utility Practices have been carried out and that the EPC 2 Works can be safely operated in parallel with the Grid System; 115
  126. (viii) (l) upon receipt by Tadau Energy from the EPC Contractor of a certificate of completion and compliance issued by the relevant Government Entity in respect of the EPC 2 Works; (m) all Spares, being the spare parts as listed in the EPC Contract 2 to be provided to Tadau Energy by the EPC Contractor have been and/or are delivered to Site Bak Bak, Site Yong East and Site Yong West and/or such other locations as may be designated by Tadau Energy; and (n) a Taking-Over Certificate has been issued by Tadau Energy when it received an application from the EPC Contractor after the EPC 2 Works have been completed and ready for Taking Over in accordance with the EPC Contract 2. Intermediate Acceptance and Final Acceptance Notwithstanding the EPC 2 Taking Over of the completed EPC 2 Works, the EPC Contractor shall be and remain responsible to collect the relevant data which shall include all information relating to the capacity, capability and the solar PV energy generated and delivered from the Unit 2 for a continuous period of two (2) calendar years from the date of issuance of the Taking-Over Certificate (“EPC 2 Test Period”). At the end of the first (1st) calendar year of the EPC 2 Test Period, a test to ascertain the Performance Ratio under the EPC Contract 2, generation capacity, stability and reliability shall be performed on the completed EPC 2 Works (“EPC 2 Intermediate Acceptance Test”) in accordance with the requirements set out in the EPC Contract 2. At the end of the second (2nd) year of the EPC 2 Test Period, the Final Acceptance Test shall be performed on the completed EPC 2 Works in accordance with the requirements set out in the EPC Contract 2. Tadau Energy shall issue the Final Acceptance Certificate subject to the following conditions being fulfilled: (i) the EPC 2 Works has been fully completed in accordance with the EPC Contract 2 in all respects; (ii) the EPC 2 PR Warranty Liquidated Damages (if any) (as described below) have been paid in full by the EPC Contractor to Tadau Energy due to any non-achievement of the guaranteed performance ratio in accordance with the EPC Contract 2; (iii) the Spares are and/or have been replenished in accordance with the EPC Contract 2; (iv) thermographic analyses have been performed with IR camera for all PV modules and electrical connections in order to detect any possible hot spots. Any PV modules with temperature anomalies shall have been replaced and electrical connections 116
  127. with temperature anomalies have been renewed , at the EPC Contractor’s sole expense; and (v) (ix) the Unit 2 has achieved the respective criteria specified for the EPC 2 Intermediate Acceptance Test and Final Acceptance Test. Parent Company Guarantee In consideration of and as a precondition to Tadau Energy agreeing to the Letter of Award 2 Novation, the Contractor’s Parent shall provide a guarantee for the performance of the EPC Contract 2 (“EPC 2 Parent Company Guarantee”) to Tadau Energy. The EPC Contractor and Contractor’s Parent shall be jointly and severally liable in respect of the obligations and liabilities under the EPC Contract 2. During the term of the EPC Contract 2 until the expiry of the EPC 2 Warranty Period (as defined below), the Contractor’s Parent undertakes that there shall be no change in the shareholder and/or the shareholding structure of the EPC Contractor, which is wholly-owned by the Contractor’s Parent. (x) Performance Security EPC 2 Advance Payment Bond In consideration of the advance payments made by Tadau Energy to the EPC Contractor to enable the EPC Contractor to commence the EPC 2 Works (the total of which shall be a sum equivalent to seven point five percent (7.5%) of the EPC 2 Contract Price) (“EPC 2 Advance Payment”), the EPC Contractor shall provide Tadau Energy with an unconditional and irrevocable on-demand bank guarantee for the equivalent of the sum of the EPC 2 Advance Payment (the "EPC 2 Advance Payment Bond"). The EPC 2 Advance Payment Bond shall be issued by a commercial bank operating in Malaysia (excluding Labuan Offshore banks) and shall be effective for a period of six (6) months from the date on which the EPC 2 Advance Payment is made. If by thirty (30) days prior to the expiry date of the EPC 2 Advance Payment Bond, the EPC 2 Advance Payment has yet to be fully recouped in accordance with the provisions of the EPC Contract 2, Tadau Energy shall be entitled to instruct the EPC Contractor to extend the validity period of the EPC 2 Advance Payment Bond for such further period as shall be determined by Tadau Energy taking into account the progress of the EPC 2 Works at such time and in accordance with the EPC Contract 2. The EPC 2 Advance Payment shall be repaid through percentage deductions in invoices, which shall commence in the invoice in which the total of all certified EPC 2 Payment Milestones (excluding the EPC 2 Advance Payment and withholdings or deductions towards the EPC 2 Retention Money) exceeds ten (10%) percent of the EPC 2 Contract Price. The deductions shall be made at the amortisation rate of one quarter (25%) of the amount of all invoices of the EPC 2 Payment Milestones (excluding the EPC 2 Advance Payment and withholdings 117
  128. or deductions towards the EPC 2 Retention Money ), until such time as the EPC 2 Advance Payment have been repaid. If the EPC 2 Advance Payment has not been repaid prior to the issuance of the Taking-Over Certificate for the EPC 2 Works or prior to termination under the EPC Contract 2, the whole of the balance then outstanding shall immediately become due and payable by the EPC Contractor to Tadau Energy. EPC 2 Performance bond The EPC Contractor shall deliver to Tadau Energy an unconditional and irrevocable on-demand bank guarantee in the value equivalent to ten percent (10%) of the total EPC 2 Contract Price (“EPC 2 Performance Bond”) within ten (10) working days from the date on which the EPC Contractor has acknowledged its receipt and acceptance of the Letter of Award 2 as security for the due performance by the EPC Contractor of its obligations under the EPC Contract 2. The EPC 2 Performance Bond shall be issued by a commercial bank operating in Malaysia (excluding Labuan Offshore banks) and shall remain in full force and effect until the expiry of thirty (30) days after the Final Acceptance Date. Tadau Energy shall be entitled to instruct the EPC Contractor to extend the validity period of the EPC 2 Performance Bond for such further period as may be determined by Tadau Energy, failing which Tadau Energy shall be entitled to make a claim on the EPC 2 Performance Bond prior to its expiry. EPC 2 Warranty bond Upon achieving EPC 2 Taking Over of the EPC 2 Works, the EPC Contractor shall provide Tadau Energy with an unconditional and irrevocable on-demand bank guarantee (“EPC 2 Warranty Bond”) for the value equivalent to ten percent (10%) of the total EPC 2 Contract Price, as a EPC 2 Warranty for Defects (as defined below) during the EPC 2 Warranty Period. The EPC 2 Warranty Bond shall be issued by a first class commercial bank operating in Malaysia. If by thirty (30) days prior to the expiry of the EPC 2 Warranty Period, there still remain substantial defects that have yet to be repaired, replaced or rectified in accordance with the EPC Contract 2, Tadau Energy shall be entitled to instruct the EPC Contractor to extend the validity period of the EPC 2 Warranty Bond for such further period as may be determined mutual agreement of the parties, failing which Tadau Energy shall be entitled to make a claim on the EPC 2 Warranty Bond prior to its expiry. (xi) Warranties The EPC Contractor warrants to Tadau Energy that: (a) the EPC 2 Works shall be designed, specified and constructed with due care and skill in accordance with Prudent Utility Practices, the specifications as set out in the EPC Contract 2 118
  129. and in a good and workmanlike manner and shall be free from defects in design , materials and workmanship; (b) all equipment and items installed in the EPC 2 Works shall be installed and all work shall be performed in accordance with Prudent Utility Practices and the specifications as set out in the EPC Contract 2; (c) title to the EPC 2 Works and any portions thereof conveyed to Tadau Energy (or its designee) by the EPC Contractor shall be of good title, free from any and all liens created by the EPC Contractor or its subcontractors; (d) the design, the components and the assembly of the EPC 2 Works shall be free of defects (both hidden or evident) during the EPC 2 Warranty Period (“EPC 2 Warranty for Defects”). The EPC 2 Warranty for Defects also includes a guarantee by the EPC Contractor to Tadau Energy that the PV modules and inverters included as part of the Unit 2 shall perform in accordance with the Plant 2 Warranties and any claim that is able to be made under such Plant 2 Warranties shall be a defect that Tadau Energy can directly claim against the EPC Contractor under the EPC 2 Warranty for Defects during the EPC 2 Warranty Period; (e) to the extent that the EPC Contractor has received the benefit of any Plant 2 Warranties or any warranties from any subcontractor which extends beyond the EPC 2 Warranty Period, the EPC Contractor shall assign the Plant 2 Warranties and warranties from any subcontractor to Tadau Energy and/or the Financing Parties; (f) the EPC 2 Works will comprise only materials and goods which are new and of sound quality; (g) a useful life of not less than twenty-one (21) years has been used as the basis of the design of the EPC 2 Works; (h) the operation and maintenance manuals provided by the EPC Contractor to Tadau Energy are fit for the purposes reasonably required by a person with adequate skill to operate, maintain, adjust and repair all parts of the EPC 2 Works; (i) the EPC 2 Works shall comply with all applicable laws and the provision of any applicable statute, ordinance or other law, or any regulation or bye-law of any local or other duly constituted authority, having the force of law made thereunder or deriving validity therefrom and any amendment or re-enactment of the same from time to time in force, provided always that the EPC 2 Works shall comply with the EIA Approval and such other environmental requirement issued by the relevant Department of Environment in Malaysia; and 119
  130. (j) the whole and each and every part or parts of the EPC 2 Works shall be fit for the purposes for which it is intended as set out in the specifications as set out in the EPC Contract 2. The EPC Contractor further represents and warrants that the EPC 2 Works shall be free from latent engineering or design defects and in the event any latent engineering or design defect, the EPC Contractor shall without charge to Tadau Energy take such remedial action as may be necessary to rectify the defect. The warranties given in under this provision shall continue for a period of sixty (60) months from the date of EPC 2 Taking Over (“EPC 2 Warranty Period”). The EPC Contractor undertakes that it shall take such actions as Tadau Energy may reasonably require to enforce any warranties given to the EPC Contractor by its subcontractor in respect of the EPC 2 Works. (xii) Defects Liability Period During the EPC 2 Defects Liability Period, being the period of twenty four (24) months following the issuance of the Taking-Over Certificate, subject to such other period as prescribed in the EPC Contract 2, the EPC Contractor shall, at its sole expense, be responsible for repairing or replacing any defective or damaged part of the EPC 2 Works which may appear or occur during the EPC 2 Defects Liability Period. The EPC 2 Defects Liability Period: (a) in respect of the completed EPC 2 Works comprising the SPP Interconnection Facility and SPP Interconnector, shall commence on the date of the taking over of the SPP Interconnection Facility and SPP Interconnector by Tadau Energy in accordance with the EPC Contract 2; (b) in respect of the completed EPC 2 Works comprising the SPP Works, shall commence on the date the EPC Contractor has handed over and effected the transfer of all rights, title and interest to the SPP Works to Tadau Energy in accordance with the EPC Contract 2; and (c) for the remaining completed EPC 2 Works, shall only commence on the date of EPC 2 Taking Over of the EPC 2 Works by Tadau Energy. The EPC 2 Defects Liability Period for the EPC 2 Works or such part(s) thereof shall be extended for a period of twenty four (24) months from the date of the completion of such replacement or repair, provided always that the EPC 2 Defects Liability Period shall not extend beyond a period of forty-eight (48) months from the date of the Taking-Over Certificate. If only part of the EPC 2 Works is affected, the EPC 2 Defects Liability Period shall be extended only for that part of the EPC 2 Works. 120
  131. (xiii) Liquidated damages EPC 2 Delay Liquidated Damages For each day of delay of the EPC 2 Works in achieving the EPC 2 Taking Over of the EPC 2 Works by the beyond the EPC 2 Guaranteed Completion Date that is not the result of a Force Majeure Event or a situation pursuant to which an extension of time may be granted in accordance with the provisions of EPC Contract 2, the EPC Contractor shall pay to Tadau Energy by way of liquidated damages the sum of Ringgit Malaysia One Hundred and Forty Four Thousand (RM144,000.00) only for each day of delay of the EPC 2 Works. Notwithstanding anything else to the contrary which may be contained or implied in the EPC Contract 2, the total of the liquidated damages for delay in EPC 2 Taking Over payable by the EPC Contractor under the EPC Contract 2 shall not exceed fifteen percent (15%) of the EPC 2 Contract Price. EPC 2 PR Warranty Liquidated Damages If the Unit 2 fails to meet the performance ratio set out in the EPC Contract 2 during the first two (2) years of the EPC 2 Warranty Period, the EPC Contractor shall pay Tadau Energy, as liquidated damages, an amount equal to one percent (1%) of the EPC 2 Contract Price for each one percent (1%) in shortfall of the performance ratio for the Unit 2, subject to a maximum of ten percent (10%) of the EPC 2 Contract Price. Limit of Liquidated Damages The total amount of liquidated damages payable by the EPC Contractor for EPC 2 Delay Liquidated Damages and/or EPC 2 PR Warranty Liquidated Damages shall not exceed twenty five percent (25%) of the EPC 2 Contract Price. (xiv) Indemnification and Liability Each party (the liable party) is liable to the other party (the injured party) for personal injury, death or property damage suffered by the injured party and/or third parties as a consequence of any act or omission by the liable party or its officer, directors, agents or employees arising in connection with the performance of the EPC Contract 2, except (i) workers compensation claims by any officers, directors, agents, employees, contractors and subcontractors of the injured party; and (ii) to the extent such injury, death or damage is attributable to the negligence or misconduct of, or breach of the EPC Contract 2, by the injured party. (xv) Force majeure For the purpose of the EPC Contract 2, a Force Majeure Event shall mean an event, condition, circumstance or its effect which: 121
  132. (a) is beyond the reasonable control of and occurs without fault or negligence on the part of the party claiming it as a Force Majeure Event; and (b) causes a delay or disruption in the performance of any obligation under the EPC Contract 2 despite all reasonable efforts of the party claiming it as a Force Majeure Event to prevent it or mitigate its effects. Subject to satisfying the foregoing criteria, Force Majeure Events include without limitation, the following: (xvi) (i) strikes or lockouts and/or other work stoppages or industrial action (other than those solely affecting the party claiming the same as a Force Majeure Event); (ii) acts of public enemies or terrorists or acts of, whether or not war is declared, invasion, acts of force by a foreign nation or embargo; (iii) public disorders, insurrection, rebellion, sabotage, riots or violent demonstrations; (iv) explosions, fire, earthquakes, landslides, subsidence, sabotage and/or other natural calamities and acts of God; (v) unusually severe weather conditions; (vi) expropriation or compulsory acquisition by any Government Entity; (vii) failure to obtain or renew any Government Authorisation; and (viii) any Force Majeure Event affecting the performance of any person that is a party to the Project Documents or other contract between Tadau Energy and such person relating to the operation or maintenance of the Unit 2. Effect of Force Majeure Event and Consequences Subject to the limitations set out in the EPC Contract 2, if either party is rendered unable by reason of a Force Majeure Event to perform any obligation under the EPC Contract 2, then upon that party giving notice of Force Majeure, those obligations of that party shall be suspended or excused to the extent their performance is affected by the Force Majeure Event. The EPC 2 Guaranteed Completion Date shall be extended by one (1) day for each day the EPC 2 Taking Over is delayed by a Force Majeure Event. (xvii) Right to Terminate under Force Majeure Either party may terminate the EPC Contract 2 with not less than thirty (30) days' notice if a force majeure event prevents either party from 122
  133. substantially performing any material obligations under the EPC Contract for a period which exceeds one hundred and eighty (180) days. While there is a right of termination as a result of a Force Majeure Event provided under the EPC Contract 2, the right is only exercisable upon giving thirty (30) days’ written notice if a Force Majeure Event is preventing either party from substantially performing any material obligation under the EPC Contract 2 for a period exceeding one hundred and eighty (180) days, subject to the following: (a) if a Force Majeure Event cannot be remedied within one hundred and eighty (180) days with the use of reasonable diligence then the one hundred and eighty (180) days period shall be extended by a further period of one hundred and eighty (180) days; and (b) if the party affected is unable to remedy the Force Majeure Event by the end of the further period of one hundred and eighty (180) days, then the parties shall consult as to what steps shall be taken with a view to mitigating or remedying the consequences of a Force Majeure Event. If the parties agree to extend the second period, then the above provisions apply with regards to the remedy and mitigation of the Force Majeure Event. If the parties are unable to agree to extend the further period of one hundred and eighty (180) days, then either party may terminate the EPC Contract 2 by giving thirty (30) days’ written notice of termination. (xviii) Insurance Tadau Energy shall at its own cost and expense procure and maintain in full force throughout the duration of the EPC Contract 2 such insurance(s) that is adequate and/or which may be required by law which Tadau Energy is subject to. (xix) Suspension and Termination Tadau Energy may at any time via an EPC 2 Variation Order instruct the EPC Contractor to (i) suspend completion of any or all the EPC 2 Works; or (ii) suspend the delivery of the Plant 2 or Contractor’s Equipment or other material which is ready for shipment to Site Bak Bak, Site Yong East and Site Yong West; or (iii) suspend the erection of the Plant 2 which has been delivered to Site Bak Bak, Site Yong East and Site Yong West. In the event of a prolonged suspension, Tadau Energy may terminate the EPC Contract 2 upon giving twenty one (21) days’ written notice to the EPC Contractor. Tadau Energy may for its convenience, terminate any part of the EPC 2 Works or all remaining EPC 2 Works or the EPC Contract 2 by giving thirty (30) days prior notice in writing to the EPC Contractor. In the event of partial termination of the EPC 2 Works, Tadau Energy shall authorise an EPC 2 Variation Order, making reasonable adjustments to one or more of the EPC 2 Contract Price, the EPC 2 123
  134. Guaranteed Completion Date , the Milestones, the Program, the Milestones Payment Schedule and such other provisions of the EPC Contract 2 which may be affected thereby, as appropriate. If EPC 2 NTP has not occurred by the EPC 2 NTP Deadline Date, and the parties are not able to reach agreement as to how to proceed within thirty (30) days after the EPC 2 NTP Deadline Date, either party shall be entitled to terminate the EPC Contract 2 immediately by written notice to the other party. Each of the following events shall constitute an event of default by the EPC Contractor, subject to the provisions of the EPC Contract 2: (a) the EPC Contractor fails to provide the Performance Security in accordance with the terms of the EPC Contract 2; (b) the EPC Contractor fails to pay Tadau Energy any amount which is due and payable under the EPC Contract 2 within sixty (60) days after receipt of notice of non-payment from Tadau Energy; (c) the EPC Contractor fails to comply with or operate in conformity with any material obligations of the EPC Contract 2 (other than a payment obligation) and such failure continues uncured for a period of thirty (30) days, after receipt of notice of such failure from Tadau Energy; (d) (i) the EPC Contractor is dissolved or liquidated, other than for the purpose of a voluntary dissolution or liquidation as part of a reorganisation or reincorporation; (ii) the EPC Contractor applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) the EPC Contractor admits in writing its inability to pay its debts as they fall due; (iv) the EPC Contractor makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (v) the EPC Contractor commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) the EPC Contractor fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; 124
  135. (vii) the EPC Contractor takes any action for the purpose of effecting any of the events described in items (i) through (v) above; (e) the Unit 2 delivers energy which is not solely driven by solar PV technology or the EPC 2 Works and/or the 48 MWac Project comprises energy storage devices; (f) the EPC 2 Works fail to achieve the Unit 2 COD within one hundred and twenty (120) days after the EPC 2 Guaranteed Completion Date; (g) the EPC Contractor Abandons the EPC 2 Works, after the Commencement Date and fails to resume activities within a period of time agreeable to Tadau Energy; (h) any representation made by the EPC Contractor herein shall be proved to have been false or misleading in any respect when made; (i) the PPA 2 is terminated by SESB due to an event of default or negligence of the EPC Contractor in the performance of its obligations and undertakings under the EPC Contract 2; (j) the liquidated damages payable in relation to EPC 2 Delay Liquidated Damages and/or EPC 2 PR Warranty Liquidated Damages have reached the maximum liquidated damages payable; (k) the EPC Contractor subcontracts the whole of the EPC 2 Works or assigns or transfers the EPC Contract 2 (or any right or interest herein) without the express written consent of Tadau Energy; or (l) the EPC Contractor fails to comply with the health, safety, environment and security requirements under the EPC Contract 2. Each of the following events shall constitute an event of default by Tadau Energy, subject to the provisions of the EPC Contract 2: (a) Tadau Energy fails to pay the EPC Contractor any amount of substantial nature which is due and payable under the EPC Contract 2 within sixty (60) days after receipt of notice of nonpayment from the EPC Contractor; (b) Tadau Energy fails to comply with or operate in conformity with any material obligations of the EPC Contract 2 (other than a payment obligation) and such failure, if capable of remedy, continues uncured for a period of ninety (90) days after receipt of notice of such failure from the EPC Contractor; 125
  136. (c) (d) (i) Tadau Energy is dissolved or liquidated, other than voluntary dissolution or liquidation as part of a reorganisation or reincorporation; (ii) Tadau Energy applies for or consents to a receiver, manager, custodian, trustee or liquidator being appointed over or taking possession of all or a substantial part of its assets; (iii) Tadau Energy admits in writing its inability to pay its debts as they fall due; (iv) Tadau Energy makes a general assignment or an arrangement or composition with or for the benefit of its creditors; (v) Tadau Energy commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganisation of its debts, winding-up or composition or readjustment of its debts; (vi) Tadau Energy fails to dispute in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under any bankruptcy or similar law; (vii) Tadau Energy takes any action for the purpose of effecting any of the events described in items (i) through (v) above; or the PPA 2 is terminated by SESB due to a default solely caused by Tadau Energy and which is not attributable to the EPC Contractor. If an event of default described above occurs (other than that described in paragraph (c) of the EPC Contractor’s events of default and paragraph (b) of Tadau Energy’s events of default above) that cannot be cured with the exercise of reasonable diligence within the period of thirty (30) days therein occurs, the non-defaulting party may terminate the EPC Contract 2 by giving seven (7) days’ written notice to the other party. If the event of default described in paragraph (c) of the EPC Contractor’s events of default or paragraph (b) of Tadau Energy’s events of default above occurs and cannot be cured with the exercise of reasonable diligence within the period of thirty (30) days specified therein, the cure period shall be extended by a further thirty (30) days and the default continues uncured at the end of such further period, the non-defaulting party may terminate the EPC Contract 2 immediately by giving written notice to the defaulting party. (xx) Consequences of Termination Event of default by the EPC Contractor Upon termination of the EPC Contract 2 by Tadau Energy: 126
  137. (a) Tadau Energy may proceed to complete the EPC 2 Works by the use of such other contractor or by such other methods as Tadau Energy may consider necessary or appropriate. (b) Tadau Energy may utilise and take possession of, free and clear of all liens, encumbrances, rights, title and interest in any materials, Plant 2, tools, equipment, design specific to the EPC 2 Works, work in progress, permits and records furnished by the EPC Contractor and paid for by Tadau Energy or reasonably necessary to complete the EPC 2 Works. (c) The EPC Contractor shall be liable for the amount by which the sum of all costs incurred by Tadau Energy in the completion of each portion of the EPC 2 Works to be paid to the new contractor appointed by Tadau Energy to complete the EPC 2 Works. (d) The EPC Contractor shall also assign to Tadau Energy all leases, contracts and applicable permits relating to the Unit 2 and the EPC 2 Works which Tadau Energy shall so request within fourteen (14) days of the termination. (e) Tadau Energy is entitled to make use of all parts, equipment and components belonging to the EPC Contractor but not within the scope of EPC 2 Works, which have been delivered and/or installed which are intended for the EPC 2 Works. (f) Tadau Energy may exercise any other remedy it may have hereunder or at law or in equity, including seeking the recovery of any other damages. (g) Save as provided for in the EPC Contract 2, Tadau Energy shall not be entitled to any consequential loss whatsoever including the reimbursement of any loss, expense, compensation, profit or damages as a result of or arising from the termination by the EPC Contractor of the EPC Contract 2. (h) Tadau Energy shall not be liable to make any further payments to the EPC Contractor until the cost of execution and all other costs incurred and losses sustained by Tadau Energy in the nature of those which Tadau Energy is entitled to recover and all other sums to which Tadau Energy is entitled under or by virtue of the EPC Contract have been ascertained and the amount payable approved by Tadau Energy. (i) If Tadau Energy terminates the EPC Contract 2 arising from or due to the EPC Contractor’s event of default due to a failure to achieve the Unit 2 COD within one hundred and twenty (120) days after the EPC 2 Guaranteed Completion Date or termination of the PPA 2 by SESB in accordance with the EPC Contract 2, Tadau Energy is and shall be entitled, but not obliged, to reject the whole or any part of the EPC 2 Works that has been performed by the EPC Contractor prior to the 127
  138. date that Tadau Energy issues the notice of such termination , and the EPC Contractor shall: (i) repay to Tadau Energy all amounts paid by Tadau Energy to the EPC Contractor in respect of the EPC 2 Works (or part of the Works that has been rejected); and (ii) at the EPC Contractor’s own cost, dismantle and remove the EPC 2 Works (or the rejected part of the EPC 2 Works) and its personnel, employees, labour and subcontractors from Site Bak Bak, Site Yong East and Site Yong West, and restore Site Bak Bak, Site Yong East and Site Yong West to its original condition as at the Commencement Date, provided that if Tadau Energy elects to exercise its right, relief and remedy under this provision, and upon the EPC Contractor complying with its obligations under this provision, the title in and to any EPC 2 Works dismantled and removed from Site Bak Bak, Site Yong East and Site Yong West will vest in the EPC Contractor. Event of default by the EPC Contractor Upon termination of the EPC Contract 2 by the EPC Contractor: (a) If the EPC Contractor terminates the EPC Contract 2 as a result of an event of default by Tadau Energy, Tadau Energy shall pay the EPC Contractor, in so far as such amount or items shall not have already been paid by Tadau Energy in accordance with the provisions of the EPC Contract 2, for the EPC 2 Works, which have been carried out and completed prior to the date of termination and in addition: (i) the amounts payable in respect of any preliminary items so far as the work or service comprised therein has been carried out and a proper proportion of any such item in which the work or service comprised has only been partially carried out; (ii) the cost of the Plant 2, materials or goods reasonably ordered for the EPC 2 Works which have been delivered to Tadau Energy or of which Tadau Energy is legally liable to accept delivery; and (iii) the reasonable cost of removal of the Contractor’s Equipment from Site Bak Bak, Site Yong East and Site Yong West and the return thereof to its original location, where any amount payable under this provision shall be paid by Tadau Energy within one hundred and eighty (180) days or such longer period as may be mutually agreed by the parties after the receipt of the EPC Contractor’s notice of termination. 128
  139. (xxi) (b) Upon payment being made by Tadau Energy in accordance with paragraph (a)(i) above, the EPC Contractor shall forthwith transfer the such of the Plant 2 and EPC 2 Works as is on Site Bak Bak, Site Yong East and Site Yong West to Tadau Energy and take all actions necessary to handover possession of Site Bak Bak, Site Yong East and Site Yong West to Tadau Energy (or its designee), free from encumbrances and any materials or goods ordered for the EPC 2 Works which have been delivered to the EPC Contractor or of which the EPC Contractor is legally liable to accept delivery including the benefits of any work or services in relation to the EPC 2 Works shall become the property of Tadau Energy and the EPC Contractor shall place the same at Tadau Energy’s disposal. (c) Save as provided in the EPC Contract 2, the EPC Contractor shall not be entitled to any consequential loss whatsoever including the reimbursement of any loss, expense, compensation, profit or damages as a result of or arising from the termination by Tadau Energy of the EPC Contract 2. (d) Upon termination of the EPC Contract 2 under this provision, the EPC Contractor shall be entitled to remove immediately all of the Contractor’s Equipment which is on Site Bak Bak, Site Yong East and Site Yong West subject to the EPC Contractor having paid and settled in full all of the outstanding amounts which are owing by the EPC Contractor to Tadau Energy. Prolonged Suspension, Termination Prolonged Force Majeure Event for Convenience and In the event of termination pursuant to a suspension, for convenience or due to a Force Majeure Event, the EPC Contractor shall be entitled to be paid an amount (the “Termination Payment”) equal to the sum of: (a) any scheduled payment due and owing to the EPC Contractor on or prior to the date of termination; (b) a pro-rata payment for the EPC 2 Works properly performed by the EPC Contractor and its subcontractors prior to the date of termination and not covered by paragraph (a) above; and (c) all actual and reasonable costs incurred by the EPC Contractor as a direct result of terminating and demobilizing all aspects of the EPC 2 Works properly performed by the EPC Contractor and its subcontractors under the EPC Contract 2 on or prior to the date of termination or such other works as may be instructed by Tadau Energy, but only to the extent such costs are not covered by payments previously made under this paragraph or under paragraphs (a) or (b) above. Tadau Energy shall pay the Termination Payment to the Contractor within ninety (90) days of Tadau Energy’s receipt of the relevant documentation required under the EPC Contract 2. The payment of 129
  140. the Termination Payment shall be the sole and exclusive remedy of the EPC Contractor with respect to termination pursuant to a suspension , for convenience or due to a Force Majeure Event. (xxii) Equivalent Project Relief Notwithstanding anything else to the contrary in the EPC Contract 2, where and to the extent that the circumstances or events giving rise to a claim for any form of relief or compensation by the EPC Contractor also gives rise to a claim for such relief or compensation by Tadau Energy under the PPA 2, the EPC Contractor shall only be entitled to such relief or compensation to the extent that Tadau Energy has been allowed equivalent relief or has been paid compensation under the PPA 2. (xxiii) Assignment The EPC Contractor shall not assign and shall not permit the creation of security interest in the EPC Contract 2 without the prior written consent of Tadau Energy. Subject to the provisions in the following paragraph, Tadau Energy may assign its rights and obligations under the EPC Contract 2 provided that Tadau Energy shall notify the EPC Contractor of the assignment. Any transfer of the controlling interest in the EPC Contractor to any person who is not a shareholder of the EPC Contractor on the date of execution of the EPC Contract 2 shall be deemed to be a transfer subject to this provision. The EPC Contractor acknowledges and agrees that Tadau Energy may assign the EPC Contract 2, all of its rights, benefits and obligations under the EPC Contract 2 including all warranties to the Financing Parties by way of security for the performance of obligations to the Financing Parties. The EPC Contractor further accepts that in the event of a default under the Financing Documents it shall accept as substitute for Tadau Energy, under the EPC Contract 2, the agent, trustee or nominee of the Financing Parties and notwithstanding any provisions of this contract which entitles the EPC Contractor to terminate the EPC Contract 2 for the default of Tadau Energy, shall afford the Financing Parties an opportunity to remedy the default by Tadau Energy and/or to provide a substitute for Tadau Energy under the EPC Contract 2, within such reasonable time, before giving effect to any termination under the EPC Contract 2. If any Financing Party requests the EPC Contractor to consent in writing to such assignment (even though such consent is not required under the EPC Contract 2), the EPC Contractor shall do so promptly with such acknowledgement and agreement to include such terms and conditions as required by the Financing Parties. At Tadau Energy’s request, the EPC Contractor shall provide to any Financing Party a certificate from the EPC Contractor and/or an opinion of legal counsel addressed to such Financing Party concerning such matters as such Financing Party reasonably requests from the EPC Contractor. If any Financing Party requests the EPC Contractor to consent in 130
  141. writing to such assignment , the EPC Contractor shall do so promptly with such acknowledgement and agreement to include such terms and conditions as required by the Financing Parties. (xxiv) Dispute resolution The EPC Contract 2 is governed by, and shall be construed in accordance with the laws of Malaysia. If any dispute in relation to the EPC Contract 2 cannot be resolved between the parties by mutual agreement in the manner provided thereunder, then such dispute shall be settled exclusively and finally by arbitration conducted in accordance with the Rules for Arbitration of the Regional Centre for Arbitration at Kuala Lumpur. Each arbitration shall be conducted in Kuala Lumpur, Malaysia. (xxv) Change in Law Adjustment If there is a Change-in-Law which requires the EPC Contractor to make any material capital improvement or other material modification to the EPC 2 Works, the cost of which is in excess of the capital improvement threshold of Ringgit One Million (RM1,000,000.00) in any calendar year, which material capital improvement or other material modification is required for the purpose of enabling the EPC Contractor to fulfil its obligations under the Project Documents in compliance with such Change-in-Law, the EPC Contractor and Tadau Energy shall determine, in good faith, any extension to the EPC 2 Guaranteed Completion Date or any adjustments to be made to the EPC 2 Contract Price. The parties shall use their respective best efforts to limit the remedy to an extension of the EPC 2 Guaranteed Completion Date only, and only in the event it is not commercially and reasonably feasible to do so, resort to an adjustment to the EPC 2 Contract Price. (xxvi) Goods and Services Tax The price quoted by the EPC Contractor for any taxable supplies to be made under the EPC Contract 2 is exclusive of goods and services tax. The parties acknowledge and agree that if the goods and services tax is imposed on any supplies made by the EPC Contractor under the EPC Contract 2, the EPC Contractor is entitled to charge goods and services tax on Tadau Energy for the payment of the supply. 4.5.3 Lease Agreements 4.5.3.1 Lease Agreement – (Site Yong East) The following section incorporates the key terms and conditions that are contained in the Lease Agreement – (Site Yong East). In respect of defined terms in this Section 4.5.3.1, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Lease Agreement – (Site Yong East). 131
  142. (i) Overview Pursuant to the Lease Agreement – (Site Yong East) dated 16 December 2016 entered into between the registered proprietor of the said Land as the Lessor and the Issuer as the Lessee, the Lessor has agreed to lease the land held under said Land, being Country Lease No. CL. 055322953 measuring approximately 9.72 acres and (ii) Country Lease No. CL. 055025824 measuring approximately 8 acres to the Issuer and the Issuer has agreed to accept the lease of the said Land for the Permitted Use, being the developing, constructing, owning, operating and maintaining a solar PV generating facility and other lawful purposes reasonably related to or incidental to such specified uses and for no other purpose, upon the terms and conditions contained therein. (ii) Lease Term The lease under Lease Agreement – (Site Yong East) shall be for the Term, being twenty four (24) years commencing from the date of the Lease Agreement – (Site Yong East). Upon the expiry of the lease, the lease may be extended for a further period of five (5) years subject to the following: (iii) (a) the term of the respective PPAs has been extended by SESB in accordance with the terms and conditions thereto; (b) the renewal of the lease shall be upon identical terms and conditions save for the rental rate to be mutually agreed upon between the parties; and (c) the Issuer shall give to the Lessor not less than two (2) months’ notice of the Issuer’s intention to exercise this option prior to the expiry of the lease. Rent The Rent under the Lease Agreement – (Site Yong East) shall be payable upon the satisfaction of the following conditions within six (6) months from the date of the Lease Agreement – (Site Yong East): (i) each of the PPAs have been executed; and (ii) the Memorandum of Sublease has been successfully registered with the Land Registry in accordance the Lease Agreement – (Site Yong East). If the conditions mentioned above have not been satisfied in full before the date being six (6) months from the date of the Lease Agreement – (Site Yong East), an extension of time shall be mutually agreed upon by the parties thereto and the parties may enter into a supplementary agreement to vary the terms of the Lease Agreement – (Site Yong East). For the avoidance of doubt, the Deposit shall be refundable to the Lessee in the event if the Lease Agreement – (Site Yong East) is terminated as a result of the 2 MWac Project or the 48 132
  143. MWac Project being aborted due to either of the conditions mentioned above not being satisfied in full , i.e. the termination of the relevant PPA prior to the conditions mentioned above being satisfied in full. Subject to the terms and conditions of the Lease Agreement – (Site Yong East), the Rent shall be paid by the Issuer to the Lessor no later than the seventh (7th) day of each month commencing from the date of satisfaction of the conditions above. (iv) Delivery of Vacant Possession Vacant possession of the said Land must be delivered by the Lessor to the Issuer free from Encumbrances no later than seven (7) days from the date of the Lease Agreement – (Site Yong East). (v) Assignment The Lessor shall have the right to apply for financing with any financial institution to create a mortgage, charge and/or lien on the rights and interests of the said Land solely for the purposes of paying the premium in the event that the said Land is required to be converted/rezoned due to the Permitted Use on the said Land provided that the Lessor shall obtain prior written approval of the Issuer which shall not be unreasonably withheld. The Issuer shall have the right to apply for financing with any financial institution including to create legal assignment over the lease they have on the said Land. The Issuer shall not create a charge affecting the Lessor’s rights over the said Land. Neither party shall under the Lease Agreement – (Site Yong East) assign any of its rights under the Lease Agreement – (Site Yong East) without the prior written consent of the other party. (vi) Right to Sub-Lease Neither the Lessor not the Issuer shall, without the prior written consent of the other party, sub-let or grant any license to use the said Land or any part thereof to any third party. (vii) First Right of Refusal The Lessor has granted to the Issuer a first right of refusal to purchase the said Land at any time during the Term and any extensions thereof. If the Lessor wishes to sell the said Land and received a bona fide offer to purchase the said Land, the Lessor shall give the Issuer written notice of the Lessor’s intention to sell the said Land with the terms and conditions as contained in the aforesaid offer to purchase. The Issuer shall have the option to purchase the said Land at the same price and under the same terms as stated in the aforementioned Lessor’s notice. In the event the Issuer does not respond to the Lessor within thirty (30) days of receiving the Lessor’s notice, the Lessor shall have the right to proceed with the sale of the said Land without any further obligation to the Issuer, provided always that the sale of the 133
  144. said Land shall be subject to the Lease Agreement – (Site Yong East) and the duly registered Memorandum of Sublease. (viii) Termination Termination by the Lessor If: (i) the Rent or any part thereof shall be in arrears and unpaid at any time for thirty (30) days; (ii) any covenants, stipulations or agreements on the part of the Issuer contained in the Lease Agreement – (Site Yong East) are not performed or observed; or (iii) the Issuer is wound up or becomes incapable or carrying on the business for whatsoever reason or is issued with a bankruptcy or winding-up petition, the Lessor shall give fourteen (14) days’ notice to the Issuer for the Issuer to settle the arrears and unpaid Rent to the Lessor or to rectify the default, failing which upon the expiry of the fourteen (14) days’ notice, it shall be lawful for the Lessor to re-enter upon the said Land and thereupon the Lease Agreement – (Site Yong East) shall be terminated. Termination by the Issuer In the event any of the PPAs is terminated or has expired before the end of the Term, the Issuer shall give the Lessor two (2) months’ written notice for the termination of the Lease Agreement – (Site Yong East). (ix) Consequences of Termination At the expiration or sooner determination of the lease, the Issuer shall peaceably and quietly yield up the said Land after having restored the said Land as near as possible to its original state and condition at the Issuer’s cost and expenses in accordance with the Lease Agreement – (Site Yong East). 4.5.3.2 Lease Agreement – (Site Yong West 1) The following section incorporates the key terms and conditions that are contained in the Lease Agreement – (Site Yong West 1). In respect of defined terms in this Section 4.5.3.2, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Lease Agreement – (Site Yong West 1). 134
  145. (i) Overview Pursuant to the Lease Agreement – (Site Yong West 1) dated 16 December 2016 entered into between the registered proprietor of the said Land as the Lessor and the Issuer as the Lessee, the Lessor has agreed to lease the land held under said Land, being Country Lease No. CL. 055022529 measuring approximately 20.143 acres to the Issuer and the Issuer has agreed to accept the lease of the said Land for the Permitted Use, being the developing, constructing, owning, operating and maintaining a solar PV generating facility and other lawful purposes reasonably related to or incidental to such specified uses and for no other purpose, upon the terms and conditions contained therein. The terms of the Lease Agreement – (Site Yong West 1) are substantially similar to the terms of the Lease Agreement – (Site Yong East) as described in Section 4.5.3.1 of this Information Memorandum, save that (i) references to the power purchase agreement therein shall be of the PPA 2 and (ii) references to the Project therein shall be of the 48 MWac Project. 4.5.3.3 Lease Agreement – (Site Yong West 2) The following section incorporates the key terms and conditions that are contained in the Lease Agreement – (Site Yong West 2). In respect of defined terms in this Section 4.5.3.3, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Lease Agreement – (Site Yong West 2). (i) Overview Pursuant to the Lease Agreement – (Site Yong West 2) dated 16 December 2016 entered into between the registered proprietor of the said Land as the Lessor and the Issuer as the Lessee, the Lessor has agreed to lease the land held under said Land, being (i) Country Lease No. CL. 055026830 measuring approximately 49.75 acres and (ii) Country Lease No. CL. 055022485 measuring approximately 3.212 acres to the Issuer and the Issuer has agreed to accept the lease of the said Land for the Permitted Use, being the developing, constructing, owning, operating and maintaining a solar PV generating facility and other lawful purposes reasonably related to or incidental to such specified uses and for no other purpose, upon the terms and conditions contained therein. The terms of the Lease Agreement – (Site Yong West 2) are substantially similar to the terms of the Lease Agreement – (Site Yong East) as described in Section 4.5.3.1 of this Information Memorandum, save that (i) references to the power purchase agreement therein shall be of the PPA 2 and (ii) references to the Project therein shall be of the 48 MWac Project. 135
  146. 4 .5.3.4 Lease Agreement – (Site Bak Bak) The following section incorporates the key terms and conditions that are contained in the Lease Agreement – (Site Bak Bak). In respect of defined terms in this Section 4.5.3.4, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Lease Agreement – (Site Bak Bak). (i) Overview Pursuant to the Lease Agreement – (Site Bak Bak) dated 28 December 2016 entered into between JS Premier Corporation Sdn Bhd (Company No. 900028-X) as the Lessor and the Issuer as the Lessee, the Lessor has agreed to lease a portion measuring 35 acres of the land held under Country Lease No. CL. 055028192 measuring approximately 54 acres to the Issuer and the Issuer has agreed to accept the lease of the said Land for the Permitted Use, being the developing, constructing, owning, operating and maintaining a solar PV generating facility and other lawful purposes reasonably related to or incidental to such specified uses and for no other purpose, upon the terms and conditions contained therein. The terms of the Lease Agreement – (Site Bak Bak) are substantially similar to the terms of the Lease Agreement – (Site Yong East) as described in Section 4.5.3.1 of this Information Memorandum, save that: (i) references to the power purchase agreement therein shall be of the PPA 2; (ii) references to the Project therein shall be of the 48 MWac Project; and (iii) if: (a) the Rent or any part thereof shall be in arrears and unpaid at any time for thirty (30) days; (b) any covenants, stipulations or agreements on the part of the Issuer contained in the Lease Agreement – (Site Bak Bak) are not performed or observed; or (c) the Issuer is wound up or becomes incapable or carrying on the business for whatsoever reason or is issued with a bankruptcy or winding-up petition, it shall be lawful for the Lessor to re-enter upon the said Land and thereupon the Lease Agreement – (Site Bak Bak) shall be terminated. There is no provision for the Lessor to give fourteen (14) days’ notice to the Issuer for the Issuer to settle the arrears and unpaid Rent to the Lessor or to rectify the default. 136
  147. 4 .5.3.5 Lease Agreement – (Site Yong West 3) The following section incorporates the key terms and conditions that are contained in the Lease Agreement – (Site Yong West 3). In respect of defined terms in this Section 4.5.3.5, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Lease Agreement – (Site Yong West 3). (i) Overview Pursuant to the Lease Agreement – (Site Yong West 3) dated 8 March 2017 entered into between the registered proprietors of the said Land as the Lessors and the Issuer as the Lessee, the Lessors has agreed to lease a portion measuring 5 acres held under Country Lease No. CL. 055021764 measuring approximately 23 acres to the Issuer and the Issuer has agreed to accept the lease of the said Land for the Permitted Use, being the developing, constructing, owning, operating and maintaining a solar PV generating facility and other lawful purposes reasonably related to or incidental to such specified uses and for no other purpose, upon the terms and conditions contained therein. The terms of the Lease Agreement – (Site Yong West 3) are substantially similar to the terms of the Lease Agreement – (Site Yong East) as described in Section 4.5.3.1 of this Information Memorandum, save for the following: (i) references to the power purchase agreement therein shall be of the PPA 2; (ii) references to the Project therein shall be of the 48 MWac Project; (iii) the lease under Lease Agreement – (Site Yong West 3) shall be for the Term, being twenty three (23) years commencing from the date of the Lease Agreement – (Site Yong West 3); (iv) the Rent under the Lease Agreement – (Site Yong West 3) shall be payable upon the satisfaction of the following conditions within six (6) months from the date of the Lease Agreement – (Site Yong West 3): (a) a satisfactory land survey on the said Land has been accepted by the Issuer; (b) achievement of the Unit 2 COD; and (c) the Memorandum of Sublease has been successfully registered with the Land Registry in accordance the Lease Agreement – (Site Yong West 3). If the conditions mentioned above have not been satisfied in full before the date being six (6) months from the date of the Lease Agreement – (Site Yong West 3), an extension of time 137
  148. shall be mutually agreed upon by the parties thereto and the parties may enter into a supplementary agreement to vary the terms of the Lease Agreement – (Site Yong West 3). For the avoidance of doubt, the Deposit shall be refundable to the Issuer in the event any of the conditions mentioned above is not satisfied in full. (v) there is no provision for the Lessors to apply for financing with any financial institution to create a mortgage, charge and/or lien on the rights and interests of the said Land solely for the purposes of paying the premium in the event that the said Land is required to be converted/rezoned due to the Permitted Use on the said Land; and (vi) The Issuer shall give the Lessors two (2) months’ written notice for the termination of the Lease Agreement – (Site Yong West 3). However, there is no requirement for the relevant power purchase agreement to be terminated or expired before the end of the Term. 4.5.3.6 Lease Agreement – (Site Yong West 4) The following section incorporates the key terms and conditions that are contained in the Lease Agreement – (Site Yong West 4). In respect of defined terms in this Section 4.5.3.6, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Lease Agreement – (Site Yong West 4). (i) Overview Pursuant to the Lease Agreement – (Site Yong West 4) dated 8 March 2017 entered into between the registered proprietors of the said Land as the Lessors and the Issuer as the Lessee, Lessor has agreed to lease the land held under said Land, being Country Lease No. CL. 055021782 measuring approximately 14 acres to the Issuer and the Issuer has agreed to accept the lease of the said Land for the Permitted Use, being the developing, constructing, owning, operating and maintaining a solar PV generating facility and other lawful purposes reasonably related to or incidental to such specified uses and for no other purpose, upon the terms and conditions contained therein. The terms of the Lease Agreement – (Site Yong West 4) are substantially similar to the terms of the Lease Agreement – (Site Yong East) as described in Section 4.5.3.1 of this Information Memorandum, save for the following: (i) references to the power purchase agreement therein shall be of the PPA 2; (ii) references to the Project therein shall be of the 48 MWac Project; 138
  149. (iii) the lease under Lease Agreement – (Site Yong West 4) shall be for the Term, being twenty three (23) years commencing from the date of the Lease Agreement – (Site Yong West 4); (iv) the Rent under the Lease Agreement – (Site Yong West 4) shall be payable upon the satisfaction of the following conditions within six (6) months from the date of the Lease Agreement – (Site Yong West 4): (a) a satisfactory land survey on the said Land has been accepted by the Issuer; (b) achievement of the Unit 2 COD; and (c) the Memorandum of Sublease has been successfully registered with the Land Registry in accordance the Lease Agreement – (Site Yong West 4). If the conditions mentioned above have not been satisfied in full before the date being six (6) months from the date of the Lease Agreement – (Site Yong West 4), an extension of time shall be mutually agreed upon by the parties thereto and the parties may enter into a supplementary agreement to vary the terms of the Lease Agreement – (Site Yong West 4). For the avoidance of doubt, the Deposit shall be refundable to the Issuer in the event any of the conditions mentioned above is not satisfied in full. (v) there is no provision for the Lessor to apply for financing with any financial institution to create a mortgage, charge and/or lien on the rights and interests of the said Land solely for the purposes of paying the premium in the event that the said Land is required to be converted/rezoned due to the Permitted Use on the said Land; and The Issuer shall give the Lessors two (2) months’ written notice for the termination of the Lease Agreement – (Site Yong West 4). There is no requirement for the relevant power purchase agreement to be terminated or expired before the end of the Term. 4.5.3.7 Lease Agreement – (Site Yong West 5) The following section incorporates the key terms and conditions that are contained in the Lease Agreement – (Site Yong West 5). In respect of defined terms in this Section 4.5.3.7, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Lease Agreement – (Site Yong West 5). (i) Overview Pursuant to the Lease Agreement – (Site Yong West 5) dated 8 March 2017 entered into between the registered proprietor of the said Land as the Lessor and the Issuer as the Lessee, Lessor has agreed to lease the land held under said Land, being Country Lease No. CL. 139
  150. 055024274 measuring approximately 25 acres to the Issuer and the Issuer has agreed to accept the lease of the said Land for the Permitted Use , being the developing, constructing, owning, operating and maintaining a solar PV generating facility and other lawful purposes reasonably related to or incidental to such specified uses and for no other purpose, upon the terms and conditions contained therein. The terms of the Lease Agreement – (Site Yong West 5) are substantially similar to the terms of the Lease Agreement – (Site Yong East) as described in Section 4.5.3.1 of this Information Memorandum, save for the following: (i) references to the power purchase agreement therein shall be of the PPA 2; (ii) references to the Project therein shall be of the 48 MWac Project; (iii) the lease under Lease Agreement – (Site Yong West 5) shall be for the Term, being twenty three (23) years commencing from the date of the Lease Agreement – (Site Yong West 5); (iv) the Rent under the Lease Agreement – (Site Yong West 5) shall be payable upon the satisfaction of the following conditions within six (6) months from the date of the Lease Agreement – (Site Yong West 5): (a) a satisfactory land survey on the said Land has been accepted by the Issuer; (b) achievement of the Unit 2 COD; and (c) the Memorandum of Sublease has been successfully registered with the Land Registry in accordance the Lease Agreement – (Site Yong West 5). If the conditions mentioned above have not been satisfied in full before the date being six (6) months from the date of the Lease Agreement – (Site Yong West 5), an extension of time shall be mutually agreed upon by the parties thereto and the parties may enter into a supplementary agreement to vary the terms of the Lease Agreement – (Site Yong West 5). For the avoidance of doubt, the Deposit shall be refundable free of interest to the Issuer in the event any of the conditions mentioned above is not satisfied in full. For this purpose, the Issuer shall give a one (1) month notice to the Lessors of the termination of the Lease Agreement – (Site Yong West 5) to which upon expiry of the one (1) month notice, the Lessors shall refund the Deposit paid earlier by the Issuer to the Issuer free of interest, failing which the Lessors shall be liable to pay the Issuer interest on the amount to be refunded at the rate of eight percent (8%) per annum and such interest shall be calculated on a daily basis from the date on which the amount 140
  151. to be refunded until such money is actually refunded to the Issuer ; 4.5.4 (v) there is no provision for the Lessor to apply for financing with any financial institution to create a mortgage, charge and/or lien on the rights and interests of the said Land solely for the purposes of paying the premium in the event that the said Land is required to be converted/rezoned due to the Permitted Use on the said Land; and (vi) The Issuer shall give the Lessors two (2) months’ written notice for the termination of the Lease Agreement – (Site Yong West 5). There is no requirement for the relevant power purchase agreement to be terminated or expired before the end of the Term. Operations and Maintenance Agreements 4.5.4.1 Operations and Maintenance Agreement 1 The following section incorporates the final agreed terms and conditions that are contained in the O&M Agreement 1. In respect of defined terms in this Section 4.5.4.1 only, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Operation and Maintenance Agreement 1. (i) Overview The O&M Agreement 1 is in final agreed form and will be entered into between Tadau Energy and the O&M Contractor, whereby Tadau Energy will appoint the O&M Contractor to execute the works under the O&M Agreement 1; namely, the provision or procurement and the performance of all the works, services, supplies and other activities necessary to operate and maintain Unit 1 and any ancillary or related facilities, in accordance with the O&M Agreement 1. (ii) Term The term of the O&M Agreement 1 shall be for the period from the date of the O&M Agreement (“O&M 1 Effective Date”) until the date falling twenty four (24) months after the COD of Unit 1, unless terminated earlier or extended further in accordance with the provisions of the O&M Agreement 1 (the “O&M 1 Term”). Tadau Energy may renew the O&M 1 Term for a further period of one (1) year by giving the O&M Contractor two (2) months prior notice, upon the same terms and conditions in the O&M Agreement 1 save for the O&M 1 Services Fee (as defined below), which the parties shall negotiate and finally agree in writing. (iii) Services Fee For the O&M 1 Services (as defined below) provided by the O&M Contractor under the O&M Agreement 1, Tadau Energy shall pay the 141
  152. O &M Contractor a fixed annual operations and maintenance services fee in the amount of Ringgit Malaysia Eight Hundred Seventeen Thousand and Five Hundred (RM817,500) (“O&M 1 Services Fee”), which, subject to the terms of the O&M Agreement 1, shall be a fixed, lump sum amount exclusive of statutory taxes. The O&M 1 Services Fee shall be payable in monthly instalments during the O&M 1 Term, commencing from the Commercial Operation Date (as defined in the EPC Contract 1). (iv) Obligations of the O&M Contractor The O&M Contractor shall perform the obligations set forth in the O&M Agreement 1, including the following: (a) (b) from the day following the date Tadau Energy issues a mobilisation notice in writing to the O&M Contractor or the date the EPC 1 NTP Notice is issued under the EPC Contract 1, whichever is earlier, up to the day preceding the COD of Unit 1, the O&M Contractor shall: (i) develop the operational and budgetary procedures in relation to the O&M 1 Services (as defined below); (ii) obtain necessary licenses for its carrying out of the O&M 1 Services; (iii) establish a temporary operating office at Site Yong East; and (iv) commence hiring of staff providing the O&M 1 Services and coordinate staffing requirements in consultation with Tadau Energy; from the COD of Unit 1 up to and including the date immediately preceding the Provisional Acceptance Date, the O&M Contractor shall: (i) operate and maintain the portions of the Unit 1 that are producing net electrical energy, on a seven (7)-day per week, twenty-four (24) hour per day basis in accordance with the terms of the O&M Agreement 1 and the EPC Contract 1; (ii) take delivery of various spare parts and consumables; (iii) develop long term operating budgets; (iv) develop start-up plans for the Unit 1; and (v) perform, or support performance by Tadau Energy of the forecasting responsibilities as reasonably required by Tadau Energy from time to time and without additional cost by the O&M Contractor; 142 operating plans and annual
  153. (c) from the Provisional Acceptance Date under the EPC Contract 1 up to and including the last day of the O&M 1 Term, the O&M Contractor shall: (i) operate and maintain the entire Unit 1 on a seven (7)day per week, twenty-four (24) hour per day basis in accordance with the O&M Agreement 1 and the EPC Contract 1; (ii) assist Tadau Energy in obtaining and renewing permits and licenses in relation to the Unit 1; (iii) to provide the performance data of the Unit 1 as required under the O&M Contract 1 and perform scheduled and unscheduled maintenance when necessary; (iv) perform scheduled and unscheduled maintenance when necessary; (v) manage on behalf of Tadau Energy, all equipment and systems guarantees available for the Unit 1 and potential equipment warranty claims; (vi) perform, or support performance by Tadau Energy of the forecasting responsibilities set forth in PPA 1; and (vii) assist Tadau Energy in taking over the Unit 1 at the Final Acceptance Date under the EPC Contract 1; (d) starting from eighteen (18) months after the commencement of the O&M 1 Term, the O&M Contractor shall include personnel designated by Tadau Energy in the performance of relevant O&M 1 Services for the purpose of training and ensuring a smooth transition in handing over the O&M 1 Services to Tadau Energy. Notwithstanding the foregoing, all O&M 1 Services will remain controlled and supervised by the EPC Contractor during the O&M 1 Term; and (e) during the O&M 1 Term of the O&M Agreement 1, the scope of services as set forth in Exhibit A (Scope of Work) and Exhibit B (Salient Terms of Project Documents) of the O&M Agreement 1, (collectively, the “O&M 1 Services”). (v) Availability Guarantee and Liquidated Damages The O&M Contractor guarantees that the Unit 1 will achieve an Availability, as calculated in accordance with the O&M Agreement 1, of ninety nine percent (99%) during each calendar year following the COD of Unit 1 and every year thereafter (“O&M 1 Guaranteed Availability”). 143
  154. If , as determined at the end of any such calendar year, the Availability is less than the O&M 1 Guaranteed Availability, then: (vi) (a) for the first (1st) twelve (12) months of the O&M 1 Term, the O&M Contractor shall pay as liquidated damages to Tadau Energy an amount equal to three percent (3%) of the O&M 1 Services Fee for the relevant period for each one per cent (1%) shortfall below the O&M 1 Guaranteed Availability, with such liquidated damage amount pro-rated to any fractional portion of such shortfall, subject to the maximum amount of liquidated damages liable to be paid by the O&M Contractor under the O&M Agreement 1, being capped at fifteen percent (15%) of the O&M 1 Services Fee for the relevant period (“O&M 1 15% Cap”); and (b) for the second (2nd) twelve (12) months of the O&M 1 Term, the O&M Contractor shall pay as liquidated damages to Tadau Energy an amount equal to six percent (6%) of the O&M 1 Services Fee for the relevant period for each one percent (1%) shortfall below the O&M 1 Guaranteed Availability, with such liquidated damage amount prorated to any fractional portion of such shortfall, subject to the maximum amount of liquidated damages liable to be paid by the O&M Contractor under the O&M Agreement 1 being capped at thirty percent (30%) of the O&M 1 Services Fee for the relevant period (“O&M 1 30% Cap”). Limitations on Liability Liability for Indirect Damage Neither party to the O&M Agreement 1 shall be liable to the other for any damages, including damages in for loss of anticipated profits, loss of use, loss of revenue or loss of goodwill. Maximum Liability Each party’s maximum liability to the other party under the O&M Agreement 1 for any 12-calendar-month period of the O&M 1 Term shall be the total O&M 1 Services Fee payable during such period. (vii) Insurance The O&M Contractor shall obtain and maintain the insurance coverages as specified below throughout the O&M 1 Term: (a) comprehensive general liability or third party liability or public liability insurance; (b) automotive liability insurance; (c) workmen’s compensation and/or employee’s liability and/or similar statutory social insurance as required by law; (d) professional indemnity insurance; and 144
  155. (e) fidelity guarantee insurance. The insurance policies procured and maintained by the O&M Contractor as specified in the O&M Agreement 1 shall comply with the following requirements: (a) naming Tadau Energy, the Financing Parties, such other person as may be deemed necessary under the Project Documents; (b) include a waiver of all express and implied rights of subrogation against Tadau Energy, the Financing Parties, and such other person as may be deemed necessary under the Project Documents for all insurances; and (c) shall cause the insurers to endorse such policies of insurances and to provide Tadau Energy with not less than thirty (30) days’ notice of any cancellation or material amendment thereof. Tadau Energy shall obtain and maintain insurance coverages as set forth in Exhibit E (Employer’s Insurances) of the O&M Agreement 1. (viii) Performance Bond The O&M Contractor shall deliver to Tadau Energy a performance bond in the value equivalent to twenty percent (20%) of the total O&M 1 Services Fee for the O&M 1 Term (“O&M 1 Performance Bond”), which shall be an unconditional and irrevocable on-demand bank guarantee issued by a commercial bank in Malaysia as approved by Tadau Energy, payable in Ringgit Malaysia, as security for the due performance by the O&M Contractor of its obligations under the O&M Agreement 1. The O&M Contractor shall maintain and renew if necessary the O&M 1 Performance Bond so that it shall remain in full force and effect until a date thirty (30) days after the expiry of the O&M 1 Term or termination of the O&M Agreement 1 in accordance with the provisions set out therein, whichever earlier, and the delivery of the O&M 1 Performance Bond shall be a condition precedent to any payments by Tadau Energy to the O&M Contractor under the O&M Agreement. (ix) Termination (a) Tadau Energy may terminate the O&M Agreement 1: (i) if the O&M Contractor becomes insolvent; (ii) if the liquidated damages arising under the O&M Agreement 1 is equal to or exceeds the 15% Cap or the 30% Cap; 145
  156. (b) (x) (xi) (iii) if the O&M Contractor fails to perform any of its material obligations and such failure is not cured within fourteen (14) days of notice from Tadau Energy demanding a cure (or, if not curable within the aforesaid fourteen (14) days, within a reasonable period but in any event not more than thirty (30) days; (iv) for any reason in Tadau Energy’s sole discretion upon sixty (60) days’ prior written notice to the O&M Contractor. The O&M Contractor may only terminate the O&M Agreement 1 in the event Tadau Energy fails to pay the O&M 1 Services Fee in accordance with the O&M Agreement 1. Right to Terminate (a) If a Force Majeure Event prevents either party of the O&M Agreement 1 from substantially performing any material obligation under the O&M Agreement 1 for a period which exceeds one hundred and eighty (180) days, either party may terminate the O&M Agreement 1 by giving thirty (30) days’ written notice of termination, unless the provisions of item (b) below apply. (b) If a Force Majeure Event which prevents either party from substantially performing any material obligation under the O&M Agreement 1 cannot be remedied within one hundred and eighty (180) days with the use of reasonable diligence, then that period shall be extended for a further period of one hundred and eighty (180) days. Assignment The O&M Contractor shall not assign the O&M Agreement 1 or its rights and obligations arising from the O&M Agreement 1 and shall not permit the creation of a security interest in the O&M Agreement 1 without the prior written consent of Tadau Energy. Tadau Energy may assign the O&M Agreement 1, all of its rights, benefits and obligations under the O&M Agreement 1, including all warranties, to the Financing Party by way of security for the performance of Tadau Energy’s obligations to the Financing Party. In the event of a default under the Financing Documents, the O&M Contractor shall accept as substitute for Tadau Energy under the O&M Agreement 1, the agent, trustee or nominee of the Financing Party. 4.5.4.2 Operations and Maintenance Agreement 2 The following section incorporates the final agreed terms and conditions that are contained in the O&M Agreement 2. In respect of defined terms in this Section 4.5.4.2 only, where the same is not defined elsewhere in this Information Memorandum, the defined terms have the meaning ascribed to them in the Operation and Maintenance Agreement 2. 146
  157. (i) Overview The O&M Agreement 2 is in final agreed form and will be entered into between Tadau Energy and the O&M Contractor, whereby Tadau Energy will appoint the O&M Contractor to execute the works under the O&M Agreement 2; namely, the provision or procurement and the performance of all the works, services, supplies and other activities necessary to operate and maintain Unit 2 and any ancillary or related facilities, in accordance with the O&M Agreement 2. (ii) Term The term of the O&M Agreement 2 shall be for the period from the date of the O&M Agreement (“O&M 2 Effective Date”) until the date falling twenty four (24) months after the COD of Unit 2, unless terminated earlier or extended further in accordance with the provisions of the O&M Agreement 2 (the “O&M 2 Term”). Tadau Energy may renew the O&M 2 Term for a further period of one (1) year by giving the O&M Contractor two (2) months prior notice, upon the same terms and conditions in the O&M Agreement 2 save for the O&M 2 Services Fee (as defined below), which the parties shall negotiate and finally agree in writing. (iii) Services Fee For the O&M 2 Services provided by the O&M Contractor under the O&M Agreement 2, Tadau Energy shall pay the O&M Contractor a fixed annual operations and maintenance services fee in the amount of Ringgit Malaysia Two Million Four Hundred Fifty Two Thousand and Five Hundred (RM2,452,500) (“O&M 2 Services Fee”), which, subject to the terms of the O&M Agreement 2, shall be a fixed, lump sum amount exclusive of statutory taxes. The O&M 2 Services Fee shall be payable in monthly instalments during the O&M 2 Term, commencing from the Commercial Operation Date (as defined in the EPC Contract 2). (iv) Obligations of the O&M Contractor The O&M Contractor shall perform the obligations set forth in the O&M Agreement 2, including the following: (a) from the day following the date Tadau Energy issues a mobilisation notice in writing to the O&M Contractor or the date the EPC 2 NTP Notice is issued under the EPC Contract 2, whichever is earlier, up to the day preceding the COD of Unit 2, the O&M Contractor shall: (i) develop the operational and budgetary procedures in relation to the O&M 2 Services (as defined below); (ii) obtain necessary licenses for its carrying out of the O&M 2 Services; 147
  158. (b) (c) (iii) establish a temporary operating office at Site Yong East and Site Yong West; and (iv) commence hiring of staff providing the O&M 2 Services and coordinate staffing requirements in consultation with Tadau Energy; from the COD of Unit 2 up to and including the date immediately preceding the Provisional Acceptance Date, the O&M Contractor shall: (i) operate and maintain the portions of the Unit 2 that are producing net electrical energy, on a seven (7)-day per week, twenty-four (24) hour per day basis in accordance with the terms of the O&M Agreement 2 and the EPC Contract 2; (ii) take delivery of various spare parts and consumables; (iii) develop long term operating budgets; (iv) develop start-up plans for the Unit 2; and (v) perform, or support performance by Tadau Energy of the forecasting responsibilities as reasonably required by Tadau Energy from time to time and without additional cost by the O&M Contractor; operating plans and annual from the Provisional Acceptance Date under the EPC Contract 2 up to and including the last day of the O&M 2 Term, the O&M Contractor shall: (i) operate and maintain the entire Unit 2 on a seven (7)day per week, twenty-four (24) hour per day basis in accordance with the O&M Agreement 2 and the EPC Contract 2; (ii) assist Tadau Energy in obtaining and renewing permits and licenses in relation to the Unit 2; (iii) to provide the performance data of the Unit 2 as required under the O&M Agreement 2 and perform scheduled and unscheduled maintenance when necessary; (iv) perform scheduled and unscheduled maintenance when necessary; (v) manage on behalf of Tadau Energy, all equipment and systems guarantees available for the Unit 2 and potential equipment warranty claims; (vi) perform, or support performance by Tadau Energy of the forecasting responsibilities set forth in PPA 2; and 148
  159. (vii) assist Tadau Energy in taking over the Unit 2 at the Final Acceptance Date under the EPC 2; (d) starting from eighteen (18) months after the commencement of the O&M 2 Term, the O&M Contractor shall include personnel designated by Tadau Energy in the performance of relevant O&M 2 Services for the purpose of training and ensuring a smooth transition in handing over the O&M 2 Services to Tadau Energy. Notwithstanding the foregoing, all O&M 2 Services will remain controlled and supervised by the EPC Contractor during the O&M 2 Term; and (e) during the O&M 2 Term of the O&M Agreement 2, the scope of services as set forth in Exhibit A (Scope of Work) and Exhibit B (Salient Terms of Project Documents) of the O&M Agreement 2, (collectively, the “O&M 2 Services”). (v) Availability Guarantee and Liquidated Damages The O&M Contractor guarantees that the Unit 2 will achieve an Availability, as calculated in accordance with the O&M Agreement 2, of ninety nine percent (99%) during each calendar year following the COD of Unit 2 and every year thereafter (“O&M 2 Guaranteed Availability”). If, as determined at the end of any such calendar year, the Availability is less than the O&M 2 Guaranteed Availability, then: (a) for the first (1st) twelve (12) months of the O&M 2 Term, the O&M Contractor shall pay as liquidated damages to Tadau Energy an amount equal to three percent (3%) of the O&M 2 Services Fee for the relevant period for each one per cent (1%) shortfall below the O&M 2 Guaranteed Availability, with such liquidated damage amount pro-rated to any fractional portion of such shortfall, subject to the maximum amount of liquidated damages liable to be paid by the O&M Contractor under the O&M Agreement 2, being capped at fifteen percent (15%) of the O&M 2 Services Fee for the relevant period (“O&M 2 15% Cap”); and (b) for the second (2nd) twelve (12) months of the O&M 2 Term, the O&M Contractor shall pay as liquidated damages to Tadau Energy an amount equal to six percent (6%) of the O&M 2 Services Fee for the relevant period for each one percent (1%) shortfall below the O&M 2 Guaranteed Availability, with such liquidated damage amount pro-rated to any fractional portion of such shortfall, subject to the maximum amount of liquidated damages liable to be paid by the O&M Contractor under the O&M Agreement 2 being capped at thirty percent (30%) of the O&M 2 Services Fee for the relevant period (“O&M 2 30% Cap”). 149
  160. (vi) Limitations on Liability Liability for Indirect Damage Neither party to the O&M Agreement 2 shall be liable to the other for any damages, including damages in for loss of anticipated profits, loss of use, loss of revenue or loss of goodwill. Maximum Liability Each party’s maximum liability to the other party under the O&M Agreement 2 for any 12-calendar-month period of the O&M 2 Term shall be the total O&M 2 Services Fee payable during such period. (vii) Insurance The O&M Contractor shall obtain and maintain the insurance coverages as specified below throughout the O&M 2 Term: (a) comprehensive general liability or third party liability or public liability insurance; (b) automotive liability insurance; (c) workmen’s compensation and/or employee’s liability and/or similar statutory social insurance as required by law; (d) professional indemnity insurance; and (e) fidelity guarantee insurance. The insurance policies procured and maintained by the O&M Contractor as specified in the O&M Agreement 2 shall comply with the following requirements: (a) naming Tadau Energy, the Financing Parties and/or such other person as may be deemed necessary under the Project Documents; (b) include a waiver of all express and implied rights of subrogation against Tadau Energy, the Financing Parties, and such other person as may be deemed necessary under the Project Documents for all insurances; and (c) shall cause the insurers to endorse such policies of insurances and to provide Tadau Energy with not less than thirty (30) days’ notice of any cancellation or material amendment thereof. Tadau Energy shall obtain and maintain insurance coverages as set forth in Exhibit E (Employer’s Insurances) of the O&M Agreement 2. 150
  161. (viii) Performance Bond The O&M Contractor shall deliver to Tadau Energy a performance bond in the value equivalent to twenty percent (20%) of the total O&M 2 Services Fee for the O&M 2 Term (“O&M 2 Performance Bond”), which shall be an unconditional and irrevocable on-demand bank guarantee issued by a commercial bank in Malaysia as approved by Tadau Energy, payable in Ringgit Malaysia, as security for the due performance by the O&M Contractor of its obligations under the O&M Agreement 2. The O&M Contractor shall maintain and renew if necessary the O&M 2 Performance Bond so that it shall remain in full force and effect until a date thirty (30) days after the expiry of the O&M 2 Term or termination of the O&M Agreement 2 in accordance with the provisions set out therein, whichever earlier, and the delivery of the O&M 2 Performance Bond shall be a condition precedent to the making of any payments by Tadau Energy to the O&M Contractor under the O&M Agreement. (ix) Termination (a) (b) (x) Tadau Energy may terminate the O&M Agreement 2: (i) if the O&M Contractor becomes insolvent; (ii) if the liquidated damages arising under the O&M Agreement 2 is equal to or exceeds the 15% Cap or the 30% Cap; (iii) if the O&M Contractor fails to perform any of its material obligations and such failure is not cured within fourteen (14) days of notice from Tadau Energy demanding a cure (or, if not curable within the aforesaid fourteen (14) days, within a reasonable period but in any event not more than thirty (30) days; (iv) for any reason in Tadau Energy’s sole discretion upon sixty (60) days’ prior written notice to the O&M Contractor. The O&M Contractor may only terminate the O&M Agreement 2 in the event Tadau Energy fails to pay the O&M 2 Services Fee in accordance with the O&M Agreement 2. Right to Terminate (a) If a Force Majeure Event prevents either party fo the O&M Agreement 2 from substantially performing any material obligation under the O&M Agreement 2 for a period which exceeds one hundred and eighty (180) days either party may terminate the O&M Agreement 2 by giving thirty (30) days’ written notice of termination, unless the provisions of item (b) below apply. 151
  162. (b) (xi) If a Force Majeure Event which prevents either party from substantially performing any material obligation under the O&M Agreement 2 cannot be remedied within one hundred and eighty (180) days with the use of reasonable diligence, then that period shall be extended for a further period of one hundred and eighty (180) days. Assignment The O&M Contractor shall not assign the O&M Agreement 2 or its rights and obligations arising from the O&M Agreement 2 and shall not permit the creation of a security interest in the O&M Agreement 2 without the prior written consent of Tadau Energy. Tadau Energy may assign the O&M Agreement 2, all of its rights, benefits and obligations under the O&M Agreement 2, including all warranties, to the Financing Party by way of security for the performance of Tadau Energy’s obligations to the Financing Party. In the event of a default under the Financing Documents, the O&M Contractor shall accept as substitute for Tadau Energy under the O&M Agreement 2, the agent, trustee or nominee of the Financing Party. 4.6 OPERATIONS AND MAINTENANCE In comparison to thermal power generation technologies, solar PV power plants have lower maintenance and servicing requirements. However, proper maintenance of the plant is essential to maximise both energy generation and the yield as well as the plant’s useful life. Tadau Energy will engage a team of experienced personnel who are registered with the relevant regulatory authorities and/or persons possessing the relevant professional qualification, as the case may be, comprising at least a facility manager, chargemen and operation and maintenance technicians to handle the operations and maintenance of the Solar PV Plants post-COD. The O&M Contractor will be providing operations and maintenance services for Unit 1 and Unit 2 for a period of two (2) years after the Commercial Operation Date of Unit 1 and Unit 2 respectively. During such period, the O&M Contractor is required to provide training to Tadau Energy’s personnel to ensure that Tadau Energy’s personnel are sufficiently trained to take over the operations and maintenance guided by the operations and maintenance manual prepared by the O&M Contractor. The key monitoring and maintenance work involved are checking integrity of the module connection and combiner box, inverter servicing, grounds-keeping (including landscaping, vegetation and pest control), security, module cleaning as preventive maintenance on one part and fault and spare part management with minimal reaction time as corrective maintenance on the other. The monitoring of the Solar PV Plants will be done off-site and the team will go on-site when required to perform the schedule maintenance or to diagnose/rectify issues pertaining to unscheduled breakdown. [The remainder of this page is intentionally left blank] 152
  163. Maintenance can be classified into the following :  Preventive maintenance - Planned in advance and aimed at fault prevention, as well as ensuring the Solar PV Plants are operating at its optimum level. Scheduled maintenance is generally carried out at intervals planned in accordance with the manufacturer’s recommendations, and as required by equipment warranties. Scheduled maintenance that requires plant shutdown would be conducted, where possible, during non-peak production periods, such as early morning or evening.  Corrective maintenance – Carried out in response to failures. A suitably stocked spare parts inventory is essential to facilitate a rapid response in the event of equipment failure. Post COD, the monitoring system of the Solar PV Plants will continuously monitor the PV plant performance to maximise availability and yield of the system. Closed circuit television systems shall be installed at all Project Lands to prevent theft and damaged caused by malicious acts. 4.7 PROJECT TAKAFUL/INSURANCE The EPC Contractor and Tadau Energy will procure and maintain the following takaful/insurance policies below over the construction and operational phases of the Project, with licensed insurers in Malaysia. The Independent Insurance Adviser will review the policies in place for the Project and confirm they are adequate and suited to Issuer’s needs. The insurance policies that are in place for the Project are:- 1. Erection All Risk (“EAR”) The EAR policy covers all risks (subject to agreed policy exclusion between the insured and the insurer) in relation to:Section 1 : Material Damage Material Damage of the Erection All Risk policy covers physical loss or damage from any cause, in a manner necessitating repair or replacement. The estimated value of the sum insured under Section 1 is RM222,330,979.00. Section 2 : Third Party Liability Third Party Liability indemnify the Insured up to but not exceeding RM20,000,000.00 against such sum which the Insured shall become legally liable to pay as damages consequent upon (a) accidental bodily injury to or illness of third parties (whether fatal or not) and (b) accidental loss of or damage to property belonging to third parties occurring in direct connection with the erection, construction or testing of the Project and happening on or in the immediate vicinity of the site during the 1 March 2017 until 5 January 2020. The estimated value of the sum insured under Section 2 is RM20,000,000.00. The insured parties covered in the EAR policy are Tadau Energy Sdn Bhd, SPCI Energy 153
  164. Malaysia Sdn Bhd (including all their appointed/nominated sub-contractors) and Sabah Electricity Sdn Bhd. The period of insurance for the EAR policy is from 1 March 2017 until 5 January 2020 (both dates inclusive), inclusive of 2 months of testing and commissioning and 24 months’ maintenance period. 2. Workmen’s Compensation The insured parties covered in the Workmen’s Compensation policy are Tadau Energy Sdn Bhd, SPCI Energy Malaysia Sdn Bhd (including all their appointed/nominated sub-contractors) and Sabah Electricity Sdn Bhd. 3. Interest Insured On all employees/workers engaged in the operation and maintenance of the Project. Sum Insured Any One Workman Any One Accident Annual Earning : : : RM10,000,000.00 RM10,000,000.00 RM33,349,646.00 Comprehensive General Liability (“CGL”) The insured parties covered in the CGL policy are Tadau Energy Sdn Bhd, the financing parties (i.e. the persons providing financing to Tadau Energy Sdn Bhd and includes any agent(s) for the Project) and Sabah Electricity Sdn Bhd. The CGL policy will pay to or on behalf of the Insured all sums which the Insured becomes legally liable to pay by way of Compensation and all costs awarded against the Insured in respect of personal injury (including death or disease) or property damage; or advertising liability first happening during the period of insurance caused by the occurrence within the territorial limits in connection with the business of the Insured. Sum Insured RM20,000,000 per occurrence and unlimited during the period of insurance. The period of insurance for the CGL policy is from 1 March 2017 until 6 January 2020 (plus 48 months maintenance period and 2 months testing and commission). 4. Single Project Professional Indemnity (“SPPI”) The insured parties covered in the SPPI policy are Tadau Energy Sdn Bhd, the financing parties (i.e. the persons providing financing to Tadau Energy Sdn Bhd and includes any agent(s) for the Project) and Sabah Electricity Sdn Bhd. The SPPI policy covers against any claim or claims for breach of professional duty may be made against the Insured and/or their employees and agents by reason of any negligent act, error or omission including the costs and expenses incurred in the defence or settlement of any claim. The period of insurance for the SPPI policy is from 1 March 2017 until 6 January 2020 (plus 48 months). Sum Insured RM20,000,000 any one claim and in the aggregate (inclusive of costs and expenses) 154
  165. The Insurance Advisor has opined that this can be done due to the interest each will acquire in the other via the Turnkey Contract , as both will effectively be deemed to have insurable interest. 4.8 GENERATION LICENCE Under the Electricity Supply Act 1990, a person who intends to operate a power plant is required to hold an electricity generation licence (“Generation Licence”). The Generation Licence may be granted by the Suruhanjaya Tenaga with the approval of the Minister upon payment of such fees and upon such conditions as appear to be requisite or expedient having regards to the function and duties of the Suruhanjaya Tenaga, established under the Energy Commission Act 2001. The Generation Licence to operate the Solar PV Plants may be suspended or revoked by the Energy Commission upon breach of any of the conditions stipulated in the respective licences. Tadau Energy has been granted the Generation Licence in relation to Unit 1 from the Suruhanjaya Tenaga on 7 June 2017. As at the date of this Information Memorandum, the Generation Licence has not yet been granted in respect of Unit 2. Under the PPAs, Tadau Energy is required, to submit to SESB a certified copy of the generation licence in respect of Unit 1, not later than 19 June 2017 and in respect of Unit 2, not later than 30 September 2017. 4.9 ENVIRONMENTAL REQUIREMENTS Tadau Energy shall be responsible for investigating the need for and obtaining all necessary consents, permits, licenses and approvals for executing the design, supply, construction and commissioning of the Solar PV Plants. Tadau Energy shall also meet all relevant legal and environmental requirements, according to the guidelines specified in the Environmental Quality Act 1974. An Environmental Impact Assessment is not required for the Solar PV Plants. [The remainder of this page is intentionally left blank] 155
  166. SECTION 5 - PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK PROGRAMME The information set out in this section is qualified in its entirety by , 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 shall, in the event of an inconsistency with the definitions section of this Information Memorandum, only be applicable for this section. Name of facility programme / : An Islamic medium term notes programme of up to RM250.0 million in nominal value Issuance type : Programme Shariah Principle : Istisna’ (Purchase Order) Ijarah (Leasing) Ijarah Mawsufah Fi Zimmah (Forward Lease) Facility description : Islamic medium term notes (“IMTNs”) programme under the Shariah principles of Istisna’ and Ijarah of up to RM250.0 million in nominal value (“SRI Sukuk Programme”). The IMTNs, which may be issued from time to time pursuant to the SRI Sukuk Programme, are referred to as “SRI Sukuk Tadau”. Pursuant to a Trust Deed entered into by the Issuer and the Sukuk Trustee, the Sukuk Trustee agrees and declares that it shall act for and on behalf of all the holders of the SRI Sukuk Tadau (“Sukukholders”) in respect of the SRI Sukuk Tadau issued or to be issued pursuant to the SRI Sukuk Programme and in connection therewith to enter into the following agreements in respect of the SRI Sukuk Programme on behalf of the Sukukholders:(i) Istisna' Agreements; (ii) ljarah Agreements; (iii) Service Agency Agreement; and (iv) Purchase Undertaking. Underlying Transaction A. At inception and during construction of the Assets The Sukuk Trustee shall declare a trust over the Trust Assets (herein defined) on an undivided basis for the benefit of all Sukukholders (“Declaration of Trust”). The “Trust Assets” 156
  167. comprise the rights , interest and benefit in, to and under the Istisna' Agreement, the completed Assets (as defined herein), the ljarah Agreement, the Service Agency Agreement and the Purchase Undertaking. Istisna’ Agreements The Sukuk Trustee (acting on behalf of the Sukukholders), shall first enter into an Istisna' Agreement with the Issuer (in its capacity as “Contractor”) in respect of each of Asset 1 and Asset 2 (as described in sub-item (x) (Solar PV Plants) under item (Other Terms and Conditions)) (collectively, the "Assets" and references to an “Asset” shall mean any one of them), to effect the following: (i) The Contractor will build, construct and deliver the Assets (for the Sukukholders for the respective Istisna' Price (as described in sub-item (ii) (Purchase and selling price/Rental) under item (Other Terms and Conditions)). The Contractor may appoint subcontractors to construct and deliver each relevant Asset. The Istisna' Price shall be determined prior to the first issuance of the SRI Sukuk Tadau and paid in instalments as specified in each Istisna' Agreement. The Istisna' Price shall be in compliance with the asset pricing requirement stipulated under the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the Securities Commission Malaysia (“SC”) as may be replaced, substituted, amended or revised from time to time ("Assets Pricing Guidelines"). Upon completion of construction and delivery of the relevant Asset, the Contractor shall accordingly notify the Sukuk Trustee of the completion and delivery of the relevant Asset. Thereafter, the relevant Istisna' Agreement will be completed in accordance with the terms thereof. (ii) Upon declaration of a Dissolution Event (as described under item (Events of Defaults or Enforcement Event, where applicable, including recourse available to investors)) when the relevant Asset has not been completed and delivered to the Sukuk Trustee (on behalf of the Sukukholders) under the relevant Istisna' Agreement, that Istisna' Agreement shall be terminated immediately whereupon the Issuer shall:(a) refund the Istisna' Price, and (b) be liable to pay the Sukuk Trustee (on behalf of the Sukukholders) the “Compensation Amount” as compensation for failure to complete the construction and delivery of the relevant Asset to the Sukuk Trustee, which amount shall be equivalent to the following: 157
  168.  aggregate Periodic Distribution Amount (as described in sub-item (iii) (Profit/Coupon/Rental Rate) under item (Other Terms and Conditions) below) paid; and  any Periodic Distribution Amount accrued but unpaid up to the date of declaration of Dissolution Event. The Compensation Amount shall be set-off against the Advance Rental (as defined herein) that has been paid to the Sukuk Trustee (on behalf of the Sukukholders) up to the date of declaration of Dissolution Event. Ijarah Agreements The Sukuk Trustee (acting on behalf of the Sukukholders), will subsequently enter into an ljarah Agreement with the Issuer in respect of each Asset, whereby:(i) the Sukuk Trustee (as "Lessor") agrees to lease and the Issuer (as "Lessee") agrees to take on the lease of the relevant Asset (under the concept of ljarah Mawsufah Fi Zimmah i.e. Forward Lease). In consideration of the Sukuk Trustee agreeing to grant to the Lessee a forward lease in respect of the relevant Asset to be completed and delivered, the Lessee shall pay advance rental at a pre-determined rental amount ("Advance Rental") at such times and in the manner as provided in the relevant ljarah Agreement. The Advance Rental shall be equivalent to the Periodic Distribution Amount which is to be channeled to the Sukukholders in proportion to their holdings in the SRI Sukuk Tadau on the Periodic Distribution Dates (as defined in sub-item (iv) (Profit/Coupon/Rental Payment frequency) under item (Other Terms and Conditions) below) prior to completion of the construction of the Asset; (ii) Upon completion and delivery of the relevant Asset up to maturity of the relevant lease (corresponding to the maturity date of the last outstanding tranche of the SRI Sukuk Tadau) ("Lease Period"), the Lessee will pay pre-determined rental amounts to the Lessor ("Lease Rentals") as further described below. SRI Sukuk Tadau Issuance The Issuer issues the SRI Sukuk Tadau, where the SRI Sukuk Tadau shall represent the Sukukholders' interest, rights and entitlements under and to the Trust Assets, including the proportionate undivided ownership of the Assets upon completion and delivery of the same. The SRI Sukuk Tadau proceeds shall be utilised to pay the Issuer (in its capacity as 158
  169. Contractor ) the Istisna' Price under the Istisna' Agreements. The Istisna' Price will be paid in accordance with the issuance of the SRI Sukuk Tadau as contemplated under the Sukuk Programme. Non-completion and non-delivery of the Assets In the event the relevant Asset is not completed and delivered to the Sukuk Trustee by the Contractor pursuant to the provisions of the relevant Istisna' Agreement, the total Advance Rental paid shall be refunded by the Lessor to the Lessee (by way of set-off against the Compensation Amount (as defined above)) and the relevant ljarah Agreement will thereafter be terminated. Service Agency Agreement Pursuant to a Service Agency Agreement:(i) the Sukuk Trustee acting on behalf of the Sukukholders shall appoint the Issuer as "Servicing Agent" throughout the Lease Period under each Ijarah Agreement; (ii) the Servicing Agent shall perform all repairs, replacements, acts and maintenance works and pay ownership expenses in respect of each Asset ("Ownership Expenses") during the respective Lease Periods. The Ownership Expenses will be set-off against (1) the Exercise Price payable by the Issuer pursuant to the Purchase Undertaking; (2) the final Lease Rental upon the expiry of each ljarah Agreement or (3) the Mandatory Redemption Amount (as defined in sub-item (xl) (Mandatory Redemption) under item (Other terms and condition)) under a Total Loss Event in respect of both Assets or the Asset 1 Mandatory Redemption Amount (as defined in subitem (xl) (Mandatory Redemption) under item (Other terms and conditions) under a Total Loss Event in respect of Asset 1 or the Asset 2 Mandatory Redemption Amount (as defined in sub-item (xl) (Mandatory Redemption) under item (Other terms and conditions) under a Total Loss Event in respect of Asset 2, as the case may be; and (iii) the Servicing Agent shall be responsible to procure takaful/insurance that provides sufficient proceeds for the redemption of the relevant SRI Sukuk Tadau under a Total Loss Event. If the takaful/insurance proceeds are insufficient to cover (1) the Mandatory Redemption Amount under a Total Loss Event in respect of both Assets or (2) the Asset 1 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 1 or (3) the Asset 2 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 2, as the 159
  170. case may be , the Servicing Agent shall be liable to make good the difference. Any excess from the takaful/insurance proceeds over the amount required to redeem the relevant SRI Sukuk Tadau and the Ownership Expenses, if any, shall be paid to the Servicing Agent as an incentive fee. B. Post-completion of the Assets and at maturity Upon completion of construction and delivery of the relevant Asset, the Contractor shall accordingly notify the Sukuk Trustee of the completion and delivery of the relevant Asset pursuant to the relevant Istisna’ Agreement. Thereafter, the relevant Istisna' Agreement will be completed in accordance with the terms thereof. Ijarah Agreements (i) During the Lease Period, the Lessee will pay the Lease Rentals to the Lessor pursuant to the Ijarah Agreements. The Lease Rentals for each tranche, save for the final Lease Rental applicable to such tranche, shall be equivalent to the Periodic Distribution Amount which is to be channelled to the Sukukholders in proportion to their holdings in the SRI Sukuk Tadau on the Periodic Distribution Dates. The final Lease Rental for each tranche shall be the aggregate of the following:  last Periodic Distribution Amount;  nominal value of the relevant maturing tranche of the SRI Sukuk Tadau; and  the Ownership Expenses (as defined herein). The final Lease Rental shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent. For the avoidance of doubt, the final Lease Rental shall not be payable if the nominal value and the accrued but unpaid Periodic Distribution Amounts of the SRI Sukuk Tadau to be redeemed is paid via the payment of the Exercise Price (as defined herein) by the Issuer (as Purchaser) in accordance with the terms of the Purchase Undertaking (as defined herein). (ii) Upon the (a) payment in full of the Lease Rentals (which corresponds to each tranche of the SRI Sukuk Tadau); and (b) maturity date of each tranche of the SRI Sukuk Tadau, it is hereby agreed that the Issuer, in its capacity as Lessee, shall not be liable to pay any Lease Rentals in respect of such maturing tranche of the SRI Sukuk Tadau after the maturity date of such tranche. For the avoidance of doubt, it is agreed that 160
  171. conditional upon the full payment of the Lease Rental for the final maturing tranche of the SRI Sukuk Tadau , the Asset shall be granted/transferred without cost to the Lessee based on the contract of hibah (i.e. gift) at the end of the Lease Period, pursuant to which the Declaration of Trust shall be dissolved. On the maturity date of each tranche of the SRI Sukuk Tadau, the Sukukholders of the redeemed tranche shall transfer their undivided and proportionate ownership in the relevant Asset to the Sukukholders of the outstanding tranche of the SRI Sukuk Tadau by way of conditional hibah. The relevant Sukukholders in respect of such redeemed tranche of the SRI Sukuk Tadau shall then cease to have any interest, rights and entitlements in respect of any undivided ownership of the Asset to which the redeemed tranche of the SRI Sukuk Tadau relates to. Conditional upon the full payment of the Lease Rental, upon the maturity date of the final outstanding tranche of the SRI Sukuk Tadau, the relevant Asset shall be granted/transferred without cost to the Lessee by way of conditional hibah in accordance with the Ijarah Agreement. Purchase Undertaking The Issuer (as "Purchaser") will grant a purchase undertaking ("Purchase Undertaking") to the Sukuk Trustee, whereby the Purchaser irrevocably undertakes to purchase the proportionate undivided ownership in the relevant Asset from the Sukuk Trustee acting for the Sukukholders, upon the declaration of any Dissolution Event at the relevant Exercise Price via a sale agreement, which shall be specific to the relevant Asset (the “Sale Agreement”), subject to the relevant Asset being completed and delivered to the Sukuk Trustee (on behalf of the Sukukholders) under the relevant Istisna' Agreement. Upon declaration of a Dissolution Event, the Sukuk Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase the proportionate undivided ownership in the relevant completed Asset from the Sukuk Trustee, at the Exercise Price via the relevant Sale Agreement. The proceeds therefrom shall be utilised for the redemption of such relevant SRI Sukuk Tadau held by the Sukukholders which shall then be cancelled. In relation to the Purchase Undertaking, the Exercise Price for the purchase of each completed Asset from the Sukuk Trustee acting for the Sukukholders upon declaration of a Dissolution Event shall be equal to the following: Exercise Price = the amount equivalent to the Istisna’ Price for the relevant Asset + Ownership Expenses in respect of the relevant Asset + all accrued and unpaid Lease Rentals in relation to the relevant Asset up to the date of the declaration of the Dissolution Event or Mandatory Redemption Event. 161
  172. The Exercise Price payable shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent . Total Loss Event (i) Upon the occurrence of a Total Loss Event (as defined below) in respect of both Asset 1 and Asset 2, the Ijarah Agreements in respect of Asset 1 and Asset 2 will be terminated. All outstanding SRI Sukuk Tadau will be redeemed using the proceeds of takaful/insurance for Asset 1 and Asset 2 pursuant to the Service Agency Agreement (as described below). (ii) Upon the occurrence of a Total Loss Event in respect of Asset 1 only, the Ijarah Agreement in respect of Asset 1 will be terminated. The SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 1 will be redeemed in the inverse order of maturity using the proceeds of the takaful/insurance for Asset 1 pursuant to Service Agency Agreement. For the avoidance of doubt, the Ijarah Agreement in respect of Asset 2 shall not be terminated, and the Advance Rentals and Lease Rentals payable thereunder shall continue to be payable. (iii) Upon the occurrence of a Total Loss Event in respect of Asset 2 only, the Ijarah Agreement in respect of Asset 2 will be terminated. The SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 2 will be redeemed using the proceeds of the takaful/insurance for Asset 2 pursuant to Service Agency Agreement. For the avoidance of doubt, a Total Loss Event in respect of Asset 2 shall constitute a Dissolution Event. Pursuant to that, the Sukuk Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase Asset 1 from the Sukuk Trustee, at the Exercise Price. The proceeds therefrom shall be utilised for the redemption of such relevant SRI Sukuk Tadau held by the Sukukholders which shall then be cancelled. "Total Loss Event" is the total loss or destruction of, or damage to the whole (and not part only) of a completed and delivered Asset under any ljarah Agreement or any event or occurrence that renders the whole (and not part only) of that Asset permanently unfit for any economic use and the repair or remedial work in respect thereof is wholly uneconomical. Please refer to Appendix A below for diagrammatic illustration of the underlying structure. 162
  173. Currency Expected facility programme size Option to upsize : Ringgit Malaysia (RM). / : Up to RM250.0 million in nominal value. : No. Tenure of : Sixteen (16) years from the date of the first issuance of SRI facility/programme Sukuk Tadau under the SRI Sukuk Programme provided that the first issuance of the SRI Sukuk Tadau under the SRI Sukuk Programme shall be made within sixty (60) business days from the date of lodgement with the SC. Availability period for : The period commencing from the date the conditions programme precedent of the SRI Sukuk Programme are fulfilled or waived by the Lead Arranger (“LA”) (as the case may be) and ending on the date falling two (2) years after the date of the first issuance of the SRI Sukuk Tadau under the SRI Sukuk Programme. Clearing & settlement : Real Time Electronic Transfer of Funds and Securities platform(s) (RENTAS) system which is operated by Malaysian Electronic Clearing Corporation Sdn Bhd ("MyClear" or its successorsin-title or successor in such capacity). Mode(s) of issue : Via bought deal basis, private placement or book running on a best efforts basis. Issuance of the SRI Sukuk Tadau shall be in accordance with (1) the "Participation and Operation Rules for Payments and Securities Services" issued by MyClear ("MyClear Rules" as may be amended or substituted from time to time) and (2) the "Operational Procedures for Securities Services” and “Operational Procedures for Malaysian Ringgit Settlement in the Real Time Electronic Transfer of Funds and Securities System” issued by MyClear ("MyClear Procedures" as may be amended and/or substituted from time to time), (collectively, "MyClear Rules and Procedures"); and (3) any other procedures/guidelines/rules issued by the relevant authorities from time to time (as the same may be amended and/or substituted from time to time). Selling restrictions : Selling Restrictions at Issuance The SRI Sukuk Tadau may only be offered, sold, transferred or otherwise disposed directly or indirectly to persons falling within the relevant category of persons specified in Section 2(6) of the Companies Act 2016, as amended from time to time (“Companies Act”), and persons to whom an offer or invitation to subscribe the SRI Sukuk Tadau may be made and to whom the SRI Sukuk Tadau are issued would fall within Part 1 of Schedule 6 (or Section 229(1)(b)) of the Capital Markets and Services Act 2007 as amended from time to time ("CMSA") or Part 1 of Schedule 7 (or Section 230(1)(b)) of the CMSA read together with Schedule 9 (or 163
  174. Section 257 (3)) of the CMSA. Selling Restrictions Thereafter The SRI Sukuk Tadau may only be offered, sold, transferred or otherwise disposed directly or indirectly to persons falling within the relevant category of persons specified in Section 2(6) of the Companies Act, as amended from time to time and persons to whom an offer or invitation to purchase the SRI Sukuk Tadau would fall within 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. Tradability & transferability : The SRI Sukuk Tadau is tradable and transferable subject to the Selling Restrictions (as described in item (Selling Restrictions)) above. Details of security / : The SRI Sukuk Programme shall be secured by, amongst collateral pledged, if others, the following: applicable (i) First ranking legal assignment of the Issuer’s rights, interests and benefits in the Project Documents (as described in sub-item (xxxvi) (Project Documents) under item (Other Terms and Conditions) below) save for all permits and licences relating to the Project (as described in sub-item (ix) (Project) under item (Other Terms and Conditions) below); (ii) First ranking legal assignment of the Issuer’s rights, titles and benefits in all permits and licences relating to the Project to the extent such permits and licences are assignable and no further consents are required to be obtained for such assignment; (iii) First ranking debenture comprising fixed and floating charges over all present and future assets of the Issuer, excluding the Distribution Account (as described in item (Details of Designated Accounts) below) and all the credit balances therein; (iv) First ranking charge and assignment over all Designated Accounts to be opened and maintained in accordance to item (Details of Designated Accounts) below, other than the Distribution Account and all the credit balances therein; and (v) Such other security(ies) as may be proposed by the Transaction Solicitors and/or the LA to be mutually agreed with the Issuer. Documentation for the purpose of all the above items in this section shall be referred to hereinafter as the “Security Documents”. Details of guarantee, if : Not guaranteed. applicable 164
  175. Convertibility issuance of : Non-convertible. Exchangeability of : Non-exchangeable. issuance and details of the exchangeability Call option and : No call option. details, if applicable Put option and details, : No put option. if applicable Positive covenants : The Issuer covenants and undertakes, inter alia, with the Sukuk Trustee and the Sukukholders that until all its liabilities and obligations under the SRI Sukuk Tadau have been discharged it shall: (i) comply at all times with the provisions of the Transaction Documents (as described in sub-item (xxiii) (Transaction Documents) under item (Other Terms and Conditions) below) and the terms and conditions of the SRI Sukuk Programme; (ii) maintain a paying agent who is based in Malaysia; (iii) exercise reasonable diligence in carrying out its business in a proper and efficient manner and in accordance with good industry practice; (iv) keep proper books and accounts at all times in accordance with all relevant laws and prepare its financial statements on a basis consistently applied in accordance with approved accounting standards and principles in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Issuer for the period to which the financial statements are made up and shall disclose or provide against all liabilities (actual or contingent) of the Issuer and provide the Sukuk Trustee access to such books and financial statement to the extent permitted by law; (v) obtain, preserve and keep in full force and effect all necessary licences, approvals, authorisations, consents, rights and permits (governmental and otherwise) and promptly obtain any further licences, approvals, authorisations, consents, rights and permits (governmental and otherwise) which is or may become necessary to enable it to own its assets, to carry on its business or for the Issuer to enter into or perform its obligations under the Transaction Documents and the Project Documents or to ensure validity, enforceability, admissibility in evidence of the obligations of the Issuer 165
  176. or the priority or rights of the Sukukholders under the Transaction Documents and the Project Documents and the Issuer shall comply with the same ; (vi) maintain or cause to be maintained such takaful contracts/ insurance policies in respect of its assets and its business against all risks in accordance with industry practice and under the Project and it shall not do or omit to do or suffer anything to be done which might render such takaful contracts/ insurance policies to be void or voidable; (vii) cause all advances made by its directors, shareholders and/or its related companies to be subordinated to all the obligations under the SRI Sukuk Tadau and no repayment and/or prepayment of such advance shall be made except for the release of cash collateral under the BG Facilities (as described in sub-item (xix) (BG Facilities) under item (Other Terms and Conditions)) and provisions set out in sub-item (xvi) under item (Negative Covenants) below; (viii) open and maintain each of the required Designated Accounts and pay all relevant amounts into such accounts and make all payments from such accounts, only as permitted under the Transaction Documents; (ix) diligently and in accordance with reasonable industry practice pursue all claims against third parties; (x) promptly comply with all applicable laws (including provisions of the Capital Markets and Services Act 2007 as amended from time to time and all circulars, conditions or guidelines issued by the SC from time to time) as may be applicable to it; (xi) pay all taxes and other liabilities when due unless being contested in good faith pursuant to legal proceedings and adequate reserves with respect thereto have been established; (xii) preserve and maintain good and valid title to its properties and assets free and clear of any encumbrances other than (a) those created for the SRI Sukuk Programme; (b) those created under the BG Facilities; and (c) Permitted Security Interest (as defined below); (xiii) take such steps as may have been notified by the Sukuk Trustee following the occurrence of a Dissolution Event to remedy or mitigate the effect of the Dissolution Event or any other step as the Sukuk Trustee may reasonably request; (xiv) comply with all environmental laws and environmental 166
  177. licences as may be applicable to it ; (xv) deliver to the Sukuk Trustee a copy of the generation licence issued by Suruhanjaya Tenaga and/or relevant authorities for the operation of the respective Solar PV Plants (“Generation Licence”) in accordance with the provisions set out in sub-item (Conditions Subsequent) under item (Conditions Precedent). Thereafter, it shall maintain or cause to be maintained in full force and effect and shall comply with the Generation Licence/provisional Generation Licence for the purposes of the Project; (xvi) ensure no changes to the existing shareholding structure of the Issuer for the first five (5) years from COD of Unit 2 (as described in sub-item (xiv) (COD of Unit 2) under item (Other Terms and Conditions)) and thereafter, Kagayaki Energy Sdn Bhd and Edra Solar Sdn Bhd to collectively directly/indirectly maintain a controlling interest in the Issuer (which for this purpose shall mean an aggregate holding of not less than 51% of the issued and paid up capital of the Issuer); (xvii) in the event the Issuer acquires any Project Land (as described in sub-item (xli) (Project Lands) under item (Other Terms and Conditions) below), no later than ninety (90) days after the Issuer is registered/ endorsed as the owner of the Project Land in the land title/ document of title (or such longer period as may be agreed by the Security Trustee in writing), the Issuer and the Security Trustee shall enter into a charge over the Project Land (in a form as agreed between the parties) in favour of the Security Trustee, and the Security Trustee shall be provided with: (i) the receipt of such presentation from the relevant land authority; (ii) evidence that the form as prescribed under section 352 of the Companies Act in respect of such charge has been lodged with the Companies Commission of Malaysia; and (iii) a legal opinion satisfactory to the Security Trustee, and addressed to the Security Trustee advising with respect to, among others, the legality, validity, binding effect and enforceability of such charge; and (xviii) such other covenants as may be advised by the Transaction Solicitors and mutually agreed between the Principal Adviser (“PA”)/ LA and the Issuer. Negative covenants : The Issuer covenants and undertakes, inter alia, with the Sukuk Trustee and the Sukukholders that (and subject to the appropriate thresholds, exclusions and carve outs for each of such covenants as agreed under the Transaction Documents) until all its liabilities and obligations under the SRI Sukuk Tadau have been discharged, the Issuer shall not, without the prior written consent of the Sukuk Trustee and Sukukholders: 167
  178. (i) amend its constitutional documents in any manner and, not to add, delete, amend or substitute its constitutional documents in any manner other than additions, deletions, amendments or substitutions as required by any law or regulation or which may be materially prejudicial to the interests of the Sukukholders; (ii) change the utilisation of proceeds from the SRI Sukuk Programme to any purposes other than the purposes set out in the Information Memorandum; (iii) enter into activities which would render the business to be non-Shariah compliant as prescribed by the SC's Shariah Advisory Council (“SAC”); (iv) reduce the nominal value and the total amount of its issued and paid-up share capital; (v) sell or dispose of any of its assets save and except in the ordinary course of business and on an-arms-length basis or the assets to be disposed of are either obsolete or damaged or worn out or if such assets do not meet the operational requirements of the Issuer; (vi) create or permit to subsist any mortgage, charge, pledge, assignment or other security interests over the whole or any part of the undertakings, assets, property or revenues, present or future, of the Issuer other than (i) those created for the SRI Sukuk Programme and the BG Facilities; and (ii) Permitted Security Interests; “Permitted Security Interest” means (a) security interests granted to secure hedging obligations (if any) that are permitted under the Transaction Documents; (b) security interests granted to secure certain obligations arising in the ordinary course of the business of the Issuer created under hire purchase facilities; (vii) incur, assume, guarantee or permit to exist any indebtedness for borrowings save and except for the SRI Sukuk Tadau, the obligations arising in the ordinary course of the business of the Issuer created under hire purchase facilities in relation to the Project and the BG Facilities; (viii) carry out any business or activity which would affect the continuance of or change of the Issuer’s core business activities as provided in the PPAs (as described in sub-items (xxxvi) (Project Documents) under item (Other Terms and Conditions) below); (ix) suspend, amend, modify, vary, or agree to any 168
  179. suspension of , or any amendment, modification or variation to, or abandon, or issue or agree to any change order or variation order being issued under, or set-off, forebear or waive compliance with, any provision of any Project Document or serve any notice of breach or default or suspension which would have a Material Adverse Effect (as described in item (Events of defaults or enforcement event, where applicable, including recourse available to investors) below); (x) agree to any variation orders under the EPC Contract 1 (as described in sub-item (xxxiii) (EPC Contract 1) under item (Other Terms and Conditions) below) that could result in a delay in the COD of Unit 1 (as described in sub-item (xiii) (COD of Unit 1) under item (Other Terms and Conditions)) beyond six (6) months from the Scheduled COD of Unit 1 (as described in sub-item (xvi) (Scheduled COD of Unit 1) under item (Other Terms and Conditions)); (xi) agree to any variation orders under the EPC Contract 2 (as described in sub-item (xxxiv) (EPC Contract 2) under item (Other Terms and Conditions) below) that could result in a delay in the COD of Unit 2 beyond six (6) months from the Scheduled COD of Unit 2 (as described in sub-item (xvii) (Scheduled COD of Unit 2) under item (Other Terms and Conditions)); (xii) dissolve, liquidate or wind up its affairs or consolidate with or merge with any other person or allow any other person to consolidate or merge; (xiii) make any investments other than Permitted Investments (as described in item (Permitted Investments) below) and those in the ordinary course of business which are synergistic to its principal activities/ core businesses; (xiv) enter into any other contracts, agreements or other arrangements or commitments, other than the Transaction Documents, the Project Documents and agreements in the ordinary course of business and on arms-length basis; (xv) make any transfers to the Distribution Account for any dividend payments on ordinary shares or payment of dividend/profit on the redeemable preference shares (if any) to the Issuer’s shareholders, payment of interest on advances made by the Issuer’s directors/ shareholders/ related companies (if any) of the Issuer, unless a Director of the Issuer certifies to the Facility Agent and Sukuk Trustee that the following conditions are satisfied on the Calculation Date (as described in item (Financial Covenants) below): 169
  180. (xvi) (a) the Project Completion Date (as described in sub-item (xviii) (Project Completion Date) under item (Other Terms and Conditions) below) shall have been achieved; (b) the first scheduled principal payment under the SRI Sukuk Tadau has been redeemed in full; (c) no Dissolution Event or potential Dissolution Event has occurred and is continuing; (d) the Maintenance Reserve Account (as described in item (Details of Designated Accounts) below) is funded from the Revenue Account (as described in item (Details of Designated Accounts) below) in the manner set out in item (Details of Designated Accounts) below and there is no shortfall; (e) the FSA Minimum Required Balance (as described in item (Details of Designated Accounts) below) has been met and will be met after the Proposed Distribution (as described in item (Financial Covenants) below); (f) notification is made to the Credit Rating Agency on the Proposed Distribution at least fourteen (14) calendar days before the date of the Proposed Distribution; and (g) the Distribution FSCR (as described in item (Financial Covenants) below) for the relevant period is at least 1.5 times; make any transfers to the Distribution Account to make any repayments of advances by the Issuer’s directors/ shareholders/ related companies and/or redemption of the Issuer’s redeemable preference shares (if any) unless a Director of the Issuer certifies to the Facility Agent and the Sukuk Trustee the following conditions are satisfied on the Calculation Date: (a) at least forty percent (40%) of the principal under the SRI Sukuk Tadau has been redeemed; (b) no Dissolution Event or potential Dissolution Event has occurred and is continuing; (c) the Maintenance Reserve Account is funded from the Revenue Account in the manner set out in item (Details of Designated Accounts) below and there is no shortfall; (d) the FSA Minimum Required Balance has been 170
  181. met and will be met after the Proposed Distribution ; (xvii) (e) notification is made to the Credit Rating Agency on the Proposed Distribution at least fourteen (14) calendar days before the date of the Proposed Distribution; (f) the Distribution FSCR for the relevant period is at least 1.5 times; and (g) the FE Ratio (as defined below) prior to and immediately after repayment of shareholders’ advances and/or redemption of redeemable preference shares is not more than 80:20. make any advances or loans to any persons or provide guarantees to secure advances or loans for the benefit of any shareholders, affiliates, or related corporations of the Issuer; (xviii) do or omit to do any act, or execute or omit to execute any documents which may render any of the Project Documents to be illegal, void, voidable or unenforceable; (xix) enter into a transaction, whether directly or indirectly with interested persons (including a director, major shareholder, chief executive or persons connected with them) unless: (a) such transaction shall be on terms that are no less favourable to the Issuer 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 RM15,000,000.00, the Issuer obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms; PROVIDED THAT the Issuer certifies to the Sukuk Trustee in writing that the transaction complies with paragraph (xix)(a) above, that, where applicable, the Issuer has received the certification referred to in paragraph (xix)(b) above and that the transaction has been approved by its board of directors and, where applicable, its shareholders at a general meeting; (xx) open any bank accounts other than the Designated Accounts, the Sukuk Trustees’ Reimbursement Account (as described in sub-item (xxii) (Sukuk 171
  182. Trustees ' Reimbursement Account for Sukukholders' Actions) under item (Other Terms and Conditions)) and any other accounts as may be permitted under the Transaction Documents; and (xxi) Financial covenants such other covenants as may be advised by the Transaction Solicitors and mutually agreed between the PA/LA and the Issuer. : Finance Service Cover Ratio ("FSCR") Commencing from the COD of Unit 2, the Issuer shall ensure that the FSCR is not less than 1.25 times. FSCR shall be calculated on a yearly basis based on the corresponding audited accounts of the Issuer and shall be the ratio of A/B where: A= “Net Available Cash” is the aggregate of all cash balances in the Designated Accounts (excluding the Distribution Account) before payment of the Finance Service (as defined below) during the corresponding twelve (12) months and the FSA SBLC Amount (as defined in sub-item (xlii) (FSA SBLC) under item (Other Terms and Conditions) below), if any; and B= “Finance Service” is the aggregate of all principal and Periodic Distribution Amounts paid during the corresponding twelve (12) months. The FSCR shall be calculated for each financial year during the tenure of the SRI Sukuk Programme based on the latest audited financial statements of the Issuer and duly confirmed by a Director of the Issuer and submitted to the Sukuk Trustee and the Facility Agent within one hundred and eighty (180) days after the end of each of its financial years. For the avoidance of doubt, any double counting shall be disregarded. Distribution FSCR The Issuer shall ensure that the Distribution FSCR is not less than 1.5 times prior to making any transfer from the Revenue Account to the Distribution Account. Distribution FSCR is to be calculated on the Calculation Date (as defined below) for dividend or other form of distribution to be declared to the shareholders of the Issuer or interest to be paid on advances made by the Issuer’s directors/ shareholders/ related companies, dividend/profit on redeemable preference shares (if any), repayment of advances made by the Issuer’s directors/ shareholders/ related companies and/or redemption of redeemable preference shares of the Issuer (“Proposed Distribution”) and shall be calculated based on the ratio of (C+ D+ E)/(C+F), whereby: 172
  183. “Calculation Date” means a date that is not more than five (5) business days before the date of transfer of the Proposed Distribution to the Distribution Account. C= "Actual Total Finance Service" is the actual aggregate of all principal and Periodic Distribution Amounts paid by the Issuer from the day after the last principal payment obligation date up to the day before the Calculation Date. D= "Opening Balances" is the opening cash balances in the Designated Accounts (excluding the Distribution Account, Maintenance Reserve Account and the Cost Savings Reserve Account (as described in item (Details of Designated Accounts) below) as at the beginning of the Calculation Date and the FSA SBLC Amount, if any. E= "Projected Pre-financing Cashflow" is the projected cashflow before financing (net of the Proposed Distribution) on the Calculation Date up to and including the next principal payment obligation date. F= "Projected Total Finance Service" is the projected aggregate of all principal and Periodic Distribution Amounts to be made by the Issuer on the Calculation Date up to and including the next principal payment obligation date. For the avoidance of doubt, any double counting shall be disregarded and the Proposed Distribution shall be transferred to the Distribution Account within five (5) business days from the Calculation Date. The Distribution FSCR to be computed prior to any proposed transfer to the Distribution Account pursuant to sub-items (xv) and (xvi) under item (Negative Covenants) above and duly confirmed by a Director of the Issuer and submitted to the Sukuk Trustee and the Facility Agent within five (5) business days after the Calculation Date. Finance to Equity Ratio (“FE Ratio”) The Issuer shall ensure the FE Ratio is not more than 80:20. The FE Ratio will be defined as: (a) (i) the aggregate outstanding nominal value of the SRI Sukuk Tadau payable by the Issuer, (ii) the aggregate amount outstanding under the obligations arising in the ordinary course of the business of the Issuer created under hire purchase facilities in relation to the Project and (iii) the aggregate amount outstanding under the BG Facilities; to 173
  184. (b) Sponsor Equity Contribution (as defined in sub-item (xxxvii) (Sponsor Equity Contribution) under item (Other Terms and Conditions) below) made less any distribution made to shareholder(s) or holder(s) of preference shares or repayment of advances pursuant to sub-item (xvi) under item (Negative Covenants) above. The FE Ratio shall be calculated in the following manner: (i) FE Ratio to be computed for each financial year during the tenure of the SRI Sukuk Programme based on the latest audited financial statements of the Issuer and duly confirmed by a Director of the Issuer and submitted to the Sukuk Trustee and the Facility Agent within one hundred and eighty (180) days after the end of each of its financial years; and (ii) FE Ratio to be computed prior to any proposed transfer to the Distribution Account pursuant to subitem (xvi) under item (Negative Covenants) above based on the latest management accounts of the Issuer as at the Calculation Date (adjusted for any transfer made/to be made to the Distribution Account after the date of the management accounts up to the Calculation Date) and duly confirmed by a Director of the Issuer and submitted to the Sukuk Trustee and the Facility Agent within five (5) business days after the Calculation Date. For the avoidance of doubt, any double counting shall be disregarded. Information covenants : Including but not limited to the following information covenants, the Issuer shall: (i) deliver to the Sukuk Trustee, the Facility Agent and the Credit Rating Agency: (a) within one hundred and eighty (180) days after the end of each of its financial year copies of the Issuer’s audited financial statements which shall contain the income statements, cash flow statements and balance sheets and which are audited by a firm of independent certified public accountants; (b) within ninety (90) days after the end of each half of Issuer’s financial year copies of the Issuer’s unaudited financial statements which shall contain the income statements and balance sheets which are duly certified by any one of the Issuer’s directors; 174
  185. (c) within one hundred and eighty (180) days after the end of each of the Sponsor’s (as described in sub-item (xxxviii) (Sponsor Completion Support) under item (Other Terms and Conditions) below) financial year, copies of the Sponsor’s audited financial statements and which shall contain the income statements, cash flow statements and balance sheets and which are audited by a firm of independent certified public accountants; (d) within ninety (90) days after the end of each half of the Sponsor’s financial year copies of the Sponsor’s unaudited financial statements which shall contain the income statements and balance sheets which are duly certified by any one of the Sponsor’s directors; (e) for the financial year commencing before the COD of Unit 2, calculation of FE Ratio (as described below) certified by at least one director of the Issuer, within one hundred and eighty (180) days after the end of its financial year; and (f) for the financial years commencing after the COD of Unit 2, calculation of FSCR (as described below) and FE Ratio certified by at least one director of the Issuer within one hundred and eighty (180) days after the end of each of its financial year. (ii) To submit to the Facility Agent and the Sukuk Trustee no later than sixty (60) calendar days prior to the beginning of each financial year an operating plan and a budget of estimated operating costs, estimated income and proposed estimated capital expenditure for each financial year (“Annual Operating Budget”) that have been approved by the Board of Directors of the Issuer which may not, without the approval of the Sukukholders, exceed the amounts set out in the Financial Model (as described in sub-item (xviii) (Conditions Precedent for Issuance) under item (Conditions Precedent) below) or Revised Financial Model (as described below), as the case may be, by more than ten percent (10%) per annum; (iii) immediately notify the Sukuk Trustee and Facility Agent if the Issuer becomes aware of: (a) any default notices, suspension notices, force majeure notices, change of law notices and termination notices in relation to the Project Documents received by the Issuer or issued by the Issuer; 175
  186. (b) any material breach, termination, rescission, discharge (other than by performance), supplement, novation, amendment or waiver in writing of, or indulgence in writing under, any provision of any Project Document or any variation order issued under any of the EPC Contracts, which would require the approval of the Sukuk Trustee in sub-item (ix) under item (Negative Covenants) above; (c) 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 SRI Sukuk Tadau to become immediately payable; (2) the SRI Sukuk Tadau to become immediately enforceable; or (3) any Dissolution Event including any other right or remedy under the terms, provisions or covenants of the SRI Sukuk Tadau or the Trust Deed to become immediately enforceable; (d) of any circumstances that has occurred that would materially prejudice the Issuer or any security included in or created by the SRI Sukuk Tadau or the Trust Deed (where applicable); (e) of any change in the nature of the business of the Issuer; (f) of any changes in the Issuer’s domicile or residency or withholding tax position or taxation jurisdiction; (g) of any change in the utilisation of proceeds from the SRI Sukuk Tadau; (h) of any litigation, arbitration or administrative proceeding or claim which would reasonably be expected to have a Material Adverse Effect, and the Issuer shall provide the Sukuk Trustee and Facility Agent with such details; (i) any change in the information relating to the Issuer and Sponsor as stated in the lodgement to the SC and the Information Memorandum; and (j) of any other matter that may materially 176
  187. prejudice the interests of the Sukukholders ; (iv) provide to the Sukuk Trustee at least on an annual basis, a certificate signed by a director of the Issuer confirming that the Issuer is compliant with all relevant material environmental laws, permits, guidelines and regulations, if required; (v) during the construction period submit to the Sukuk Trustee, the Facility Agent and the Credit Rating Agency, (a) on a monthly basis, a summary of the progress of work done and (b) on a quarterly basis, a report prepared by the owner’s engineer and reviewed by the independent technical adviser (“Independent Technical Adviser”) on amongst others, the progress of construction; and (c) on a quarterly basis, the construction budget and comparison to the actual construction cost prepared by the Issuer and duly certified by any one of the Issuer’s directors; (vi) inform the Sukuk Trustee of any material change in the directorship and shareholders and any other changes that may have a material effect on the Issuer’s and the Sponsor’s business condition (financial or otherwise) or operating results; (vii) promptly inform the Sukuk Trustee and the Facility Agent of any change in Project Costs (as defined in sub-item (xi) (Project Costs) under item (Other Terms and Conditions) below) exceeding the original estimated Project Costs by three percent (3%) or any variation order which may result a delay in the Initial Operation Date as defined in sub-item (xv) (Initial Operation Date) under item (Other Terms and Conditions) below) or the COD of Unit 2 for more than six (6) months beyond the Scheduled COD of Unit 2; (viii) promptly inform the Sukuk Trustee and the Facility Agent of any updates to the Financial Model arising from the requirements of the PPAs and thereafter to promptly submit to the Sukuk Trustee and the Facility Agent a copy of the Financial Model that has been revised and endorsed by the Suruhanjaya Tenaga/ Sabah Electricity Sdn Bhd (“SESB”) with a projected base case FSCR of at least 1.25 times and a FE Ratio of not exceeding 80:20 and certified by at least one director of the Issuer (“Revised Financial Model”); (ix) promptly deliver additional financial or non-financial information or reports as the Sukuk Trustee may from time to time reasonably request, including without limitation, such information as the Sukuk Trustee may require in order to discharge its duties and obligations to the extent permitted by law; and 177
  188. (x) deliver to the Sukuk Trustee and the Facility Agent at the end of its financial year, a certificate confirming that the Issuer has complied with its obligations under the Transaction Documents and the terms and conditions of the SRI Sukuk Tadau and that there did not exist or had existed, from the date of the first issuance of the SRI Sukuk Tadau or the date of the previous certificate as the case may be, any Dissolution Event and if such is not the case, to specify the same; (xi) provide annual reporting, via newsletters, website updates, annual report or any other communication channels, to the Sukukholders on the following: (xii) (a) the original amount earmarked for the Eligible SRI projects (as described in sub-item (xliii) (Eligible SRI projects) under item (Other Terms and Conditions)); (b) the amount utilised for the Eligible SRI projects; (c) the unutilised amount and where such unutilised amount is placed or invested pending utilisation; and (d) where feasible and to the extent possible, the impact objectives from the Eligible SRI projects; and such other covenants as may be advised by the Transaction Solicitors and mutually agreed between the PA/LA and the Issuer. Details of designated : account(s), if applicable Name of account Disbursement Account (“DA”) Opened by / to be opened by Issuer Maintained/operated or (i) to be maintained by/operated by (ii) Prior to occurrence of a Dissolution Event: Jointly the Facility Agent and the Issuer Upon occurrence of a Dissolution Event: Security Trustee Signatories to the account (i) Prior to occurrence of a Dissolution Event: Jointly the Facility Agent and the Issuer 178
  189. (ii) Upon occurrence of a Dissolution Event: Security Trustee Sources of funds Utilisation of funds DA shall capture the funds from the following sources: (i) all proceeds from the issuance of the SRI Sukuk Tadau; and (ii) equity injection by the shareholders of the Issuer prior to COD of Unit 2. The funds in the DA shall be utilised in the following manner: (i) Payment of Project Costs (Note 1); (ii) Transfer to the FSA, the FSA Required Profit Balance (as defined below); and (iii) Transfer to the Cost Savings Reserve Account an amount equivalent to fifty percent (50%) of the reduction in construction cost (i.e. the difference between the construction costs reflected in the PPAs and the updated financial model submitted to and accepted by SESB one (1) year post COD of Unit 2); and (iv) Upon Project Completion Date, balance to be transferred to the Revenue Account. The Disbursement Account may be closed at such time after the Project Completion Date, when the balance standing to the credit thereof to the Disbursement Account equals zero. (Note 1: The release of funds from the DA for payment of Project Costs is subject to the receipt of satisfactory documentary evidence such as the certification by the Independent Technical Adviser, if applicable, of progress billings from the EPC Contractor (as described in sub-item (xxxv) (EPC Contractor) under item (Other Terms and Conditions) below) and invoices from suppliers.) Diagram illustrating the Refer to Appendix B below flow of monies and conditions for disbursement Name of account Revenue Account (“RA”) Opened by / to be opened by Issuer Maintained/operated or (i) to be maintained by/operated by Prior to occurrence of a Dissolution Event: Jointly the Facility Agent and the Issuer 179
  190. (ii) Upon occurrence of a Dissolution Event: Security Trustee Signatories to the account (i) Prior to occurrence of a Dissolution Event: Jointly the Facility Agent and the Issuer (ii) Upon occurrence of a Dissolution Event: Security Trustee Sources of funds Utilisation of funds RA shall capture the funds from the following sources: (i) all revenues, income and receivables (including liquidated damages and insurance proceeds) in connection with the Project and all Project Documents (including the PPAs); (ii) any excess balances in the DA after the Project Completion Date; (iii) any excess amounts (for the avoidance of doubt, such amounts to include, where relevant, any proceeds of Permitted Investments) in the Maintenance Reserve Account (as defined below) will be credited to the Revenue Account as soon as practicable; and (iv) equity contribution and/or advances from shareholder or intercompany advances post COD of Unit 2. The credit balances in the RA shall be applied in the following manner: (i) on the monthly transfer date, for transfers to the Operating Account for payment of taxes, operating and maintenance expenses, duties, capital expenditures (recurring or otherwise) in accordance with the Annual Operating Budget and other payment obligations under the Project Documents (including any Issuer’s compensation payments) or in relation to the Project; (ii) for purposes of meeting the requirements in connection with the Maintenance Reserve Account; (iii) for purposes of transfer to the Maintenance Reserve Account for payment of cost of repair and replacement under the Project for which insurance claims have been received upon the receipt of satisfactory documentary evidence for such cost; (iv) for remittance of Periodic Distribution Amount and scheduled nominal value of the SRI Sukuk Tadau into the Finance Service Account (as described below); 180
  191. (v) for remittance into the Finance Service Account for purposes of meeting and maintaining the FSA Minimum Required Balance; (vi) for remittance of the Mandatory Redemption Amount, the Asset 1 Mandatory Redemption Amount or the Asset 2 Mandatory Redemption Amount, as the case may be (if applicable); and (vii) for transfers to the Distribution Account, subject to compliance with sub-items (xv) and (xvi) under item (Negative Covenants) above. Diagram illustrating the Refer to Appendix B below flow of monies and conditions for disbursement Name of account Opened by/to opened by Finance Service Account (“FSA”) be Issuer Maintained/operated or (i) to be maintained by/operated by (ii) Prior to occurrence of a Dissolution Event: Facility Agent Upon occurrence of a Dissolution Event: Security Trustee Signatories account to the (i) Prior to occurrence of a Dissolution Event: Facility Agent (ii) Upon occurrence of a Dissolution Event: Security Trustee Sources of funds (a) Funds transferred from DA to maintain the FSA Required Profit Balance; (b) Funds transferred from RA and/or Cost Savings Reserve Account to capture and maintain the FSA Minimum Required Balance; (c) Any excess balance transferred from the Cost Savings Reserve Account subsequent to its closure (if applicable); and (d) Proceeds from the FSA SBLC. Upon each issuance of the SRI Sukuk Tadau, the FSA shall capture the Periodic Distribution Amounts payable up to the next 181
  192. immediate Periodic Distribution Date post Scheduled COD of Unit 2 (“FSA Required Profit Balance”). Commencing on the Periodic Distribution Date post Scheduled COD of Unit 2, amounts equivalent to at least the aggregate of following shall be deposited into the FSA (“FSA Minimum Required Balance”): (a) the next scheduled Periodic Distribution Amount due shall be deposited six (6) months before the due date; and (b) the scheduled nominal value due (if applicable) shall be deposited six (6) months before the scheduled Reduction Date as per the Reduction Schedule (as described in sub-item (vii) (Reduction Schedule) under item (Other Terms and Conditions) below). In the event that there is a deficiency in respect of the FSA Required Profit Balance or the FSA Minimum Required Balance and that the SBLC Option (as defined in sub-item (xlii) (FSA SBLC) under item (Other Terms and Conditions) below) is not exercised, the Issuer is required to rectify or cure the deficiency within thirty (30) calendar days from notification of such deficiency by the Facility Agent. Utilisation of funds The credit balances shall be utilised for making any payment of Periodic Distribution Amount and scheduled nominal value (if applicable) on the Periodic Distribution Dates. Diagram illustrating the Refer to Appendix B below flow of monies and conditions for disbursement Name of account Opened by/to opened by Operating Account (“OA”) be Issuer Maintained/operated or (i) to be maintained by/operated by (ii) Prior to occurrence of a Dissolution Event: Issuer Upon occurrence of a Dissolution Event: Security Trustee Signatories account to the (i) Prior to occurrence of a Dissolution Event: Issuer (ii) Upon occurrence of a Dissolution Event: Security Trustee 182
  193. Sources of funds The OA shall capture amounts from the RA . Utilisation of funds Payment of taxes, operating and maintenance expenses, duties and capital expenditures (recurring or otherwise) in accordance with the Annual Operating Budget and other payment obligations under the Project Documents (including any Issuer’s compensation payments) or in relation to the Project. Diagram illustrating the Refer to Appendix B below flow of monies and conditions for disbursement Name of account Maintenance Reserve Account (“MRA”) Opened by/to be Issuer opened by Maintained/operated or (i) Prior to occurrence of a Dissolution Event: to be maintained by/operated by Jointly the Facility Agent and the Issuer (ii) Upon occurrence of a Dissolution Event: Security Trustee Signatories account to the (i) Prior to occurrence of a Dissolution Event: Jointly the Facility Agent and the Issuer (ii) Upon occurrence of a Dissolution Event: Security Trustee Sources of funds The MRA shall capture amounts from the RA. The MRA shall maintain at all times RM 4.1 million to be built up semi-annually in six (6) equal instalments commencing on the seventh (7th) year after the COD of Unit 1 and the COD of Unit 2. The release of funds from the MRA is subject to receipt of satisfactory documentary evidence. Utilisation of funds The funds in the MRA shall be utilised for meeting the maintenance obligations of the Issuer, including any repair or replacement under the Project whether covered by insurance or otherwise. Any distribution from the MRA to pay for maintenance costs of the Project shall be restored within three (3) months following such withdrawal. Any excess funds in the MRA shall be credited into the Revenue Account as soon as practicable. 183
  194. Diagram illustrating the Refer to Appendix B below flow of monies and conditions for disbursement Name of account Distribution Account (“DTA”) Opened by/to be Issuer opened by Maintained/operated or (i) Prior to occurrence of a Dissolution Event: to be maintained by/operated by Issuer (ii) Upon occurrence of a Dissolution Event: Issuer Signatories account to the (i) Prior to occurrence of a Dissolution Event: Issuer (ii) Upon occurrence of a Dissolution Event: Issuer Sources of funds The DTA shall capture amounts from the RA. Utilisation of funds The funds in the DTA shall be utilised for dividend payments to holders of ordinary shares and/or dividend/profit on redeemable preference shares (if any) of the Issuer, interest on advances made by the Issuer’s directors/ shareholders/ related companies (if any) of the Issuer, redemption of the Issuer’s redeemable preference shares (if any) and the repayment of advances to Issuer’s directors/ shareholders/ related companies. Diagram illustrating the Refer to Appendix B below flow of monies and conditions for disbursement Name of account Cost Savings Reserve Account (“CSRA”) Opened by/to be Issuer opened by Maintained/operated or (i) Prior to occurrence of a Dissolution Event: to be maintained by/operated by Facility Agent (ii) Upon occurrence of a Dissolution Event: Security Trustee 184
  195. Signatories account to the (i) Prior to occurrence of a Dissolution Event: Facility Agent Upon occurrence of a Dissolution Event: (ii) Security Trustee Sources of funds The CSRA shall capture the balances transferred from the DA. Utilisation of funds In the event there are insufficient funds in the RA, the credit balances in the CSRA may be transferred to the FSA to maintain the FSA Minimum Required Balance. The CSRA may be closed and the balances to be transferred to the FSA after the first anniversary from COD of Unit 2 if SESB confirms in writing that there will be no adjustment to the energy rate pursuant to the PPAs. Diagram illustrating the Refer to Appendix B below flow of monies and conditions for disbursement Credit rating(s) of : Rated as follows: facility/programme, if applicable Credit rating agency Conditions Precedent : RAM Rating Services Bhd (RAM) Credit rating : AA3 Final/Indicative : Indicative rating Amount rated : 250,000,000 : Conditions Precedent for Issuance The conditions precedent to the issuance of the SRI Sukuk Tadau under the SRI Sukuk Programme shall be as set out below: (i) The Transaction Documents and other relevant documents pertaining to the SRI Sukuk Tadau have been signed and where applicable stamped and presented for registration with the relevant registries; (ii) Evidence that the forms as prescribed under section 352 of the Companies Act in respect of the charges created by the Security Documents shall have been duly lodged with the Companies Commission of Malaysia; (iii) Evidence that the power of attorney clause as may be 185
  196. contained in the Transaction Documents (where applicable) shall have been presented for registration with the High Court of Malaya; (iv) All notices, consents and/or acknowledgements (where applicable) to be issued under the relevant Security Documents shall have been issued to the relevant counter-parties and acknowledged shall have been made or received as the case may be; (v) A certified true copy of the Board of Director’s Resolution of the Issuer authorising, amongst others, (i) the undertaking and implementation of the SRI Sukuk Programme, and (ii) the execution of the Transaction Documents; (vi) A certified true copy of the board resolution of the Sponsor, authorising the acceptance as the Sponsor of the SRI Sukuk Tadau in accordance with the terms of the Transaction Documents and the execution of other related documents to the SRI Sukuk Programme (where applicable); (vii) Certified true copies of the Issuer’s and the Sponsor’s constitutional documents and the latest forms as prescribed under sections 78 (Return of allotment), 46 (Registered office and office hours) and 58 (Duty to notify of particulars and changes of director, manager and secretary) of the Companies Act, where applicable, and any other statutory forms as may be required by the LA and the Transaction Solicitors; (viii) Specimen signatures of the Issuer’s Sponsor’s authorised signatories; (ix) Receipt of satisfactory legal due diligence report on the Issuer and the Sponsor; (x) A report of the company search conducted on the Issuer and the Sponsor; (xi) A report of the relevant winding up search conducted on the Issuer and the Sponsor; (xii) Evidence that arrangement has been made for payment of all transaction fees, costs and expenses due from the Issuer in relation to the SRI Sukuk Programme; (xiii) The certified true copies of the duly executed and stamped Project Documents and any other supplemental documentation in relation thereto; (xiv) Documentary evidence that the Sukuk Trustees' Reimbursement Account in accordance with the Trust 186 and the
  197. Deeds Guidelines has been established and the deposit of RM30 ,000.00 has been made; (xv) The PA/LA have received from the Transaction Solicitors a satisfactory legal opinion addressed to the PA/LA and the Sukuk Trustee advising with respect to, among others, the legality, validity and enforceability of the Transaction Documents and a confirmation addressed to the PA/LA that all the conditions precedent in relation to the Transaction Documents have been fulfilled or waived, as the case may be; (xvi) The PA/LA have received a satisfactory legal opinion from the Issuer’s external legal counsel addressed to the PA/LA and the Sukuk Trustee advising with respect to, among others, the legality, validity and enforceability of the Project Documents and confirming to the PA/LA and the Sukuk Trustee that all the conditions precedent in relation to the Project Documents, where applicable, have been fulfilled or waived as the case may be; (xvii) Title search results on the Project Lands; (xviii) A copy of the financial model of the Solar PV Plants reviewed by an independent financial model reviewer from a reputable accounting firm evidencing, amongst others, that the projected base case FSCR of at least 1.25 times and FE Ratio of not exceeding 80:20 (“Financial Model”); (xix) Certified true copy of the duly executed joint venture agreement dated 18 May 2015 between Edra Global Energy Berhad and Kagayaki Energy Sdn Bhd, the novation agreement dated 17 June 2015 entered into between Edra Global Energy Berhad, Edra Solar Sdn Bhd and Kagayaki Energy Sdn Bhd and any supplemental agreements thereafter; (xx) The SRI Sukuk Programme shall have received a minimum rating of AA3 from RAM; (xxi) Endorsement of SAC, acknowledgment in respect of the lodgement to the SC and approvals from any other relevant authorities pursuant to any relevant guidelines issued and to be issued from time to time by the SC or any other authorities having jurisdiction over matters pertaining to the SRI Sukuk Programme; (xxii) The endorsement from the Shariah Adviser that the SRI Sukuk Programme and the Transaction Documents are in compliance with Shariah principles; (xxiii) Evidence that all the Designated Accounts have been 187
  198. opened in accordance with the provisions of the Transaction Documents ; (xxiv) Evidence that all other accounts of the Issuer with financial institutions (other than the Designated Accounts, the Sukuk Trustees’ Reimbursement Account and any accounts opened pursuant to the BG Facilities), if any, have been closed; (xxv) Receipt of: (a) a certified copy of all the requisite approvals required from the Department of Environment under the Environmental Quality Act 1974 in respect of the Project pursuant to the Submission of an Environmental Impact Assessment Report by the Project Company in relation thereto (“EIA Approval”) (if the Department of Environment requires the submission of an Environmental Impact Assessment Report by the Project Company) or written confirmation from the Department of Environment that EIA Approval is not required; and (b) a certified copy of (1) the application for the development order in relation to the Project and (2) the letter of no objection from the relevant district officer in relation to the Project; (xxvi) Receipt of a certified copy of the technical report prepared by the Independent Technical Adviser; (xxvii) Receipt of the confirmation by a Director of the Issuer supported by relevant documentary evidence that the 20% equity contribution in the form of cash has been deposited into the Disbursement Account and/or the Project Costs have been paid; (xxviii) Receipt of an operating plan and a budget of estimated operating costs, estimated income and proposed estimated capital expenditure of the Solar PV Plants for the period commencing from the Scheduled COD of Unit 1 and ending on 30 June 2018 with the amounts as set out in the Financial Model; and (xxix) Such other conditions precedent as may be advised by the Transaction Solicitors and agreed by the Issuer. Conditions Precedent for Subsequent Issuances (i) All representations and warranties are true and 188
  199. correct in all material respects by reference to the facts and circumstances subsisting at such time ; (ii) No Dissolution Event has occurred and is continuing; (iii) Such issuance would not cause the FE Ratio to exceed 80:20; (iv) Documentary evidence evidencing that the FSA Required Profit Balance will be deposited into the FSA; and (v) Such other conditions precedent as may be advised by the Transaction Solicitors and agreed by the Issuer. Conditions Subsequent Representation warranties (i) Receipt of a certified true copy of the duly executed Generation License relating to Unit 1 (as described in sub-item (x) (Solar PV Plants) under item (Other Terms and Conditions)) within 14 calendar days from the Initial Operation Date (as defined in the PPA 1) of Unit 1; (ii) Receipt of certified true copy of the duly executed Generation License relating to Unit 2 (as described in sub-item (x) (Solar PV Plants) under item (Other Terms and Conditions)) within 14 calendar days from the Scheduled COD of Unit 2; (iii) Receipt of a certified true copy of the development order in relation to the Project within ninety (90) calendar days from the first issuance of the SRI Sukuk Tadau; and (iv) Such other conditions subsequent as may be advised by the Transaction Solicitors and agreed by the Issuer. and : Issuer The Issuer hereby represents and warrants as follows: (i) it is a company duly incorporated and validly existing under the laws of Malaysia and it has the power and authority to own its assets and to conduct the business which it is being conducted; (ii) (a) its constitutional documents incorporate provisions which authorise; (b) all necessary corporate action have been taken to authorise; and (c) subject to the perfection requirements referred to in the legal opinion delivered under sub-item (xv) (Conditions Precedent for Issuance) under item (Conditions 189
  200. Precedent ), all authorisations of any government or other authority have been duly obtained and are in full force and effect which are required to authorise it to own its assets, carry on its business as it is being conducted, and sign and deliver, and perform the transactions contemplated and the obligations specified, in each of the Transaction Documents (of which it is a party to), the PPAs (of which it is a party to) in accordance with its terms; (iii) neither the signing and delivery of the Transaction Documents and the Project Documents nor the performance of any of the transactions contemplated in the Transaction Documents and the Project Documents will: (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, judgment, order, licence, permit or consent by which it or any of its assets are bound or affected; (b) cause any limitation on Issuer or the powers of its respective directors, imposed by or contained in its constitutional documents, or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded; or (c) cause the creation or imposition of any security interest or restriction of any nature on any of its assets (other than the security as contemplated under the Transaction Documents); (iv) it has no subsidiaries or any shareholdings in other companies and it does not engage in any business other than its current principal activity; (v) subject to any general principles of law limiting its obligations referred to in the legal opinion delivered under sub-item (xv) (Conditions Precedent for Issuance) under item (Conditions precedent), each of the Transaction Documents and Project 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 enforceable under laws of Malaysia; (vi) adequate insurance/takaful cover as required in the ordinary course of business and under the Project Documents and such insurances/takafuls are valid and in full force and effect; 190
  201. (vii) as of the date of issue thereof, the information contained in the Information Memorandum is, after having made all reasonable enquiries, is not false or misleading and there is no material omission therefrom; (viii) the latest audited financial statements have been prepared in accordance with the approved accounting standards in Malaysia, which have been consistently applied and (in conjunction with the notes to such statements) present a true and fair view of its state of affairs of the Issuer for the financial year ended on such date; (ix) there is no litigation or arbitration which would have a Material Adverse Effect; (x) there have been no defaults under other agreements of the Issuer; (xi) no winding up and no other steps or proceedings in connection with the insolvency of the Issuer have been taken or are pending; (xii) there has been no material adverse change in the financial condition of the Issuer since the date of its latest audited financial statements; and (xiii) such other representations and warranties as may be advised by the Transaction Solicitors and agreed by the Issuer. Sponsor The Sponsor hereby represents and warrants as follows: (i) it is a company duly incorporated and validly existing under the laws of Malaysia and it has the power and authority to own its assets and to conduct the business which it is being conducted; (ii) (a) its constitutional documents incorporate provisions which authorise; (b) all necessary corporate action have been taken to authorise; and (c) subject to the perfection requirements referred to in the legal opinion delivered in sub-item (xv) (Conditions Precedent for Issuance) under item (Conditions Precedent), all authorisations of any government or other authority have been duly obtained and are in full force and effect which are required to authorise it to own its assets, carry on its business as it is being conducted, and sign and deliver, and perform the transactions contemplated and the obligations specified, in each of the Transaction Documents (of which it is a party to) (of which it is a party to) in 191
  202. accordance with its terms ; (iii) neither the signing and delivery of the Transaction Documents nor the performance of any of the transactions contemplated in the Transaction Documents will: (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, judgment, order, licence, permit or consent by which it or any of its assets are bound or affected; (b) cause any limitation on Issuer or the powers of its respective directors, imposed by or contained in its constitutional documents, or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded; or (c) cause the creation or imposition of any security interest or restriction of any nature on any of its assets (other than the security as contemplated under the Transaction Documents); (iv) subject to any general principles of law limiting its obligations referred to in legal opinion delivered in item sub-item (xv) (Conditions Precedent for Issuance) under item (Conditions Precedent), 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 enforceable under laws of Malaysia; (v) the latest audited financial statements have been prepared in accordance with the approved accounting standards in Malaysia, which have been consistently applied and (in conjunction with the notes to such statements) present a true and fair view of its state of affairs for the financial year ended on such date; (vi) there is no litigation or arbitration which would have a material adverse effect on the Sponsor’s financial ability to discharge its obligations as the Sponsor in accordance with the terms of the SRI Sukuk Programme; (vii) there have been no defaults under other agreements of the Sponsor which would have a material adverse effect on the Sponsor’s financial ability to discharge its obligations as the Sponsor in accordance with the terms of the SRI Sukuk Programme; 192
  203. (viii) no winding up and no other steps or proceedings in connection with the insolvency of the Sponsor have been taken or are pending; (ix) there has been no material adverse change in the financial condition of the Sponsor since the date of its latest audited financial statements; and (x) such other representations and warranties as may be advised by the Transaction Solicitors and agreed by the Issuer. Events of default or : Dissolution Events shall include but not limited to the enforcement events, following: where applicable, including recourse (i) Non-Payment: where the Issuer fails to pay any available to investors amount due from it under the SRI Sukuk Tadau and/or under any of the Transaction Documents on the due date, or if so payable, on demand unless its failure to pay is caused by systemic failure of the banking payment system and is made within two (2) business days’ of its due date; or (ii) Misrepresentation: any representation or warranty made or given by the Issuer and/or the Sponsor in any of the Transaction Documents or which is contained in any certificate, statement or document furnished at any time under or in connection with the SRI Sukuk Tadau and/or any of the Transaction Documents, is or proves to have been incorrect or misleading in any material respect on or as of the date made or given or deemed made or given; or (iii) Invalidity: at any time, any provisions of any of the Transaction Documents or the Project Documents is or becomes, for any reason, invalid, illegal, void, voidable or unenforceable or if any law is brought into effect which would prevent the Issuer from or entitle the Issuer to refrain from performing any of its obligations thereunder; or (iv) Repudiation: (1) the Issuer repudiates or terminates the Project Documents or does or causes to be done any act or thing evidencing an intention to repudiate or terminate the Project Documents; (2) the Issuer or the Sponsor repudiates any of the Transaction Documents or the Issuer or the Sponsor alleges that any Transaction Document is not in proper legal form for enforcement thereof or does or causes to be done any act or thing evidencing an intention to repudiate or terminate any of the Transaction Documents; or (v) Breach of obligation: where the Issuer fails to perform or observe or commits a breach of any covenant, 193
  204. condition or provision or any of its obligations under any of the Transaction Documents (other than an obligation referred to under item (i) above) or any other related documents or under any undertaking or arrangement entered into in connection therewith and in the case of any such breach or failure in the opinion of the Sukuk Trustee capable of being remedied, the Issuer fails to remedy such breach or failure within a period of thirty (30) days of such failure; or where the Sponsor fails to observe or perform its obligations under the Sponsor Completion Support, and in the case of any such breach or failure which is in the opinion of the Sukuk Trustee capable of being remedied, the Sponsor fails to remedy such failure to observe or perform any of its obligations within thirty (30) days of such failure; or (vi) Other Events: any other event or series of events has or have occurred or a situation exists which have or would in the opinion of the Sukuk Trustee be expected to have a Material Adverse Effect (as defined below) and in the case of the occurrence of such event(s) or situation which in the opinion of the Sukuk Trustee is capable of being remedied, the Issuer does not remedy it within a period of thirty (30) days after the Issuer becomes aware or having been notified by the Sukuk Trustee of the event or situation, whichever is earlier; or (vii) Winding-up: where any step or action is taken for the winding-up, dissolution or liquidation of the Issuer or a resolution to wind-up the Issuer has been passed and no action is taken in good faith to set aside or dispute such step or action in court within thirty (30) days from the date of service of such winding-up petition or the making of any order or the passing of any resolution for the winding-up, dissolution or liquidation of the Issuer; or (viii) Appointment of receiver, legal process: where an encumbrancer takes possession of, or a trustee, liquidator, receiver or similar officer is appointed in respect of, the whole or a substantial part of the business or assets of the Issuer and such appointment is not withdrawn or discharged within thirty (30) days of such appointment; or (ix) Cross default: where any other indebtedness for borrowings of the Issuer: (1) becomes due and payable prior to its stated maturity; or (2) capable of being declared due or payable before its stated maturity arising from the occurrence of a Dissolution Event; or (3) if any security created to secure any such indebtedness becomes enforceable; or 194
  205. (x) Composition: where the Issuer convenes a meeting of its creditors or proposes or makes any arrangement or composition with, or any assignment for the benefit of, its creditors under Section 366 of the Companies Act; or (xi) Termination of Project Documents: when there is an invalidation, termination or revocation of any of the Project Documents, and substitute arrangements satisfactory to the Sukuk Trustee are not put in place within ninety (90) days; or (xii) Breach of the Issuer’s Obligations under any of the Project Documents: where the Issuer fails to comply with any of its obligations, or commits or threatens to commit a breach of any obligation, term, stipulation, covenant or undertaking, under any of the Project Documents and the occurrence of such event or situation has a Material Adverse Effect and in the opinion of the Sukuk Trustee is capable of being remedied in accordance with the terms of the Project Documents, the Issuer does not remedy it within the timeframe stipulated in the Project Documents; or (xiii) Judgment passed: where the Issuer fails to satisfy any judgment at any time passed against it by any court of competent jurisdiction; or (xiv) Insolvency: where the Issuer is for the purpose of Section 466 of the Companies Act deemed unable to pay any of its debts or becomes unable to pay any of its debts as they fall due or the Issuer suspends or stops making payments (whether interest or principal) with respect to any of its financial indebtedness or notifies in writing to the relevant creditor to admit its inability in making payments (whether interest or principal) with respect to any of its financial indebtedness; or (xv) Approvals: (a) any governmental authorisation (other than the Generation Licence) is revoked, terminated, withheld, invalidated, cancelled or not renewed or modified or amended or a notice of violation is issued under any governmental authorisation by the issuing agency or other governmental instrumentality having jurisdiction thereover, or any proceeding is commenced by any governmental instrumentality for the purpose of modifying, revoking, terminating, withholding, invalidating or cancelling any governmental authorisation and in each case in a manner which has or would reasonably be expected to give rise to a Material Adverse Effect; (b) the Generation Licence is revoked, terminated, withheld, invalidated, cancelled or not renewed or modified or amended or ceases to be in full force and effect 195
  206. without a substitute licence being issued therefor within one hundred and eighty (180) days of such revocation, termination, withholding, invalidation, cancellation, non-renewal, or cessation; or, as the case may be, and the effect of such modification or amendment would be to prevent the implementation or carrying out of the Project by the Project Company or has or would reasonably be expected to give rise to a Material Adverse Effect; or (c) Any condition or provision of the Generation Licence is not complied with and such non-compliance has not been remedied or waived by the Suruhanjaya Tenaga in writing (in each case) within ninety (90) days of its occurrence unless the Suruhanjaya Tenaga has permitted the Project Company to remedy such noncompliance and the Project Company has demonstrated to the satisfaction of the Sukuk Trustee by the sixtieth (60) day after its occurrence that it will remedy such non-compliance within ninety (90) days of its occurrence or such other cure period as may be permitted or required by the Suruhanjaya Tenaga; (xvi) Changes to Project Documents and Financial Model: changes to the Project Documents and Financial Model which would have a Material Adverse Effect; or (xvii) Cease or change in business: the Issuer ceases or threatens to cease to carry on its business or changes or threatens to change the nature and scope of its business; or (xviii) Suspension of Construction Work on the Solar PV Plants: suspension of construction work on the whole or any material part of the Solar PV Plants and such suspension continues uncured or is not remedied for a period of sixty (60) calendar days; or (xix) Failure to achieve COD: failure of the Issuer to achieve: (a) COD of Unit 1 within six (6) months from the Scheduled COD of Unit 1 or any extension thereof; or (b) COD of Unit 2 within six (6) months from the Scheduled COD of Unit 2 or any extension thereof; or (xx) Step-in by Suruhanjaya Tenaga: Suruhanjaya Tenaga exercises its statutory right to step in and operate Unit 1 and/or Unit 2 of the Solar PV Plants under the PPA 1 and/or PPA 2, as the case may be; or (xxi) SESB Exercises Step-in Right: SESB exercises its 196
  207. rights to step in and operate Unit 2 of the Solar PV Plants under the PPA 2 ; or (xxii) Seize of Assets: all or substantial part of the property or assets, undertakings, rights or revenue of the Issuer are condemned, seized or otherwise expropriated, nationalised or compulsorily acquired by any person acting under the authority of the governmental body; (xxiii) Total Loss Event: there is a Total Loss Event in respect of Asset 2; or (xxiv) such other events as may be advised by the Transaction Solicitors and mutually agreed between the PA/ LA and the Issuer. For the purpose of the principal terms and conditions of the SRI Sukuk Tadau, “Material Adverse Effect” means any material adverse effect on: (i) the business or condition (financial or otherwise) or results of the operations or assets of the Issuer, (ii) the ability of the Issuer to perform any of its obligations under any of the Transaction Documents, (iii) the validity or enforceability of any of the Transaction Documents, (iv) the ability of any of the Sponsor to perform any of its obligations under Sponsor Completion Support, and/or (v) the rights or remedies of the Sukuk Trustee, the Security Trustee or the Sukukholders under the Transaction Documents. The Sukuk Trustee may at its discretion and shall, upon the instruction of the Sukukholders by way of special resolution, subject to it being indemnified by the Sukukholders to its satisfaction, issue a notice to the Issuer declaring that a Dissolution Event has occurred and all sums payable by the Issuer under the outstanding SRI Sukuk Tadau shall become immediately due and payable in full whereupon the Security Trustee shall be entitled to immediately enforce the security created under the Security Documents, without further notice to the Issuer. Governing laws : Laws of Malaysia. Provisions on buy- : The Issuer or any its subsidiaries or agent(s) of the Issuer back, if applicable may purchase the SRI Sukuk Tadau at any price in the open market or by a private treaty on a willing buyer-willing seller basis. The SRI Sukuk Tadau so acquired by the Issuer or any of its subsidiaries or its agent(s) must be surrendered for cancellation and shall not be reissued or resold. Provisions on redemption, applicable Voting early : Please refer to sub-item (xx) (Redemption) under item (Other if Terms and Conditions) below. : All matters/resolutions which require the Sukukholders’ 197
  208. consent under the SRI Sukuk Programme shall be carried out on a collective basis . Any SRI Sukuk Tadau held by the Issuer or any interested person (includes directors, major shareholders and chief executive) of the Issuer shall not be counted for the purpose of voting, nor entitle them to participate in the voting of any Sukukholders' resolutions, nor form part of the quorum of any meeting subject to any exceptions in the SC’s Trust Deeds Guidelines. Permitted investments, if applicable : The funds standing to the credit of the Designated Accounts may be placed in permitted investments limited to the following (“Permitted Investments”) which shall comprise Shariah-compliant investment products approved by the SAC of SC, the SAC of Bank Negara Malaysia (“BNM”) and/or other recognised Shariah authorities: (a) Accounts maintained with a Shariah compliant financial institution with a minimum credit rating of AA3/P1 and/or AA-/MARC-1; (b) Money market instruments of a Shariah compliant financial institution with a minimum credit rating of AA3/P1 and/or AA-/MARC-1; (c) Islamic treasury bills, Islamic money market instruments, and other Islamic instruments or sukuk issued by BNM or the Government of Malaysia; and (d) Unit trust that invests in Islamic money market instruments with the prior written approval of the Credit Rating Agency, subject to the following: (i) The maturity of the Permitted Investments in securities shall fall on a date, which is at least five (5) business days before the next Periodic Distribution Date or the maturity date of the SRI Sukuk Tadau, whichever is earlier. However, the maturity of the Permitted Investment in money market instruments of a financial institution and accounts maintained with financial institutions shall fall on a date, which is at least two (2) business days before the next Periodic Distribution Date or the maturity date, whichever is earlier save that this condition shall not apply to any placement of money with the Facility Agent; and (ii) The Permitted Investments being denominated in Ringgit Malaysia. 198
  209. Other Terms and Conditions : (i) Identified Assets : The Solar PV Plants. (ii) Purchase and : Istisna' Price selling price/Rental The Istisna' Price pursuant to the Istisna' Agreement (which shall be equal to the aggregate proceeds from the issuance of the SRI Sukuk Tadau) shall be determined prior to the issuance of the SRI Sukuk Tadau. The Istisna' Price shall be in line with the Asset Pricing Guidelines. Advance Rentals and Lease Rentals The Advance Rentals and Lease Rentals (based on the relevant Periodic Distribution Rate) shall be determined prior to issuance of each SRI Sukuk Tadau. (iii) Profit/Coupon/ : Fixed rate to be determined prior to the issuance of the SRI Sukuk Tadau (“Periodic Distribution Rate”). Rental Rate (fixed or The “Periodic Distribution Amount” shall be calculated at floating) the Periodic Distribution Rate on the nominal value of the SRI Sukuk Tadau based on Periodic Distribution Basis (as defined below). (iv) Profit/Coupon/ : The frequency of payment of the Periodic Distribution Rental Payment Amounts for the SRI Sukuk Tadau shall be on a semi-annual frequency basis or such other period to be determined by the Issuer prior to the issuance of the SRI Sukuk Tadau. The periodic distribution dates (“Periodic Distribution Dates”) shall be the date for payment of each of the Periodic Distribution Amount, each being a date falling at the end of each consecutive six (6) month periods commencing from the date of the first issuance of the relevant SRI Sukuk Tadau or such other period to be determined by the Issuer prior to the issuance of the SRI Sukuk Tadau. (v) Profit/Coupon/ : The Periodic Distribution Amount shall be calculated on the basis of actual/365 (“Periodic Distribution Basis”). Rental Payment Basis (vi) Details on utilisation of proceeds by the Issuer : The proceeds shall be utilised by the Issuer for Shariah compliant purposes in relation to the Project(1) for payment of the Project Costs incurred or to be incurred based on the FE Ratio of 80:20(2). Notes: (1) The Project is deemed to be an Eligible SRI project under the Guidelines on Unlisted Capital Market 199
  210. Products under the Lodge and Launch Framework issued by the SC on 9 March 2015 and revised on 16 January 2017 (“LOLA Guidelines”) pursuant to paragraph 7.04 (b)(i) (new or existing renewable energy – solar) of Part 3 of the LOLA Guidelines. (2) (vii) Reduction Schedule This includes reimbursement of fees and expenses paid by the Issuer or the Sponsor in relation to the SRI Sukuk Programme and the BG Facilities. : The limit of the SRI Sukuk Programme shall be reduced according to a reduction schedule ("Reduction Schedule") as set out below: Reduction Date (Anniversary year from the date of first issue) Issue date 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Reduction/ Redemption Amount Available Limit (RM) (RM) 14,000,000 9,000,000 15,000,000 18,000,000 19,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 15,000,000 15,000,000 15,000,000 10,000,000 250,000,000 250,000,000 236,000,000 227,000,000 212,000,000 194,000,000 175,000,000 155,000,000 135,000,000 115,000,000 95,000,000 75,000,000 55,000,000 40,000,000 25,000,000 10,000,000 0 (viii) Tenure of the : The SRI Sukuk Tadau shall have a tenure of two (2) years or SRI Sukuk more but not exceeding sixteen (16) years provided that the Tadau maturity date of the SRI Sukuk Tadau shall not extend beyond the tenure of the SRI Sukuk Programme. (ix) Project : The financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of the Solar PV Plants, to be located at Kudat, Sabah, Malaysia and associated facilities as described under the PPA 1 and the PPA 2, and includes any modification thereto. 200
  211. (x) Solar PV Plants : Details of the solar PV energy generating facilities are as follows: Unit 1 (2 MWac) under PPA 1 (“Unit 1” or “Asset 1”) 2 MWac solar PV energy generating facility to be located in Jalan Sikuati, Kudat situated on the lands held under: (i) Country Lease No. CL. 055322953, measuring approximately in area of 9.72 acres; and (ii) Country Lease No. CL. 055025824, measuring approximately in area of 8 acres, (“Site Yong East”). Unit 2 (48 MWac) under PPA 2 (“Unit 2” or “Asset 2”) Three (3) solar PV energy generating facilities to be located on the following sites: (a) 1.5 MWac solar PV energy generating facilities to be located at Jalan Sikuati, Kudat situated on Site Yong East. (b) 12.6 MWac solar PV energy generating facilities to be located in Jalan Pantai Bak Bak, Kudat situated on a portion measuring 35 acres of the lands held under Country Lease No. CL. 055028192 measuring approximately in area of 54 acres (“Site Bak Bak”). (c) 33.9 MWac solar PV energy generating facilities to be located in Jalan Tai Cheong, Kudat situated on: (i) the land held under Country Lease No. CL. 055022529 measuring approximately in area of 20.143 acres; (ii) the land held under Country Lease No. CL. 055026830, measuring approximately in area of 49.75 acres; (iii) the land held under Country Lease No. CL. 055022485, measuring approximately in area of 3.212 acres; (iv) a portion of land measuring 5 acres held under Country Lease No. CL. 055021764 measuring up to a total area of 23 acres; (v) the land held under Country Lease No. CL. 055021782 measuring up to a total area of 14 acres; and 201
  212. (vi) the land held under Country Lease No. CL. 055024274 measuring up to a total area of 25 acres. (“Site Yong West”). “Solar PV Plants” shall mean Unit 1 and Unit 2 collectively. “Solar PV Plant” shall, where the context requires, be reference to Unit 1 or Unit 2, as the case may be. (xi) Project Costs : The total cost and expenses relating to the Project incurred or to be incurred by the Issuer including: (a) all costs associated with development, design, engineering, procurement, construction, installation, testing, commissioning and ownership in respect of the Project; and (b) any other Project related costs, including financing cost up to the next immediate Periodic Distribution Date post Scheduled COD of Unit 2 and expenses relating to the SRI Sukuk Programme and the BG Facilities, consultancy fees, takaful contributions, contingencies and working capital requirements of the Project. (xii) Maturity Date : The respective scheduled maturity date being, the date on which the relevant outstanding tranche of the SRI Sukuk Tadau in question is due to be redeemed. (xiii) COD of Unit 1 : Commercial Operation Date of Unit 1 means the date on which all the conditions precedent to commercial operation as set forth in the PPA 1 shall have been satisfied or waived. (xiv) COD of Unit 2 : Commercial Operation Date of Unit 2 means the date on which all the conditions precedent to commercial operation as set forth in the PPA 2 shall have been satisfied or waived. (xv) Initial Operation Date : Initial Operation Date means such date as may be applied according to the PPA 2. (xvi) Scheduled COD of Unit 1 : 30th June 2017. For the avoidance of doubt, in the event the Scheduled COD of Unit 1 is not a business day and is a Saturday, Sunday or an expected holiday, the Scheduled COD of Unit 1 shall be the preceding business day. (xvii) Scheduled COD of Unit 2 : 31st March 2018. For the avoidance of doubt, in the event the Scheduled COD of Unit 2 is not a business day and is a Saturday, Sunday or an expected holiday, the Scheduled COD of Unit 2 shall be the preceding business day. (xviii) Project Completion Date : The first date on which all of the following conditions have been complied: (i) the project completion reports (as described in the 202
  213. PPAs ) have been issued by the EPC Contractor and submitted to SESB; (ii) SESB has issued a written confirmation that the COD of Unit 1 and COD of Unit 2 have been achieved (as described in the PPAs); and (iii) the confirmation by the EPC Contractor that the Issuer has discharged in full its payment obligations under the EPC Contracts, including the respective Retention Money (as described in the EPC Contracts). (xix) BG Facilities : Bank guarantee facilities procured or to be procured by the Issuer for the benefit of Suruhanjaya Tenaga, SESB and/or any other relevant authority in connection with the Project. (xx) Redemption : Unless previously redeemed, purchased or cancelled, all outstanding SRI Sukuk Tadau will be redeemed by the Issuer at 100% of their nominal value on their respective maturity dates. (xxi) Status : The SRI Sukuk Tadau will represent the Sukukholders’ undivided and proportionate beneficial ownership and interest in the Trust Assets. The SRI Sukuk Tadau shall constitute direct, unconditional, secured and unsubordinated obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of Issuer, subject to those preferred by law and the Transaction Documents. (xxii) Sukuk Trustees’ : The Issuer shall set up a Shariah-compliant Sukuk Trustees' Reimbursement Account for Sukukholders' Actions ("Sukuk Reimbursement Trustees’ Reimbursement Account") with a sum of Account for Sukukholders’\ RM30,000.00 (which shall be maintained at all times Actions throughout the tenure of the SRI Sukuk Programme). The Sukuk Trustees’ 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 a Dissolution Event which are to be provided in the relevant Transaction Documents. (xxiii) Transaction Documents (xxiv) Power Purchase : “Transaction Documents” includes the transaction documents executed or to be executed in connection with the proposed issue of the SRI Sukuk Tadau, which term includes issue documents, Shariah required documents, Sponsor Completion Support, Security Documents relating to SRI Sukuk Tadau, and any other facilities to be mutually agreed to between the Issuer and the LA to be included as a Transaction Document. : The power purchase agreement dated 15 December 2016 between the Issuer and SESB in connection with Unit 1, and 203
  214. Agreement 1 or PPA 1 (xxv) includes any amendments, variations and/or supplemental made or entered into from time to time. Power : The power purchase agreement dated 15 December 2016 Purchase between the Issuer and SESB in connection with Unit 2, and Agreement 2 or includes any amendments, variations and/or supplemental PPA 2 made or entered into from time to time. (xxvi) Lease : The lease agreement dated 16 December 2016 between the Agreement Issuer as lessee and the registered proprietor of the below (Site Yong mentioned land as lessor over the land held under Country West 1) Lease No. CL. 055022529 measuring approximately 20.143 acres situated at Kudat, Sabah. (xxvii) Lease Agreement (Site Yong West 2) (xxviii) Lease Agreement (Site Yong East) (xxix) Lease Agreement (Site Bak Bak) (xxx) The lease agreement dated 16 December 2016 between the Issuer as lessee and the registered proprietor of the below mentioned land as lessor over the land held under (i) Country Lease No. CL. 055026830 measuring approximately 49.75 acres and (ii) Country Lease No. CL. 055022485 measuring approximately 3.212 acres, both situated at Kudat, Sabah. : The lease agreement dated 16 December 2016 between the Issuer as lessee and the registered proprietor of the below mentioned land as lessor over the land held under Country Lease No. CL. 055322953 measuring approximately 9.72 acres and (ii) Country Lease No. CL. 055025824 measuring approximately 8 acres, both situated at Kudat, Sabah. : The lease agreement dated 28 December 2016 between the Issuer as lessee and JS Premier Corporation Sdn Bhd (Company No. 900028-X) as lessor over a portion measuring 35 acres of the land held under Country Lease No. CL. 055028192 measuring approximately 54 acres situated at Kudat, Sabah. Lease : The lease agreement dated 8 March 2017 between the Agreement Issuer as lessee and the registered proprietors of the below (Site Yong mentioned land as lessors over a portion measuring 5 acres West 3) of the land held under Country Lease No. CL. 055021764 measuring up to a total area of 23 acres situated at Kudat, Sabah. (xxxi) Lease Agreement (Site Yong West 4) (xxxii) Lease Agreement (Site Yong West 5) : The lease agreement dated 8 March 2017 between the Issuer as lessee and the registered proprietors of the below mentioned land as lessors over the land held under Country Lease No. CL. 055021782 measuring approximately 14 acres situated at Kudat, Sabah. : The lease agreement dated 8 March 2017 between the Issuer as lessee and the registered proprietor of the below mentioned land as lessor over the land held under Country Lease No. CL. 055024274 measuring approximately 25 acres situated at Kudat, Sabah. 204
  215. (xxxiii) EPC Contract 1 : Contract agreement dated 24 January 2017 between the Issuer and the EPC Contractor for the design, engineering, procurement, construction, installation, testing and commissioning of the 2 MWac PV electric installation proposed to be located in Kudat, Sabah. (xxxiv) EPC Contract 2 : Contract agreement dated 24 January 2017 between the Issuer and the EPC Contractor for the design, engineering, procurement, construction, installation, testing and commissioning of the three (3) solar PV electric installation with an aggregate capacity of 48 MWac proposed to be located at Site Bak Bak, Site Yong East and Site Yong West in Kudat, Sabah. (xxxv) EPC Contractor : SPIC Energy Malaysia Sdn Bhd. (xxxvi) Project : The Project Documents of the Project shall include the following: Documents (i) The PPA 1 and PPA 2 (collectively referred to as “PPAs”); (ii) The Lease Agreement (Site Yong West 1), Lease Agreement (Site Yong West 2), Lease Agreement (Site Yong East), Lease Agreement (Site Bak Bak), Lease Agreement (Site Yong West 3), Lease Agreement (Site Yong West 4) and Lease Agreement (Site Yong West 5) (collectively referred to as the “Lease Agreements” and any one of them a “Lease Agreement”); (iii) The EPC Contract 1 and EPC Contract 2 (collectively referred to as the “EPC Contracts”) and associated bonds, performance bonds or completion guarantees (if any) from or on behalf of the EPC Contractor; (iv) The operation and maintenance agreements entered or to be entered into by the Issuer in connection with the Project; (v) Applicable insurance policies/takaful contracts of or for the benefit of the Issuer pursuant to any Project Document; (vi) All relevant permits and licences relating to the Project which are issued in favour of or for the benefit of the Issuer; and (vii) Such other project documents as advised by the Transaction Solicitors to the LA and mutually agreed between the Issuer and the LA. 205
  216. (xxxvii) Sponsor Equity Contribution Sponsor Completion Support (xxxviii) : Refers to all shareholder equity contribution and commitment made directly or indirectly by the Sponsor in relation to the Project whether in the form of ordinary share capital, preferred shares, redeemable preference shares or subordinated shareholder loans/financing. : Kagayaki Energy Sdn Bhd (“Sponsor”) shall provide an unconditional and irrevocable letter of undertaking for the period commencing from (and including) the issue date of the SRI Sukuk Tadau and expiring on the date falling six (6) months from the COD of Unit 2 or the date of declaration of a Dissolution Event (whichever is earlier) (“Undertaking Period”) to: (i) inject the Sponsor Equity Contribution into the Project in accordance with the Financial Model or Revised Financial Model (if applicable); and (ii) fund any cost overruns incurred relating to the Project. In respect of the Sponsor Completion Support, the Sponsor shall have the right, but not the obligation, to increase the amount and/or extend the period of the undertaking at its sole discretion. The Sponsor Completion Support shall cease and have no further effect on the earlier of the expiry of the Undertaking Period or the date on which the following having been fulfilled and confirmed by a Director of the Issuer to the Sukuk Trustee and Security Trustee: (xxxix) Taxation (i) the date of acceptance specified in (a) the Final Acceptance Certificate (as defined in the EPC Contract 1) issued under the EPC Contract 1 as the date on which the works are completed in accordance with the EPC Contract 1 and (b) the Final Acceptance Certificate (as defined in the EPC Contract 2) issued under the EPC Contract 2 as the date on which the works are completed in accordance with the EPC Contract 2; (ii) all construction costs in relation to the Project payable under the EPC Contracts have been paid (including any cost overruns); and (iii) the Conditions Subsequent under item (Conditions precedent) have been satisfied. : All payments by the Issuer shall be made in full without withholding or deductions for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied by or on behalf of Malaysia or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law (in which event the Issuer shall 206
  217. 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 were made ). (xl) Mandatory Redemption : Upon the occurrence of a Total Loss Event in respect of any Asset, the Project Company shall immediately notify the Sukuk Trustee in writing. In the event of a Total Loss Event in respect of Asset 1 and Asset 2 (“Mandatory Redemption Event”), the Issuer shall redeem the nominal value of all outstanding SRI Sukuk Tadau and all accrued and unpaid Periodic Distribution Amount thereon and pay the Ownership Expenses (if any) (collectively, the “Mandatory Redemption Amount”), using the proceeds of takaful/insurance for Asset 1 and Asset 2 (including, where applicable, the amount payable by the Servicing Agent pursuant to the Service Agency Agreement) as soon as practicable upon receiving the same. If the takaful/insurance proceeds are insufficient to cover the Mandatory Redemption Amount, the Servicing Agent shall irrevocably and unconditionally undertake to make good the difference and shall immediately make such requisite payment to the Issuer if sufficient proceeds of takaful/insurance have not been received within thirty (30) calendar days after the occurrence of a Mandatory Redemption Event. The Mandatory Redemption Amount shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent in relation to the Assets. The Ijarah Agreements in respect of Asset 1 and Asset 2 will be terminated. In the event of a Total Loss Event in respect of Asset 1 (“Asset 1 Mandatory Redemption Event”), the Issuer shall redeem the nominal value of the SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 1 in the inverse order of maturity (collectively, the “Asset 1 Mandatory Redemption Amount”) using the proceeds of takaful/insurance for Asset 1 (including, where applicable, the amount payable by the Servicing Agent pursuant to the Service Agency Agreement) as soon as practicable upon receiving the same. If the takaful/insurance proceeds are insufficient to cover the Asset 1 Mandatory Redemption Amount, the Servicing Agent shall irrevocably and unconditionally undertake to make good the difference and shall immediately make such requisite payment to the Issuer if sufficient proceeds of takaful/insurance have not been received within thirty (30) calendar days after the occurrence of an Asset 1 Mandatory Redemption Event. The Asset 1 Mandatory Redemption Amount shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent in relation to Asset 1. The Ijarah Agreement in respect of Asset 1 will be terminated. In the event of a Total Loss Event in respect of Asset 2 207
  218. (“Asset 2 Mandatory Redemption Event”), the Issuer shall redeem the nominal value of the SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 2 (collectively, the “Asset 2 Mandatory Redemption Amount”) using the proceeds of takaful/insurance for Asset 2 (including, where applicable, the amount payable by the Servicing Agent pursuant to the Service Agency Agreement) as soon as practicable upon receiving the same. If the takaful/insurance proceeds are insufficient to cover the Asset 2 Mandatory Redemption Amount, the Servicing Agent shall irrevocably and unconditionally undertake to make good the difference and shall immediately make such requisite payment to the Issuer if sufficient proceeds of takaful/insurance have not been received within thirty (30) calendar days after the occurrence of an Asset 2 Mandatory Redemption Event. The Asset 2 Mandatory Redemption Amount shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent in relation to Asset 2. The Ijarah Agreement in respect of Asset 2 will be terminated. The Sukuk Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase Asset 1 from the Sukuk Trustee, at the Exercise Price, whereupon the Ijarah Agreement in respect of Asset 1 will be terminated. (xli) Project Lands : Means, collectively, the parcels of lands leased pursuant to the Lease Agreements (as defined in sub-item (xxxvi) above) where the Solar PV Plants are to be constructed and located, and the lands under any Lease Agreement shall be referred to as “Project Land”. (xlii) FSA SBLC : Two (2) years subsequent to COD of Unit 2, the Issuer may, if so requested by its shareholders, be permitted to meet the whole or part of the FSA Minimum Required Balance by delivering to the Security Trustee a FSA SBLC (“SBLC Option”). “FSA SBLC” means an unconditional, irrevocable and on demand standby letter of credit procured by any of the Issuer’s shareholders and issued by a licensed Islamic financial institution with a minimum long term rating of at least AA3 by RAM or AA- by MARC (“Provider”) to the Security Trustee and on terms satisfactory to the Security Trustee. The FSA SBLC shall: (i) cover, on the issue date of such FSA SBLC, the amount of shortfall in the FSA Minimum Required Balance (“FSA SBLC Amount”); (ii) provide for no recourse to the Issuer for the Provider of such FSA SBLC; and (iii) provide that such FSA SBLC will be drawn if not 208
  219. renewed within twenty (20) business days prior to its original expiry date and/or to any subsequent expiry date thereafter. In the event the rating of the Provider of the FSA SBLC is downgraded by 2 or less notches from the SRI Sukuk Programme rating, the shareholders of the Issuer will have to replace the existing FSA SBLC with a new FSA SBLC from a licensed Islamic financial institution of equal or higher long-term credit rating, within forty-five (45) days from the date of the rating downgrade. Failure to do so entitles the Security Trustee to call on the existing FSA SBLC and the proceeds from the FSA SBLC shall be deposited into the FSA. In the event the rating of the Provider of the FSA SBLC is downgraded by more than 2 notches from the SRI Sukuk Programme rating, the Security Trustee shall draw on the FSA SBLC immediately and the proceeds from the FSA SBLC shall be deposited into the FSA. SRI : “Eligible SRI projects” refers to eligible sustainable and responsible investment projects, and has the meaning ascribed to it under the LOLA Guidelines. (xliii) Eligible projects (xliv) Jurisdiction (xlv) Other Disclosures (a) If the issuer or : None. its board members have been convicted or charged with any offence under any securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, or if any action has been initiated against the issuer or its board members for breaches of the same, for the past 10 years prior to the lodgement/since incorporation, for : The Issuer submits to the exclusive jurisdiction of the courts of Malaysia. 209
  220. issue incorporated less than 10 years (b) If the issuer has : Not applicable. been subjected to any action by the stock exchange for any breach of the listing requirements or rules issued by the stock exchange, for the past five years prior to the lodgement Ta'widh : In the event of any overdue payments of any amounts due under the SRI Sukuk Tadau, the Issuer shall pay to the Sukukholders the compensation on such overdue amounts at the rate and manner as may be prescribed by the SAC of SC from time to time in accordance with Shariah principles. Ibra’ : Not applicable. Kafalah : Not applicable. 210
  221. APPENDIX A TRANSACTION STRUCTURE 211
  222. Unless the context otherwise requires , any abbreviations used in this document shall be the same as per definitions contained in the PTC. 1. Pursuant to a Trust Deed entered into by the Issuer and the Sukuk Trustee, the Sukuk Trustee agrees and declares that it shall act for and on behalf of all the holders of the SRI Sukuk Tadau (“Sukukholders”) in respect of the SRI Sukuk Tadau issued or to be issued pursuant to the SRI Sukuk Programme and in connection therewith to enter into the following agreements in respect of the SRI Sukuk Programme on behalf of the Sukukholders:(i) Istisna' Agreements; (ii) ljarah Agreements; (iii) Service Agency Agreement; and (iv) Purchase Undertaking. Underlying Transaction A. At inception and during construction of the Assets The Sukuk Trustee shall declare a trust over the Trust Assets (herein defined) on an undivided basis for the benefit of all Sukukholders (“Declaration of Trust”). The “Trust Assets” comprise the rights, interest and benefit in, to and under the Istisna' Agreement, the completed Assets (as defined herein), the ljarah Agreement, the Service Agency Agreement and the Purchase Undertaking. 2. Istisna’ Agreements The Sukuk Trustee (acting on behalf of the Sukukholders), shall first enter into an Istisna' Agreement with the Issuer (in its capacity as “Contractor”) in respect of each of Asset 1 and Asset 2 (collectively, the "Assets" and references to an “Asset” shall mean any one of them), to effect the following: (i) The Contractor will build, construct and deliver the Assets (for the Sukukholders for the respective Istisna' Price. The Contractor may appoint sub-contractors to construct and deliver each Asset. The Istisna' Price shall be determined prior to the first issuance of the SRI Sukuk Tadau and paid in instalments as specified in each Istisna' Agreement. The Istisna' Price shall be in compliance with the asset pricing requirement stipulated under the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the SC as may be replaced, substituted, amended or revised from time to time ("Assets Pricing Guidelines"). Upon completion of construction and delivery of the relevant Asset, the Contractor shall accordingly notify the Sukuk Trustee of the completion and delivery of the relevant Asset. Thereafter, the relevant Istisna' Agreement will be completed in accordance with the terms thereof. (ii) Upon declaration of a Dissolution Event when the relevant Asset has not been completed and delivered to the Sukuk Trustee (on behalf of the Sukukholders) under the relevant Istisna' Agreement, that Istisna' Agreement shall be terminated immediately whereupon the Issuer shall:a. refund the Istisna' Price, and 212
  223. b . be liable to pay the Sukuk Trustee (on behalf of the Sukukholders) the “Compensation Amount” as compensation for failure to complete the construction and delivery of the relevant Asset to the Sukuk Trustee, which amount shall be equivalent to the following:   aggregate Periodic Distribution Amount paid; and any Periodic Distribution Amount accrued but unpaid up to the date of declaration of Dissolution Event; The Compensation Amount shall be set-off against the Advance Rental (as defined herein) that has been paid to the Sukuk Trustee (on behalf of the Sukukholders) up to the date of declaration of Dissolution Event. 3. Ijarah Agreements The Sukuk Trustee (acting on behalf of the Sukukholders), will subsequently enter into an ljarah Agreement with the Issuer in respect of each Asset, whereby:- 4. (i) the Sukuk Trustee (as "Lessor") agrees to lease and the Issuer (as "Lessee") agrees to take on the lease of the relevant Asset (under the concept of ljarah Mawsufah Fi Zimmah i.e. Forward Lease). In consideration of the Sukuk Trustee agreeing to grant to the Lessee a forward lease in respect of the relevant Asset to be completed and delivered, the Lessee shall pay advance rental at a pre-determined rental amount ("Advance Rental") at such times and in the manner as provided in the relevant ljarah Agreement. The Advance Rental shall be equivalent to the Periodic Distribution Amount which is to be channeled to the Sukukholders in proportion to their holdings in the SRI Sukuk Tadau on the Periodic Distribution Dates prior to completion of the construction of the Asset; (ii) Upon completion and delivery of the relevant Asset up to maturity of the relevant lease (corresponding to the maturity date of the last outstanding tranche of the SRI Sukuk Tadau) ("Lease Period"), the Lessee will pay predetermined rental amounts to the Lessor ("Lease Rentals") as further described below. SRI Sukuk Tadau Issuance The Issuer issues the SRI Sukuk Tadau, where the SRI Sukuk Tadau shall represent the Sukukholders' interest, rights and entitlements under and to the Trust Assets, including the proportionate undivided ownership of the Assets upon completion and delivery of the same. The SRI Sukuk Tadau proceeds shall be utilised to pay the Issuer (in its capacity as Contractor) the Istisna' Price under the Istisna' Agreements. The Istisna' Price will be paid in accordance with the issuance of the SRI Sukuk Tadau as contemplated under the SRI Sukuk Programme. Non-completion and non-delivery of the Assets In the event the relevant Asset is not completed and delivered to the Sukuk Trustee by the Contractor pursuant to the provisions of the relevant Istisna' Agreement, the total Advance Rental paid shall be refunded by the Lessor to the Lessee (by way of set-off against the Compensation Amount (as defined above)) and the relevant ljarah Agreement will thereafter be terminated. 213
  224. 5 . Service Agency Agreement Pursuant to a Service Agency Agreement:- 6. (i) the Sukuk Trustee acting on behalf of the Sukukholders shall appoint the Issuer as "Servicing Agent" throughout the Lease Period under each Ijarah Agreement; (ii) the Servicing Agent shall perform all repairs, replacements, acts and maintenance works and pay ownership expenses in respect of each Asset ("Ownership Expenses") during the respective Lease Periods. The Ownership Expenses will be set-off against (1) the Exercise Price payable by the Issuer pursuant to the Purchase Undertaking; (2) the final Lease Rental upon the expiry of each ljarah Agreement or (3) the Mandatory Redemption Amount under a Total Loss Event in respect of both Assets or the Asset 1 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 1 or the Asset 2 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 2, as the case may be; and (iii) the Servicing Agent shall be responsible to procure takaful/insurance that provides sufficient proceeds for the redemption of the relevant SRI Sukuk Tadau under a Total Loss Event. If the takaful/insurance proceeds are insufficient to cover (1) the Mandatory Redemption Amount under a Total Loss Event in respect of both Assets or (2) the Asset 1 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 1 or (3) the Asset 2 Mandatory Redemption Amount under a Total Loss Event in respect of Asset 2, as the case may be, the Servicing Agent shall be liable to make good the difference. Any excess from the takaful/insurance proceeds over the amount required to redeem the relevant SRI Sukuk Tadau and the Ownership Expenses, if any, shall be paid to the Servicing Agent as an incentive fee. B. Post-completion of the Assets and at maturity Upon completion of construction and delivery of the relevant Asset, the Contractor shall accordingly notify the Sukuk Trustee of the completion and delivery of the relevant Asset pursuant to the relevant Istisna’ Agreement. Thereafter, the relevant Istisna' Agreement will be completed in accordance with the terms thereof. 7. Ijarah Agreements (i) During the Lease Period, the Lessee will pay the Lease Rentals to the Lessor pursuant to the Ijarah Agreements. The Lease Rentals for each tranche, save for the final Lease Rental applicable to such tranche, shall be equivalent to the Periodic Distribution Amount which is to be channelled to the Sukukholders in proportion to their holdings in the SRI Sukuk Tadau on the Periodic Distribution Dates. The final Lease Rental for each tranche shall be the aggregate of the following:  last Periodic Distribution Amount;  nominal value of the relevant maturing tranche of the SRI Sukuk Tadau; and  the Ownership Expenses (as defined herein). 214
  225. The final Lease Rental shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent . For the avoidance of doubt, the final Lease Rental shall not be payable if the nominal value and the accrued but unpaid Periodic Distribution Amounts of the SRI Sukuk Tadau to be redeemed is paid via the payment of the Exercise Price (as defined herein) by the Issuer (as Purchaser) in accordance with the terms of the Purchase Undertaking (as defined herein). (ii) Upon the (a) payment in full of the Lease Rentals (which corresponds to each tranche of the SRI Sukuk Tadau); and (b) maturity date of each tranche of the SRI Sukuk Tadau, it is hereby agreed that the Issuer, in its capacity as Lessee, shall not be liable to pay any Lease Rentals in respect of such maturing tranche of the SRI Sukuk Tadau after the maturity date of such tranche. For the avoidance of doubt, it is agreed that conditional upon the full payment of the Lease Rental for the final maturing tranche of the SRI Sukuk Tadau, the Asset shall be granted/transferred without cost to the Lessee based on the contract of hibah (i.e. gift) at the end of the Lease Period, pursuant to which the Declaration of Trust shall be dissolved. On the maturity date of each tranche of the SRI Sukuk Tadau, the Sukukholders of the redeemed tranche shall transfer their undivided and proportionate ownership in the relevant Asset to the Sukukholders of the outstanding tranche of the SRI Sukuk Tadau by way of conditional hibah. The relevant Sukukholders in respect of such redeemed tranche of the SRI Sukuk Tadau shall then cease to have any interest, rights and entitlements in respect of any undivided ownership of the Asset to which the redeemed tranche of the SRI Sukuk Tadau relates to. Conditional upon the full payment of the Lease Rental, upon the maturity date of the final outstanding tranche of the SRI Sukuk Tadau, the relevant Asset shall be granted/transferred without cost to the Lessee by way of conditional hibah in accordance with the Ijarah Agreement. 8. Purchase Undertaking The Issuer (as "Purchaser") will grant a purchase undertaking ("Purchase Undertaking") to the Sukuk Trustee, whereby the Purchaser irrevocably undertakes to purchase the proportionate undivided ownership in the relevant Asset from the Sukuk Trustee acting for the Sukukholders, upon the declaration of any Dissolution Event at the relevant Exercise Price via a sale agreement , which shall be specific to the relevant Asset (the “Sale Agreement”), subject to the relevant Asset being completed and delivered to the Sukuk Trustee (on behalf of the Sukukholders) under the relevant Istisna' Agreement. Upon declaration of a Dissolution Event, the Sukuk Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase the proportionate undivided ownership in the relevant completed Asset from the Sukuk Trustee, at the Exercise Price via the relevant Sale Agreement. The proceeds therefrom shall be utilised for the redemption of such relevant SRI Sukuk Tadau held by the Sukukholders which shall then be cancelled. In relation to the Purchase Undertaking, the Exercise Price for the purchase of each completed Asset from the Sukuk Trustee acting for the Sukukholders upon declaration of a Dissolution Event shall be equal to the following: Exercise Price = the amount equivalent to the Istisna’ Price for the relevant Asset + 215
  226. Ownership Expenses in respect of the relevant Asset + all accrued and unpaid Lease Rentals in relation to the relevant Asset up to the date of the declaration of the Dissolution Event or Mandatory Redemption Event. The Exercise Price payable shall be set-off against the reimbursement of any Ownership Expenses payable to the Servicing Agent. Total Loss Event (i) Upon the occurrence of a Total Loss Event (as defined below) in respect of both Asset 1 and Asset 2, the Ijarah Agreements in respect of Asset 1 and Asset 2 will be terminated. All outstanding SRI Sukuk Tadau will be redeemed using the proceeds of takaful/insurance for Asset 1 and Asset 2 pursuant to the Service Agency Agreement (as described below). (ii) Upon the occurrence of a Total Loss Event in respect of Asset 1 only, the Ijarah Agreement in respect of Asset 1 will be terminated. The SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 1 will be redeemed in the inverse order of maturity using the proceeds of the takaful/insurance for Asset 1 pursuant to Service Agency Agreement. For the avoidance of doubt, the Ijarah Agreement in respect of Asset 2 shall not be terminated, and the Advance Rentals and Lease Rentals payable thereunder shall continue to be payable. (iii) Upon the occurrence of a Total Loss Event in respect of Asset 2 only, the Ijarah Agreement in respect of Asset 2 will be terminated. The SRI Sukuk Tadau up to the amount of the Exercise Price in relation to Asset 2 will be redeemed using the proceeds of the takaful/insurance for Asset 2 pursuant to Service Agency Agreement. For the avoidance of doubt, a Total Loss Event in respect of Asset 2 shall constitute a Dissolution Event. Pursuant to that, the Sukuk Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase Asset 1 from the Sukuk Trustee, at the Exercise Price. The proceeds therefrom shall be utilised for the redemption of such relevant SRI Sukuk Tadau held by the Sukukholders which shall then be cancelled. "Total Loss Event" is the total loss or destruction of, or damage to the whole (and not part only) of a completed and delivered Asset under any ljarah Agreement or any event or occurrence that renders the whole (and not part only) of that Asset permanently unfit for any economic use and the repair or remedial work in respect thereof is wholly uneconomical. [The remainder of this page is intentionally left blank] 216
  227. APPENDIX B FUND FLOWS OF THE DESIGNATED ACCOUNTS 217
  228. Unless the context otherwise requires , any abbreviations used in this document shall be the same as per definitions contained in the lodgement kit. 1(A) SRI Sukuk Tadau is issued by the Issuer. The proceeds from the issuance of the SRI Sukuk Tadau and equity injection by the shareholders of the Issuer prior to the COD of Unit 2 shall be deposited in the DA. Concurrently thereto, funds in the DA shall be transferred to the FSA which shall be equivalent to the FSA Required Profit Balance. The funds in the FSA shall be utilised for payment of the Periodic Distribution Amounts up to next immediate Periodic Distribution Date post Scheduled COD of Unit 2. 1(B) The funds in the DA shall also be used to pay for the Project Costs subject to receipt of satisfactory documentary evidence such as the certification by the Independent Technical Adviser, if applicable, of progress billings from the EPC Contractor and invoices from suppliers. 1(C) The funds in the DA shall be transferred to the Cost Savings Reserve Account of an amount equivalent to fifty percent (50%) of the reduction in construction cost i.e. the difference between the construction costs reflected in the PPAs and the updated financial model submitted to and accepted by SESB one (1) year post COD of Unit 2. The credit balances in the CSRA may be transferred to the FSA to maintain the FSA Minimum Required Balance in the event there are insufficient funds in the RA. The CSRA may be closed and the balances to be transferred to the FSA after the first anniversary from COD of Unit 2 if SESB confirms in writing that there will be no adjustment to the energy rate pursuant to the PPAs. 2(A) RA shall capture the funds from the following sources: (a) all revenues, income and receivables (including liquidated damages and insurance proceeds) in connection with the Project and all Project Documents (including the PPAs); (b) any excess balances in the DA after the Project Completion Date; (c) any excess amounts (for the avoidance of doubt, such amounts to include, where relevant, any proceeds of Permitted Investments) in the Maintenance Reserve Account will be credited to the Revenue Account as soon as practicable; and (d) equity contribution and/or advances from shareholder or intercompany advances post COD of Unit 2. 2(B) On the monthly transfer date, funds in the RA shall be transferred to the Operating Account for payment of taxes, operating and maintenance expenses, duties, capital expenditures (recurring or otherwise) accordance with the Annual Operating Budget and other payment obligations under the Project Documents (including any Issuer’s compensation payments) or in relation to the Project. 2(C) The funds in the Revenue Account can be applied for transfer to the Maintenance Reserve Account for the following purposes: 218
  229. (a) meeting the requirements in connection with the Maintenance Reserve Account; and (b) payment of cost of repair and replacement under the Project for which insurance claims have been received upon the receipt of satisfactory documentary evidence for such cost. The Maintenance Reserve Account shall maintain at all times RM 4.1 million to be built up semi-annually in six (6) equal instalments commencing on the seventh (7th) year after the COD of Unit 1 and the COD of Unit 2. The release of funds from the MRA is subject to receipt of satisfactory documentary evidence. The funds in the Maintenance Reserve Account shall be utilised for meeting the maintenance obligations of the Issuer, including any repair or replacement under the Project whether covered by insurance or otherwise. Any distribution from the MRA to pay for maintenance costs of the Project shall be restored within three (3) months following such withdrawal. Any excess funds in the MRA shall be credited into the Revenue Account as soon as practicable. 2(D) Commencing on the Periodic Distribution Date post-Scheduled COD of Unit 2, the Revenue Account shall transfer funds into the Finance Service Account amounting to at least the aggregate of the following (“FSA Minimum Required Balance”): (a) the next scheduled Periodic Distribution Amount due shall be deposited six (6) months before the due date; and (b) the scheduled nominal value due (if applicable) shall be deposited six (6) months before the scheduled Reduction Date as per the Reduction Schedule. In the event that there is a deficiency in respect of the FSA Required Profit Balance or the FSA Minimum Required Balance and that the SBLC Option is not exercised, the Issuer is required to rectify or cure the deficiency within thirty (30) calendar days from notification of such deficiency by the Facility Agent. The funds in the RA shall also be used for the remittance into the FSA of the Periodic Distribution Amount, scheduled nominal value of the SRI Sukuk Tadau and the Mandatory Redemption Amount, the Asset 1 Mandatory Redemption Amount or the Asset 2 Mandatory Redemption Amount, as the case may be (if applicable). 2(E) Funds in the Revenue Account may be transferred to the Distribution Account, subject to compliance with sub-items (xv) and (xvi) under the Negative Covenants of the lodgement kit. The funds in the DTA shall be utilised for dividend payments to holders of ordinary shares and/or dividend/profit on redeemable preference shares (if any) of the Issuer, interest on advances made by the Issuer’s directors/ shareholders/ related companies (if any) of the Issuer, redemption of the Issuer’s redeemable preference shares (if any) and the repayment of advances to Issuer’s directors/ shareholders/ related companies. 219
  230. SECTION 6 - INVESTMENT CONSIDERATIONS An investment in the SRI Sukuk Tadau involves certain risks . Prospective investors of the SRI Sukuk Tadau should consider carefully, in the light of their own financial circumstances and investment objectives, the following factors, in addition to the matters set forth elsewhere in this Information Memorandum, prior to investing in the SRI Sukuk Tadau. The Issuer believes that the factors described below represent the principal risks inherent in investing in the SRI Sukuk Tadau. However, neither the Issuer nor the Principal Adviser/Lead Arranger/Lead Manager represent that the statements below regarding the risks of investing in any of the SRI Sukuk Tadau are complete or exhaustive. Prospective investors are strongly encouraged to undertake their own investigations and analysis on the Issuer and its business and risks associated with the SRI Sukuk Programme. Prospective investors should read the detailed information set out elsewhere in this Information Memorandum and reach their own views prior to making any investment decision. 6.1 INVESTMENT CONSIDERATIONS RELATING TO THE SRI SUKUK TADAU 6.1.1 The credit rating of the SRI Sukuk Programme The SRI Sukuk Programme has been accorded a long-term rating of AA3 with a stable outlook by RAM, which indicates a high safety for payment of financial obligations. A credit rating addresses the likelihood of full and timely payment of profit and principal to the holders of the SRI Sukuk Tadau. A credit rating is not a recommendation to buy, hold or sell the SRI Sukuk Tadau and there can be no assurance that such a credit rating will not be revised on a periodic review basis by RAM during the tenure of the SRI Sukuk Programme or that such a credit rating will not be withdrawn entirely if circumstances in the future so warrant. Further, such a rating is not a guarantee of repayment or that there will be no default by the Issuer under the SRI Sukuk Tadau. In the event that the rating initially assigned to the SRI Sukuk Tadau 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 SRI Sukuk Tadau. Any downgrading, suspension or withdrawal of a rating may have an adverse effect on the liquidity and market price of the SRI Sukuk Tadau. Any downgrading, suspension or withdrawal of a rating will not in itself constitute a Dissolution Event under the SRI Sukuk Programme or an event obliging the Issuer to redeem the SRI Sukuk Tadau. 6.1.2 Profit rate risks Investment in the SRI Sukuk Tadau involves the risk of subsequent changes in the market conditions, profit rates, the Government of Malaysia’s policies and regulations concerning, inter alia, monetary and fiscal issues, which may adversely affect the value of the SRI Sukuk Tadau. The SRI Sukuk Tadau is a fixed income Islamic security and therefore its price may fluctuate due to movements in the relevant benchmark profit rates. Generally, a rise in the benchmark profit rates may cause a fall in the prices of fixed income securities. The SRI Sukuk Tadau may be similarly affected, resulting in a capital loss for the Sukukholders. Conversely, when the 220
  231. benchmark profit rates fall , prices of fixed income securities and the prices at which the SRI Sukuk Tadau are traded may rise. Sukukholders may enjoy a capital gain but the profit received may be reinvested at lower returns. 6.1.3 Liquidity of the SRI Sukuk Tadau The SRI Sukuk Tadau comprises a new issue of securities for which there is currently no established secondary market. There is no assurance that a secondary market for the SRI Sukuk Tadau will develop or, if it does develop, that it will provide the Sukukholders with liquidity of investment or that it will continue for the tenure of the SRI Sukuk Tadau. If a market develops, the market value of the SRI Sukuk Tadau may fluctuate, and a lack of liquidity, in particular can have a material adverse effect on the market value of the SRI Sukuk Tadau. An investor in the SRI Sukuk Tadau must be prepared to hold the SRI Sukuk Tadau until the earlier of the maturity or the occurrence of the Dissolution Event of the relevant Sukuk or mandatory redemption of the SRI Sukuk Tadau. 6.1.4 Market Risk If a market develops, the market value of the SRI Sukuk Tadau may fluctuate. Any sale of the SRI Sukuk Tadau by the Sukukholders in any secondary market which may develop may be at a discount from the original issue price of the SRI Sukuk Tadau, depending on many factors, including the prevailing interest rates and the market for similar securities. Other than the operating results and/or the financial conditions of the Issuer and/or the Sponsor, the price of the SRI Sukuk Tadau in the secondary market may be influenced by numerous factors, including but not limited to, the political, economic, and any other factors that can affect the capital markets, the Project, the industry, the Issuer and/or the Sponsor in general. Adverse economic and financial developments could have a material adverse effect on the market value of the SRI Sukuk Tadau. 6.1.5 Suitability of Investments The SRI Sukuk Tadau issued under the SRI Sukuk Programme may not be a suitable investment for all investors. Each potential investor in the SRI Sukuk Tadau must determine the suitability of the 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 SRI Sukuk Tadau, the merits and risks of investing in the SRI Sukuk Tadau 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 SRI Sukuk Tadau and the impact the SRI Sukuk Tadau 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 SRI Sukuk Tadau; 221
  232. 6 .1.6 (d) understand thoroughly the terms of the SRI Sukuk Tadau 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. Shariah compliance Notwithstanding that the Shariah Adviser has provided a Shariah pronouncement on the structure and mechanism of the SRI Sukuk Tadau, case law in Malaysia indicates that the courts in Malaysia may still examine the issue of whether the SRI Sukuk Tadau are in compliance with Shariah. Investors who are permitted to hold only Shariah-compliant sukuk will not be able to hold the SRI Sukuk Tadau in the event the SRI Sukuk Tadau are held to be non-Shariah compliant, and will be required to sell the SRI Sukuk Tadau held by them, which may expose them to losses. 6.1.7 Enforcement and realisation Following the enforcement of the security upon the declaration of a Dissolution Event (as defined in the PTC), the Sukuk Trustee (on behalf of the Sukukholders) will have recourse to the security provided to secure the SRI Sukuk Tadau. The realisation value of the security or any part thereof may be adversely affected by numerous factors, including without limitation, general changes in political and economic conditions, changes in governmental rules and regulations, war or acts of violence and other factors which are beyond the control of the Issuer, the Security Trustee and any person or party involved or interested in the SRI Sukuk Tadau. No assurance can be given that the Security Trustee will be in a position to realise the security provided to secure the SRI Sukuk Tadau for an amount that is sufficient to repay all amounts outstanding in relation to the SRI Sukuk Tadau. 6.2 INVESTMENT CONSIDERATIONS RELATING TO THE ISSUER 6.2.1 The Issuer’s Ability to Meet its Obligations under the SRI Sukuk Tadau The ability of the Issuer to meet its obligations to the Sukukholders in terms of payment of amounts due in respect of the SRI Sukuk Tadau will mainly depend on the Issuer’s income and the strength of the Issuer’s operation to generate sufficient Energy Payments and positive cashflows. Any potential delay in the completion of any of the Solar PV Plants which exceeds any potential delay initially projected or the occurrence of output shortages post-COD or any unscheduled prolonged outages or the delay in receipt of payment from SESB may affect the Issuer’s ability to pay the amounts due under the SRI Sukuk Tadau. SESB, the sole counterparty making the Energy Payment, is 83% owned by Tenaga Nasional Berhad and 17% owned by the Sabah State Government. There is no assurance that SESB will be able to meet its obligations under the PPAs in a timely manner. To mitigate this risk, funds will be maintained in the FSA upon issuance of the SRI Sukuk Tadau of an amount equivalent to the FSA Required Profit Balance intended to service the Periodic Profit Payments payable up to the next immediate Periodic 222
  233. Distribution Date post Scheduled COD of Unit 2 (as defined in sub-item (xvii) of item (Other terms and conditions) of the PTC). Commencing on the Periodic Distribution Date post Scheduled COD of Unit 2 , to ensure that there are funds for profit and principal payments, the FSA must have 100% of the profit and principal sum six (6) months before the respective due dates. In addition, all revenue post completion of the Solar PV Plants will be captured in the RA (jointly controlled by the Issuer and the Facility Agent) to be utilised in the manner set out in Section 5 of this Information Memorandum. This risk is further mitigated by the restriction imposed for the payment of dividends on ordinary shares / profit on the redeemable preference shares (if any) /interest on advances made by the Issuer’s directors/ shareholders/ related companies (if any) and repayment of advances by the Issuer’s directors/ shareholders/ related companies and/or redemption of the Issuer’s redeemable preference shares. In this regard, any such payment is subject to, amongst others, compliance to the Distribution FSCR (as calculated in the manner set out in item (Financial Covenants) of the PTC. In addition, the Issuer shall ensure that at least forty percent (40%) of the principal under the SRI Sukuk Tadau has been redeemed prior to proposing any repayment of such advances or redemption of redeemable preference shares. The payments under the SRI Sukuk Tadau will be the Issuer’s obligations and will not be the obligations or responsibilities of the Principal Adviser, the Lead Arranger, the Lead Manager, the Facility Agent, or their respective subsidiaries or affiliates, the advisers of the Issuer, the Sukuk Trustee and any other person involved or interested in the transactions envisaged under the SRI Sukuk Tadau. None of such persons will accept any liability whatsoever to the Sukukholders in respect of any failure of the Issuer to pay any amount due in respect of the SRI Sukuk Tadau. 6.2.2 Foreign Exchange Risk The Issuer faces foreign exchange risk as 80% of the Contract Price (“RMB Contract Price”) is denominated in Renminbi. To mitigate the foreign exchange risk, the Issuer had procured the EPC Contractor to enter into a hedging arrangement with Bank of China (Malaysia) Berhad to fix the RMB Contract Price to RM176,277,498.85 which shall be the final and conclusive amount in RM pursuant to the EPC Contracts. 6.3 INVESTMENT CONSIDERATIONS RELATING TO THE PROJECT 6.3.1 Completion Delay The timely completion of the Solar PV Plants is dependent upon, amongst others, the performance of the EPC Contractor in completing the same in accordance with the agreed dates in order for Tadau Energy to meet the respective COD for each of the Solar PV Plants. If Tadau Energy fails to achieve COD on or before the Scheduled COD of Unit 1 (i.e. 30 June 2017) due to default of Tadau Energy or its contractors or agents under the PPA 1, Tadau Energy shall be liable to pay SESB a compensation amount equal to RM1,000.00 per day for each day of delay, commencing from the Scheduled COD of Unit 1 until the earlier of (i) the COD of Unit 1; (ii) the date on which the PPA 1 is terminated by SESB; or (iii) 180 days after the Scheduled COD of Unit 1. 223
  234. Total compensation payable by Tadau Energy shall not exceed RM180 ,000.00. The failure to achieve the COD of Unit 1 within 180 days from the Scheduled COD of Unit 1 shall be constitute an event of default under the PPA 1. The PPA 2 specifies the Scheduled COD of Unit 2 is 31 March 2018. If Tadau Energy fails to achieve COD of Unit 2 on or before the Scheduled COD of Unit 2 due to default of Tadau Energy or its contractors or agents under the PPA 2, Tadau Energy shall pay SESB a compensation amount equal to RM24,000.00 per day for each day of delay, commencing from the Scheduled COD of Unit 2 until the earlier of (i) the COD of Unit 2; (ii) the date on which the PPA 2 is terminated by SESB; or (iii) 180 days after the Scheduled COD of Unit 2. The failure to achieve the COD of Unit 2 beyond 180 days from the Scheduled COD of Unit 2 shall be constitute an event of default under the PPA 2. However, the aforementioned risk is mitigated, amongst others, by the following:  Experience of the EPC Contractor and guarantee from parent company The EPC Contractor is a wholly-owned subsidiary of CPI Power Engineering Co. Ltd. (“CPIPEC”) which in turn is wholly-owned by State Power Investment Corporation (“SPIC”). SPIC, a state-owned investment company, is an integrated energy group with total installed capacity of 107.4 gigawatt for 2016, comprising thermal, hydro, nuclear, solar and wind power, Clean energy accounted for 40.06% of the total installed capacity. In respect of solar power generation, SPIC is involved in almost the entire industry chain which includes research and development, planning and design, manufacturing of polysilicon, cells and modules, project construction and training. Although the EPC Contractor has no operating history in Malaysia and was established pursuant to securing the EPC Contracts, the construction works and all technical aspects of the Project will be carried out by the technical and support teams from CPIPEC. CPIPEC is an experienced EPC Contractor who had completed installation of solar PV plants with an aggregate installed capacity of about 940 MW since 2009 and another seven (7) solar PV plants with an aggregate installed capacity of 631 MW under construction, all of which are located in China and expected to be commissioned by 2017. In addition, pursuant to the EPC Contracts, CPIPEC has provided a Parent Company Guarantee in which it has guaranteed the performance of all of the EPC Contractor’s obligations and/or liabilities under the EPC Contracts. However, there is no assurance that the EPC Contractor would be able to familiarise itself with the local construction requirements/standards to ensure timely completion of the Solar PV Plant.  Current progress of the work done at the Solar PV Plants The Independent Technical Adviser, based on its report, has opined that:  In respect of the Unit 2, there could be a medium risk of a three (3) months delay to the Guaranteed Completion Dates and while there is a low risk of a delay of one (1) month or greater to the Scheduled COD of Unit 2; and 224
  235.  In respect of Unit 1, likelihood of delay to COD of a month or less is high, potentially arising from the works in relation to the interconnection facilities as well as the review and approval by SESB for Unit 1 and the related interconnection facilities. Nevertheless, the Scheduled COD of Unit 1 of 30 June 2017 is achievable with concerted efforts and expedient approvals from SESB in respect thereto. As at 6 June 2017, Unit 1 is 91% completed, and the Initial Operation Date (as defined in PPA 1) is expected to be 19 June 2017, in accordance with the PPA 1. The works outstanding for achieving commercial operation of Unit 1 is mainly in relation to the calibration process to be undertaken by Tenaga National Berhad (“TNB”) and the commissioning of Unit 1. Nevertheless, Tadau Energy reserves the right to claim any Delay LDs (as defined below) from the EPC Contractor, to be determined by Tadau Energy after the completion of Unit 2.  Delay Liquidated Damages Liquidated damages are payable by the EPC Contractor (“Delay LDs”) for each day of delay of works beyond the respective Guaranteed Completion Dates that is not a result of a Force Majeure Event (as referred in the EPC Contracts) or extension of time under circumstances as specified in Section 4.5.2 of this Information Memorandum. In this regard, the EPC Contractor shall pay the following: EPC 1 - RM6,000 for each day of delay of the works; and EPC 2 - RM144,000 for each day of delay of the works. The Delay LDs are capped at 15% of the Contract Price for the respective EPC Contracts. The Independent Technical Adviser, based on its report, has opined that the Delay LDs is able cover the cost of delay under the PPAs.  Guaranteed Completion under the EPC Contracts The risk of delay in completion is mitigated as the Guaranteed Completion Date of Unit 1 is about 32 days before the Scheduled COD of Unit 1 while the Guaranteed Completion Date of Unit 2 is about 144 days before the Scheduled COD of Unit 2. This will provide some buffer to handle unforeseen issues/circumstances that may arise during the construction, testing and commissioning of the Solar PV Plants.  Project Monitoring and Management The construction progress, testing and commissioning as well as verification of such results will be subject to strict monitoring of the Sponsor, Tadau Energy and Fichtner GmbH & Co KG, the owners’ engineer. The Independent Technical Adviser will review the construction progress report on a quarterly basis and will highlight any issues. As such, potential delays and issues can be identified at an early stage and the actual delay is expected to be managed by Tadau Energy. Close liaison and engagement with SESB on a monthly basis and on-demand basis at the design and implementation stage will mitigate interconnection risk and meeting the requirements of SESB. 225
  236. 6 .3.2 Construction Cost Overruns The Issuer has entered into fixed price EPC Contracts with the EPC Contractor in respect of Unit 1 and Unit 2 respectively. The Contract Price is all inclusive, nonescalating fixed price to cover all works, services and/or activities necessary for the execution and completion of the Solar PV Plants. However, the EPC Contracts allow an increase in the Contract Price in certain limited circumstances such as arising from Change-in-Law (as detailed in Section 6.3.17 of this Information Memorandum), variation order issued by Tadau Energy and suspension of works instructed by Tadau Energy, which may lead to cost overruns. Construction cost overruns would be funded out from the budgeted contingency sum forming part of the Project Costs. The Sponsor has included about approximately 12% of the Contract Price as project contingency to cover any potential cost overruns encountered during the construction stage, any excess of which shall be covered by the Sponsor pursuant to the Sponsor Completion Support. The Independent Technical Adviser, based on its report, has opined that the contingency provided is sufficient for the purposes of the Project. 6.3.3 The Sponsor Completion Support The Sponsor Completion Support is provided by the Sponsor as its commitment to ensure the successful completion of the Solar PV Plants through injection of equity in accordance with the Financial Model or Revised Financial Model, as the case may be, and to fund any cost overruns incurred relating to the Project. The funding for cost overruns will be required when the additional Project Cost incurred is in excess of the contingency sums estimated and deposited in the Disbursement Account (as defined in item (Details of designated account(s), if applicable) of the PTC) upon issuance of the SRI Sukuk Tadau. Any adverse effect to the business, operations and/or financial position of the Sponsor may directly have an adverse effect on the Sponsor’s ability to fulfil its obligations under the Sponsor Completion Support. The Sponsor’s main source of income is derived from investments in oil palm plantations, properties and equity investments. The Sponsor has received a letter of award from Suruhanjaya Tenaga in December 2016 to build, own and operate a new diesel independent power plant in Lahad Datu, Sabah with a total capacity of 30MW and is in the midst of negotiating the principal terms with the authorities. As such, there is no assurance that the Sponsor is able to fulfil its obligations under the Sponsor Completion Support. The Sponsor seeks to mitigate these risks through, inter-alia, the incorporation of corporate governance principles at the operating company, maintaining personnel equipped with industry knowledge, implementation of prudent financial policy and careful planning with the involvement of its consultant, Fichtner GmbH & Co KG and close monitoring of project/plants Kagayaki Energy is involved in. 226
  237. 6 .3.4 EPC Contractor Performance and Termination There is no assurance that the Solar PV Plants will be completed within the agreed costs and scheduled timeframe, and no assurance that the Solar PV Plants would deliver the expected performance. If the Unit 1 Contracted Capacity or the Unit 2 Contracted Capacity is not achieved in the performance test conducted prior to the CODs, the contracted capacity of the relevant Solar PV Plants shall be revised downwards to reflect the actual capacity, reducing future revenue, whereupon the EPC Contractor shall be liable to pay the PR Warranty Liquidated Damages for failure to meet the minimum acceptance criteria of the performance ratio. There is no assurance that the full amount of the EPC 1 Delay Liquidated Damages or the EPC 2 Delay Liquidated Damages (as described in Sections 4.5.2.1 and 4.5.2.2 of this Information Memorandum respectively) and/or the EPC 1 PR Warranty Liquidated Damages or the EPC 2 PR Warranty Damages (as described in Sections 4.5.2.1 and 4.5.2.2 of this Information Memorandum respectively) claimed by Tadau Energy that is in excess of the amount covered by the performance bond shall be paid by the EPC Contractor. If Tadau Energy chooses to terminate the EPC Contracts, Tadau Energy will not be entitled to any consequential loss including any loss, compensation or profit or damages as a result from the termination of the EPC Contracts. The EPC Contractor is liable to pay Tadau Energy, amongst others, all costs incurred by Tadau Energy to complete the works covered under the EPC Contracts. 6.3.5 Technology and Module Degradation Risk The Solar PV Plants are subject to the risk that the parts and key components (especially PV modules, inverters and transformers) do not function as expected, or performance degrades more rapidly than expected. Hence, this may lead to lower electricity output and revenue achieved by Tadau Energy. This risk is also partly mitigated by the long operating history of crystalline silicon technology and the power output warranty provided by the PV module manufacturer, JA Solar Sdn Bhd, for 25 years based on the nominal peak power with maximum initial degradation of 3% after the first year and a linear degradation of 0.65% per year during the following 24 years with a minimum output power of 81.4% after year 25. Although the Base Case Cashflow Projections have taken into account such warranty, there is no assurance that the manufacturer will be able to honour the warranty obligations. Nonetheless, finding suitable replacement PV module manufacturers may not be as challenging given the abundance of PV module producers and the low barriers to switching to another supplier if necessary coupled with the rapid technological advancement in the field. In addition, the inverters manufacturer, Huawei Technologies Co., Ltd has provided a five (5) year warranty for the inverters used for the Project. There will also be a build up in the Maintenance Reserve Account of RM4.1 million to fund the maintenance of the Solar PV Plants, as described in Section 6.3.8 of this Information Memorandum. All of the Plant’s equipment will operated and maintained by experienced contractors. The O&M Contractor will be trained both in theory and practice by the relevant supplier’s personnel and are to follow all their guidelines. 227
  238. 6 .3.6 Meteorological Risks The energy produced by the Solar PV Plants are dependent on the actual weather conditions and solar irradiation affecting the Solar PV Plants which is beyond the control of Tadau Energy. According to the PPAs, SESB shall not pay Issuer for electricity generated using energy storage devices, hybrid generating devices with other fuel sources or concentrated solar thermal technology. The actual annual solar irradiation rates may often deviate from the long-term average irradiation rates used for projecting energy production in cashflow projections. In addition, industrial atmospheric pollution or haze may reduce the irradiation received or contain potentially corrosive substances that require additional cleaning of or which may cause damage to the PV modules. Further, parts of the Project Land that are of sloping terrain are subject to the risk of soil movement or erosion whilst those low-lying parts may be subject to the risk of possible flooding especially during the monsoon season that may damage the equipment/cables. As such, the revenue of Tadau Energy may be adversely affected upon occurrence of such events. The risk is mitigated by proper soil investigation being carried out and that the design of the Solar PV Plant takes into consideration the weather conditions. In addition, the parent company of the EPC Contractor, CPIPEC, has the track record of successfully executing solar plants located on hills and undulating/uneven terrain. 6.3.7 Output Shortfall Risk and the Operations and Maintenance Risk The operations and maintenance of the Solar PV Plants will be handled by the O&M Contractor, who will, starting from eighteen (18) months from the commencement of the O&M 1 Term (as defined in Section 4.5.4.1 of this Information Memorandum) of the O&M 2 term (as defined in Section 4.5.4.2) of the Information Memorandum) include personnel designated by Tadau Energy into the performance of the relevant operations and maintenance. As such, post-COD, the operation and maintenance of the Solar PV Plants will be handled by Tadau Energy’s in-house operations and maintenance team and thus, the financial performance of the Solar PV Plants depends to a large extent on their effective management of the operations and performance of the Solar PV Plants. This risk is mitigated as the O&M Contractor, who has experience with the operation and maintenance of solar PV plants, will initially handle the operations and maintenance of the Solar PV Plants, and will train the personnel from Tadau Energy for the purposes of transitioning such operations and maintenance services to Tadau Energy’s personnel. In addition, the term of the O&M 1 Term and the O&M 2 Term, may be extended in accordance with the provisions of the respective O&M Agreements. Any unexpected and extended breakdowns of the Solar PV Plants may lead to the energy generated at risk of being less than seventy percent (70%) of the DAQ during the relevant contract year. Consequently, Tadau Energy has to pay SESB the NonDelivery Payment for such shortfall in Net Electrical Output delivered in that contract year, except in an Emergency Condition under the PPAs or an interruption due to a Force Majeure Event under the PPAs affecting Tadau Energy or any default or omission on the part of SESB. Further, if the actual capacity of (i) Unit 1 is lower than the Unit 1 Contracted Capacity based on the performance tests conducted (i) on every fifth (5th), tenth (10th), and fifteenth (15th) anniversary of the Unit 1 COD and/or (ii) Unit 2 is lower 228
  239. than the Unit 2 Contracted Capacity based on the performance tests conducted no later than sixty (60) days before the the fifth (5th), tenth (10th), fifteenth (15th) and twentieth (20th) anniversary of the Unit 2 COD, the Contracted Capacity of the respective Solar PV Plants shall be revised to reflect the actual certified capacity. This may have material adverse effect on the future revenue and cashflow of the Issuer. To mitigate the output shortfall risk, the EPC Contractor has provided warranties that during the first two (2) years of the Warranty Period (as detailed in Section 4.5 of this Information Memorandum), the Solar PV Plants shall meet the guaranteed performance ratio under the EPC Contracts. Failure to meet the performance ratio for any of the Solar PV Plants for any year under warranty will result in the EPC Contractor being liable to pay Tadau Energy liquidated damages in the manner as set out in Section 4.5.2 of this Information Memorandum and subject to a maximum of ten percent (10%) of the relevant Contract Price. In addition, the retention sum under the EPC Contracts shall be released to the EPC Contractor after the final acceptance certificate has been issued and that final acceptance test of the relevant Solar PV Plants has been achieved in accordance with the terms in the EPC Contracts. In addition, the operations and maintenance of Solar PV Plants are considered to be of lower complexity as compared to the conventional thermal power plants and that maintenance work may be undertaken during non-peak production periods, such as early morning or evening. Further, preventive maintenance activities will be undertaken to include all the activities that can be planned in advance. All the faults acknowledged through the monitoring systems or during the plant periodical inspections, will be promptly checked on site, according to the reaction times set out in the operation and maintenance manuals provided or to be provided by the EPC Contractor to Tadau Energy. Statistical analysis of the faults will be performed to check recurring events and to reduce the response time in attending to the faults. A suitably stocked spare parts inventory will facilitate a rapid response in the event of equipment failure. Tadau Energy will also procure machinery breakdown takaful/insurance after the COD of Unit 1 and Unit 2, which would mitigate, to a certain extent, the operating and maintenance risk. The Issuer shall determine the optimum spare parts to be kept in stock for Unit 1 and Unit 2 which will depend on the size of the plant and the potential for sharing critical equipment across the Project Lands to reduce plant downtime and minimising cost. Given that the Solar PV Plants are located at three (3) different sites and connected to the grid system/distribution network at two different connection points, this allows for diversification of risk of having to rely on a centrally located site particularly upon occurrence of major breakdown or catastrophic events such as fires, explosions, floods and tropical storm. Further, due to the modular structure of the Solar PV Plants, where each inverter creates a separate module that independently produces a small share of the Solar PV Plants output; the failure of a particular module does not affect the output of others, thus lowering the operating risk. 6.3.8 Risk of Increase in Operations and Maintenance Cost The Energy Payments received from SESB are fixed as per the PPAs. However, the operation and maintenance cost of the Solar PV Plants may increase in response to changes in market conditions or changes in technology or as a result of unscheduled repairs or the replacement of parts. The cashflows of Tadau Energy may be 229
  240. negatively affected if the operations and maintenance cost is higher than initially budgeted . This risk is mitigated for the first two years after COD of each of Unit 1 and Unit 2 as the operations and maintenance of the Solar PV Plants will be carried out by the O&M Contractor for an agreed sum in accordance with the O&M Agreements.In addition, the monthly transfer of funds from the RA to the OA based on the Annual Operating Budget, which in any case, shall not exceed ten percent (10%) per annum of the amounts set out in the Financial Model or Revised Financial Model, as the case may be. In addition, Tadau Energy will be establishing a Maintenance Reserve Account in the sum of not less than RM4.1 million to fund the maintenance expenses of the Solar PV Plants. The maintenance reserve shall be used exclusively to meet the maintenance obligations of Tadau Energy, including any repair or replacement of parts in connection with the Project, whether covered by takaful/insurance or otherwise. 6.3.9 Availability of the Grid System / Distribution Network and Acceptance of Net Electrical Output The Energy Payments to be made by SESB will be based on the Net Electrical Output delivered by Tadau Energy and accepted by SESB, which shall not exceed the MAAQ of such contract year. Hence, any interruption in the grid connection or irregularities in overall power supply of the local grid system /distribution network may adversely affect the revenue of Tadau Energy. In addition, SESB is not obliged to accept Net Electrical Output from Tadau Energy in the following circumstances: (a) the occurrence of an emergency conditions as described in the PPAs within the grid system or distribution network as a result of which the grid system or distribution network is unable to accept Net Electrical Output from the Solar PV Facilities is subject a maximum of 185 hours per contract year and advance notice is to be provided to the extent practicable together with full explanation of such occurrence promptly after it occurs; (b) interruptions by SESB to conduct necessary maintenance is subject to the maximum of 48 hours per contract year for maintenance to be carried out from 9.00 a.m. to 3.00 p.m. and maximum of 137 hours per contract year for maintenance to be carried out from 3.01 p.m. to 8.59 p.m. with 72 hours prior notice is required for such planned maintenance; and (c) any constraint or interruption in the grid system or distribution network as a result of which the grid system or distribution network is unable to accept Net Electrical Output from the Solar PV Plants is subject to a maximum 185 hours in each contract year and advance notice is to be provided to the extent practicable together with full explanation of such occurrence promptly after it occurs. SESB will also not be obliged to accept Net Electrical Output from Tadau Energy (i) which does not conform to the electrical characteristics described in the PPAs, (ii) where the Solar PV Plants have delivered Net Electrical Output exceeding the MAAQ 230
  241. for the relevant time period or (iii) the Net Electrical Output delivered by the Solar PV Facilities exceeds the relevant Contracted Capacity. However, excluding the specific events set out in the foregoing paragraphs, if SESB fails to accept the Net Electrical Output generated and delivered by Tadau Energy in the manner set out in the PPAs, SESB shall pay Tadau Energy the Non-Acceptance Payment for such period SESB fails to accept the Net Electrical Output. 6.3.10 Total Loss Under the Transaction Documents, upon the occurrence of a Total Loss Event, the Issuer shall notify the Sukuk Trustee of such occurrence. In such event, if a Total Loss Event occurs in respect of Asset 2 or both Asset 1 and Asset 2, the Issuer shall redeem the nominal value of all outstanding SRI Sukuk Tadau. If the Total Loss Event occurs in respect of Asset 1, the Issuer shall redeem the nominal value of the SRI Sukuk Tadau up to the amount of the Exercise Price (as defined in item (Facility Description) of the PTC) in respect of Asset 1. If the proceeds of the takaful/insurance for the relevant Asset are insufficient to cover such amounts, Tadau Energy shall make good the difference. The ability of Tadau Energy to make good the difference, for not taking full Takaful/insurance coverage in connection with the Asset, is in turn subject to Tadau Energy’s ability to meet its obligations under the SRI Sukuk Tadau, as set out in Section 6.2.1 of this Information Memorandum. However, a written report will be obtained from the takaful/insurance adviser prior to the issuance of the SRI Sukuk Tadau that the Takaful/insurance cover obtained by or for the benefit of Tadau Energy in relation to the Project is adequate and in compliance with Tadau Energy’s obligations to insure under the EPC Contracts and the PPAs. 6.3.11 Regulatory Risks 6.3.11.1 Generation Licence Under the Electricity Supply Act, a person who intends to operate a power plant is required to hold an electricity generation licence. When issuing the Generation Licences, the Suruhanjaya Tenaga may also impose such conditions as may appear to be requisite or expedient in accordance with the provisions of the Electricity Supply Act. There is no certainty as to the nature of such conditions that may be imposed. Pursuant to the Electricity Supply Act, in the event of a breach of any of such conditions imposed, the Generation Licences may be suspended or revoked by the Suruhanjaya Tenaga. Under the PPA 1, Tadau Energy is required, prior to the Initial Operation Date (as defined in the PPA 1), to submit to SESB a certified copy of the Generation Licence in respect of Unit 1, and under the PPA 2, Tadau Energy is required to submit to SESB a certified copy of the Generation Licence in respect of Unit 2 no later than six (6) months prior to the Commercial Operation Date (as defined in PPA 2). Unless and until such Generation Licences are obtained, Tadau Energy would not be able to commence the generation of solar PV energy. A delay in obtaining the relevant Generation Licence could result in the failure to meet Initial Operation Date and consequentially the Scheduled COD under the PPA 1, and/or the Scheduled COD 231
  242. under the PPA 2 . In such event, it would reduce the revenue and cashflow of Tadau Energy post-COD. Under each PPA, SESB is entitled to terminate the PPA in accordance with its terms in the event the relevant Generation Licence is suspended, revoked, terminated or expired due to Tadau Energy’s default and Tadau Energy has not caused the same to be reinstated or renewed within the stipulated remedy period. Tadau Energy has obtained the Generation Licence in relation to Unit 1 on 7 June 2017. 6.3.11.2 Regulatory Risks Tadau Energy will require various approvals, licences, permits and certificates to operate its business and the Solar PV Plants. Tadau Energy will be required to renew these approvals, licences, permits and certificates or to obtain new approvals, licences, permits and certificates. There will not be any assurance that in the future the relevant authorities will issue or renew any required approvals, licences, permits or certificates in a timely manner or at all or if renewed, additional conditions may be imposed by the relevant authorities. Under the PPAs, SESB is entitled to terminate any of the PPAs in accordance with its terms in the event the relevant Generation Licence is suspended or revoked or terminated due to a default by Tadau Energy and Tadau Energy has not caused the same to be reinstated or renewed within the stipulated remedy period. In addition, failure to renew, maintain or obtain the required approvals, licences, permits and certificates may interrupt the Project’s operations which may have a material adverse effect on Tadau Energy’s business, financial condition and results of operations. 6.3.12 Risk of Termination of the PPAs The PPAs may be terminated by SESB as a result of an event of default by Tadau Energy under circumstances set out in Section 4.5.1 of this Information Memorandum. SESB has the option, but not the obligation to purchase Unit 1 and/or Unit 2 in accordance with the terms of the respective PPAs. In the event that SESB exercises the option to purchase Unit 1 and/or Unit 2 and the respective Sponsors Gross Equity Contribution amounts to less than 20% of the respective Total Project Costs, SESB is obliged to pay, amongst others, ninety five percent (95%) of the PPA 1 Outstanding Indebtedness or the PPA 2 Outstanding Indebtedness, as the case may be. Nevertheless, this risk is mitigated as the FE Ratio is to be maintained upon issuance of the SRI Sukuk Tadau and to be maintained during the tenure of the SRI Sukuk Programme. As such, should SESB exercise the option to purchase Unit 1 and/or Unit 2, then SESB is obliged to pay Tadau Energy’s Outstanding Indebtedness. In the event SESB does not exercise the option to purchase Unit 1 or Unit 2, as the case may be, and no payment is forthcoming from SESB, the Sukukholders may not be able to realise their security. This is mitigated by the fact that for so long as the Solar PV Plants are catering to the energy requirements of the state, it is less likely that SESB will not exercise its option to purchase. 232
  243. The PPAs may also be terminated by Tadau Energy as a result of an event of default by SESB under circumstances set out in Section 4 .5.1 of this Information Memorandum. In the event Tadau Energy exercises the option to sell the affected Solar PV Plant(s) to SESB, SESB shall purchase the affected Solar PV Plants(s) provided that all rights, tittle and interest in the affected site(s) (including the access rights) are capable of being transferred to SESB free of encumbrances. The purchase price payable by SESB shall include all Outstanding Indebtedness at the termination date. Nevertheless, there is no assurance that SESB will be able to pay the purchase price as a result of termination due to an event of default by Tadau Energy or SESB. The Suruhanjaya Tenaga may also exercise its statutory right to step in and operate any of the Solar PV Plants. However, there is no reason for Suruhanjaya Tenaga to choose to exercise its step in rights if Tadau Energy observes the terms and performs its obligations of the PPAs. While the termination risks are not unusual for power purchase agreements executed in Malaysia, Tadau Energy will implement effective management and operational policies and procedures to ensure compliance with its obligations under the PPAs. However, there can be no assurance that such measures would be effective. In any case, a default on the PPA 1 will not automatically cause the default of PPA 2 unless the underlying reason of the default is also applicable to the PPA 2 and vice versa. 6.3.13 Adequacy of takaful/insurance In order to mitigate certain risks in relation to the Project, the EPC Contractor shall maintain takaful contracts/insurance policies during the construction of the Solar PV Plants, which set out Tadau Energy as an insured party, and Tadau Energy and the O&M Contractor shall maintain takaful contracts/insurance policies post completion of the Solar PV Plants, in accordance with the requirements of the Project Documents. However, there is no assurance that there will be sufficient coverage to fully protect against interruption to business, generation of revenue, accidents or any other liabilities associated with the business of Tadau Energy. However, in respect of takaful contracts/insurance policies to be maintained during the construction of the Solar PV Plants, a written report will be obtained from the takaful/insurance adviser prior to issuance of the SRI Sukuk Tadau that the Takaful/insurance cover obtained by or for the benefit of Tadau Energy in relation to the Project is adequate and in compliance with Tadau Energy’s insurance obligations under the EPC Contracts and the PPAs. 6.3.14 Adjustment of Inaccurate Meters In the event the metering equipment fails to register, or if the measurement made by the metering equipment is found upon testing to be inaccurate by more than +/-1%, the PPAs provide for adjustments of the measurements of the inaccurate or defective metering device for billing purposes. Any downward adjustments to the measurements will result in lower energy payments to be paid to Tadau Energy and will have an adverse effect on the revenue of Tadau Energy which in turn will have an adverse effect on the ability of Tadau 233
  244. Energy to meet its obligation to pay the amounts due in respect of the SRI Sukuk Tadau . This risk is mitigated by Unit 1 and Unit 2 each having two (2) tariff energy meters: one which serves as the main tariff energy meter, and the other for checking purposes. Both tariff energy meters have the same specification and performance, with the same amount of the energy registered for comparison purposes. Further, the accuracy of the tariff energy meters is higher than Accuracy Class 0.2s, which is in accordance to the International Electrotechnical Commission (IEC) standard. SESB also conducts an annual calibration of all independent power producers’ energy tariff meters. Therefore, there is a low likelihood of inaccuracies in the measurements made by the metering equipment. 6.3.15 Adjustment of Energy Rate The PPAs provide for downward adjustments in Energy Rates in the event of the following: (a) there are savings in construction costs and financing costs of the Project from the amounts reflected in the initial financial model set out in the PPAs; and (b) if there are incentive or benefit in respect of taxes (including but not limited to any relief, reduction or abatement in the payment of any such taxes) and /or any tax allowance, exemption or waiver (including but not limited to any investment tax allowance) from any government entity at any time from the date of the PPAs up to 1 year from COD. Although the reduction in Energy Rate may have an adverse effect on revenue of Tadau Energy, such adjustments to the Energy Rate would be adjusted downwards to reflect fifty percent (50%) of the construction costs reductions and sixty percent (60%) of the financing costs reductions. This risk is mitigated by virtue of the responsibility of Tadau Energy to promptly submit the Revised Financial Model with a projected base case FSCR of at least 1.25 times and a FE Ratio of not exceeding 80:20 that has been revised and endorsed by the Suruhanjaya Tenaga/ SESB. Consequently, the transfer of funds to the OA shall not exceed amounts set out in the Revised Financial Model. Furthermore, an amount equivalent to fifty percent (50%) of the reduction in construction cost (i.e. the difference between the construction costs reflected in the PPAs and the updated financial model submitted to and accepted by SESB one (1) year post COD of Unit 2) shall be transferred from the Disbursement Account to the Cost Savings Reserve Account, subject to the availability of funds in the Disbursement Account. The balances in the Cost Savings Reserve Account may be transferred to the Finance Service Account to maintain the FSA Minimum Required Balance in the event there are insufficient funds in the Revenue Account. 6.3.16 Risk of Liquidated Damages Amount Being Challenged Whilst the liquidated damages are supported by on-demand performance bonds issued by the EPC Contractor with the liquidated damages level acting as the ceiling to the compensation available, it is possible that the EPC Contractor may challenge the quantum of the liquidated damages payable. There is no assurance that Tadau Energy will be able to recover reasonable compensation to cover the losses in the event that the amount of compensation is challenged by the EPC Contractors. 234
  245. 6 .3.17 Change-in-Law To the extent that a change in law (including the change in distribution code or grid code, as the case may be) which compels Tadau Energy to make capital improvements or any other material modification to the Solar PV Plants, the cost of which is in excess of RM250,000.00 for Unit 1 and RM1,000,000.00 for Unit 2 in any calendar year is required for the purpose of enabling Tadau Energy to fulfil its obligations under the PPAs (“Change-in-Law”), SESB and Tadau Energy shall renegotiate the relevant Energy Rate (as defined in the PPAs) or, in the case of the PPA 1, an extension of the PPA 1 Term (as defined in Section 4.5.1.1 of this Information Memorandum) for submission to Suruhanjaya Tenaga for approval. If the parties cannot reach an agreement, the dispute resolution process under the PPAs shall apply. Nevertheless, the inability of Tadau Energy to perform its obligations during the period required by Tadau Energy to effect the changes or modification to the Solar PV Plants necessitated by any Change-in-Law shall not be a breach of the PPAs to the extent such inability is a direct consequence of the Change-in-Law. 6.3.18 Project Lands Tadau Energy has the first right of refusal to purchase any of the Project Lands during the term of the lease should the land owner(s) decide to sell such Project Land(s) and has received a bona fide offer for such purchase. However, pursuant to the terms of the SRI Sukuk Programme, Tadau Energy may not incur, assume, guarantee or permit to exist any indebtedness other than the SRI Sukuk Tadau, hire purchase facilities in relation to the Project and BG Facilities. Approval from the Sukukholders will be required prior to Tadau Energy securing such financing to acquire any of the Project Lands. Although the Issuer will use its best endeavours to secure the necessary financing for the purchase of the said land, there is no assurance that Tadau Energy will be able to secure such financing on terms favourable to Tadau Energy or that such financing will be approved by the Sukukholders. The Lease Agreement (Site Yong East), Lease Agreement (Site Yong West 1), Lease Agreement (Site Yong West 2) and Lease Agreement (Site Bak Bak) may be terminated in the event the corresponding PPA is terminated or has expired before the end of the term of the relevant Lease Agreement. In the event that SESB exercises its right to purchase the 2 MWac Project of the 4MWac Project, as the case may be, from Tadau Energy pursuant to the relevant PPA, there is currently no arrangement in place for the relevant Project Lands to be automatically leased to SESB. The Project Lands may also be subject to a compulsory land acquisition by the Government of Malaysia. If a compulsory land acquisition is made in respect of any or all of the Project Lands, this will result in an adverse impact on the Project and accordingly, the ability of the Issuer to meet its obligation to make payments under the SRI Sukuk Tadau. 6.3.19 Land Use The Project Lands are required to be rezoned for light industrial use for the purposes of the Project. 235
  246. In respect of Site Yong East , a public notice for the proposed rezoning to Site Yong East was issued in a local newspaper by the Kudat Town Board and no objection has been received in respect of the proposed rezoning, which is currently pending a recommendation from the Kudat Town Board and subsequently final approval from the Central Town and Country Planning Board (“Central Board”) of Jabatan Perancang Bandar dan Wilayah Negeri Sabah (“JPBW”). Tadau Energy expects to receive the final approval on 22 June 2017, the next scheduled meeting of the Central Board. Tadau Energy is currently liaising with the Department of Town and Country Planning of JPBW for the proposed rezoning of Site Yong West and Site Bak Bak. There is a risk that an objection may be made against the proposed rezoning in respect of Site Yong West and Site Bak Bak, as well as a risk that the Central Board will not provide its final approval in respect of the rezoning of the Project Lands, in which case, the Project Lands may not be rezoned. Any contravention by Tadau Energy of the applicable laws and regulations in respect of the aforementioned rezoning shall carry a penalty of a fine or imprisonment. However, an objection may only be made by a person or public body affected by the proposed rezoning, and who would be required to send a statement of objection to the Kudat Town Board setting out the nature and reason for such objection. It is unlikely that there will be cause for objection for the proposed rezoning of Site Yong West and Site Bak Bak, especially in view of the fact that there was no objection in respect of the rezoning of Site Yong East. In addition, the proposed rezoning is for electricity supply for Sabah, and as such, it is also highly unlikely that the Central Board will not grant the final approval for the rezoning of any of the Project Lands. 6.3.20 Force Majeure Force majeure provisions are found in, the PPAs and the EPC Contracts and the other Project Documents (“the Agreements”). A force majeure event is an event, condition, or circumstance, or its effect which: (a) is beyond the reasonable control of and occurs without fault or negligence on the part of the party claiming it; and (b) causes a delay or disruption in the performance of obligation under the affected Agreements despite all reasonable efforts of the party claiming it to prevent it or mitigate its effects. There is a risk that Tadau Energy may be adversely affected by a force majeure event either directly or indirectly if the other project counterparties to the affected Agreements are relieved of their contractual obligations thereunder. Under the terms of the PPAs, Tadau Energy is able to extend the Scheduled Commercial Operation Date of the relevant Solar PV Plant by one (1) day for each day the relevant Commercial Operation Date is delayed by a force majeure event and Tadau Energy shall not be entitled under its insurance to receive insurance proceeds which replace any Energy Payments not received by Tadau Energy for such period. 236
  247. 6 .4 GENERAL INVESTMENT CONSIDERATIONS 6.4.1 Political, Economic and Regulatory Risk The performance and financial condition of the Issuer and the Sponsor may be affected by economic, political and regulatory conditions in Malaysia and other countries in the region, such as the changes in policies and regulatory requirements affecting solar power plants, risk of war, risk of terrorist attacks, expropriation and renegotiations or nullification of existing contracts. Investors should note that whilst the Issuer and the Sponsor strive to continue to take effective measures such as prudent financial management and efficient operating procedures, there is no assurance that adverse political, economic or regulatory conditions will not materially affect the Issuer and the Sponsor. 6.4.2 Inherent regulatory risk Regulatory risk is an inherent feature for independent power producers such as Tadau Energy. Events such as the imposition of an annual windfall profit levy on independent power producers in Peninsular Malaysia and Sabah in 2008, which had subsequently been abolished, remains vulnerable to regulatory risk. 6.4.3 Change in Law The structure of the transaction and the issue of the SRI Sukuk Tadau are based on Malaysian law, tax and administrative practices in effect as at the date hereof and having due regard to the expected tax treatment of all relevant statutes under such law and practices. No assurance can be given that the Malaysian laws, tax or administrative practices will not change after the date of issue of the SRI Sukuk Tadau or that such change will not adversely impact the structure of the transaction and the treatment of the SRI Sukuk Tadau. 6.4.4 Forward looking statements Certain statements, information, estimates and reports in this Information Memorandum are based on historical data, which may not be reflective of the 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 and the Sponsor and although each of the Board of Directors of the Issuer and the Sponsor 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, the Sponsor or its advisers or arrangers, and there can be no assurance that the plans and objectives will be achieved. A deterioration in the financial condition of the Issuer and/or the Sponsor could adversely affect the market value of the SRI Sukuk Tadau and the ability of the Issuer or the Sponsor to make payments under Transaction Documents (as defined in item (xxiii) (Transaction Documents) under item (Other Terms and Conditions) of the PTC) relating to the SRI Sukuk Tadau to which it is a party when due, if at all. 237
  248. SECTION 7 - INDUSTRY OVERVIEW The information below is included for information purposes only and has not been independently verified by the Issuer , PA, LA or LM. All data and information below have been obtained from publicly available official sources of Malaysia. Neither the Issuer, any one of the PA, LA or LM nor any other party will be held responsible for any information contained herein. 7.1 OUTLOOK AND ECONOMY OF MALAYSIA The Malaysian economy in 2016 In 2016, the Malaysian economy recorded a growth of 4.2% (2015: 5.0%) despite considerable external and domestic headwinds. The global economic landscape was challenging given the subdued global demand and low commodity prices. International financial markets were also subjected to heightened uncertainty with significant reversal of capital flows from emerging economies. This was driven by the unexpected political developments in the advanced economies, such as the UK and the US, and the macroeconomic policies adopted by these economies. Domestically, the economy continued to face headwinds from the higher cost of living amid soft employment conditions. Concurrently, business and consumer sentiments were affected by a confluence of global and domestic factors, including the heightened volatility in financial markets and the significant underperformance of the ringgit. Against these external and domestic challenges, all sectors of the economy recorded a modest expansion during the year. Domestic demand continued to anchor growth, supported mainly by private sector spending. Private consumption growth, in particular, was sustained at 6.1% (2015: 6.0%), supported by continued employment and wage growth following the increase in minimum wage and civil servant salaries. Government measures to boost disposable income such as the temporary reduction in employees’ contribution to the Employees Provident Fund (EPF), higher Bantuan Rakyat 1Malaysia (BR1M) payouts and tax relief to lower-income tax payers also supported household spending. Public consumption growth moderated to 1.0% (2015: 4.4%) following the expenditure rationalisation adopted by the Government in early 2016 given the lower petroleum related revenue because of low crude oil prices. Gross fixed capital formation (GFCF) expanded moderately by 2.7% in 2016 (2015: 3.7%) driven mainly by lower private investment growth due to weak profitability and business sentiments. Public investment recorded a smaller rate of decline in 2016 (-0.5%; 2015: -1.0%) due to the smaller contraction in spending on fixed assets by public corporations given the higher investment in the downstream oil and gas industry, and the transportation and utilities sub-sectors. On the supply side, all economic sectors continued to expand in 2016, with the exception of the agriculture sector. Agriculture production declined by 5.1% (2015: 1.2%), as crude palm oil (CPO) output was affected by the El Niño weather phenomenon. While growth in the services sector was higher at 5.6% (2015: 5.1%) following sustained demand in the consumer-related sectors, other sectors expanded more moderately. Headline inflation, as measured by the annual percentage change in the Consumer Price Index (CPI), was unchanged at 2.1% in 2016 (2015: 2.1%), which is at the lower end of the Bank’s forecast range of 2% - 3%. Inflation during the year was driven mainly by adjustments to administered prices undertaken since the fourth quarter of 20156 and higher prices of fresh food items due to the El Niño weather phenomenon. The administered price items are toll charges (October 2015), cigarette prices (November 2015), railway fares (December 2015), reduction in electricity rebates (January 2016) and cooking oil (November 238
  249. 2016 ). The inflationary pressures were, however, offset by the lapse in the impact of GST and lower domestic fuel prices. Moderate domestic demand conditions and a subdued external price environment also helped to contain domestic inflationary pressures. Correspondingly, core inflation was broadly stable during the year, averaging 2.1% in 2016 (2015: 2.3%). Outlook for the Malaysian Economy in 2017 Global economic activity is projected to improve in 2017, underpinned by an expansion in domestic demand in the advanced and emerging market economies, boosted in part by expansionary fiscal policies in selected major economies. These pro-growth policies would spur global demand and provide impetus to global trade. The outlook would also be supported by a recovery in commodity prices amid the move to reduce oversupply conditions. Nonetheless, the global economy will continue to be subjected to several downside risks. These include a potential retreat from globalisation and free trade in the advanced economies, and uncertainty over the UK and EU negotiations and geopolitical developments. With the gradual improvement in global growth, recovery in global commodity prices and the continued growth of domestic demand are expected to collectively support Malaysia’s growth performance. The Malaysian economy is projected to register a sustained growth of 4.3% 4.8% in 2017. Domestic demand will continue to be the principal driver of growth, underpinned by private sector activity. Notwithstanding the higher inflation, private consumption growth is expected to be sustained by continued wage growth and the increase in disposable income due to selected Government measures and higher global commodity prices. In an environment of cautious business sentiment and continued uncertainty in the economy, investment growth is projected to remain modest. Nonetheless, private investment activity will be supported by higher capital expenditure in export-oriented industries and implementation of ongoing and new projects, particularly in the manufacturing and services sectors. While public expenditure would be lower as a result of the Government’s continued commitment to fiscal consolidation, the public sector is projected to support growth, driven mainly by higher public investment arising from the ongoing implementation of key infrastructure projects in selected sectors. On the supply side, all economic sectors are projected to register positive growth in 2017. The services and manufacturing sectors would be the key contributors to overall growth. The agriculture sector is expected to rebound as yields recover from the El Niño weather phenomenon. Growth in the mining sector is expected to remain steady, as a stronger expansion in natural gas output offsets a moderation in the crude oil sub-sector. (Source: Bank Negara Malaysia Annual Report 2016) 7.2 OVERVIEW OF THE UTILITIES SECTOR The utilities subsector recorded a stronger growth of 6.1% during the first six months of 2016 (January – June 2015: 3.8%). This was mainly due to higher usage of electricity during the El Niño weather phenomenon. Value-added of electricity and gas segment increased 5.8% (January – June 2015: 3.2%). During the first seven months of 2016, electricity consumption grew significantly by 9.5% to 80,430.2 million kilowatt-hours (kWh) (January – July 2015: 2.3%; 73,459.5 million kWh) with industrial, commercial and mining segment increased 8.7%, accounting for 77% of 239
  250. total usage (January – July 2015: 1.9%; 77.6%). Similarly, electricity consumption by domestic and public lighting sectors recorded a double-digit growth of 12.3%, amounting to 23% of total consumption (January – July 2015: 3.7%; 22.4%). Meanwhile, gas consumption increased 3.6% to 80.2 million MMBtu mainly driven by higher demand from the industrial segment (January – June 2015: 8.2%; 77.5 million MMBtu). (Source: Economic Report 2016/2017, Ministry of Finance Malaysia) 7.3 OVERVIEW AND OUTLOOK OF THE RENEWABLE ENERGY INDUSTRY Renewable energy account for a rising share of the world’s total electricity supply, and they are the fastest growing source of electricity generation according to the International Energy Outlook 2016. Total generation from renewable resources increases by 2.9%/year, as the renewable share of world electricity generation grows from 22% in 2012 to 29% in 2040. Generation from non-hydropower renewables is the predominant source of the increase, rising by an average of 5.7%/year and outpacing increases in natural gas (2.7%/year), nuclear (2.4%/year), and coal (0.8%/year). Solar is the world’s fastest-growing form of renewable energy, with net solar generation increasing by an average of 8.3%/year. Of the 5.9 trillion kWh of new renewable generation added over the projection period, hydroelectric and wind each account for 1.9 trillion kWh (33%), solar energy for 859 billion kWh (15%), and other renewables (mostly biomass and waste) for 856 billion kWh (14%). (Source: International Energy Outlook 2016, United States Energy Information Administration under the United States Department of Energy.) Malaysia is blessed with many indigenous renewable energy sources. The renewable energy sources identified are: (a) (b) (c) (d) (e) (f) Palm oil biomass wastes and palm oil mill effluents; Mini-hydro; Solar power; Solid waste and land-fill gas; Wind energy* and geothermal*; Wastes and gases from agro-based* and farming industries*. * Note: The detail resources potentials are yet to be fully examined and verified. Since 2001 Malaysia has made efforts towards renewable energy development where the principle adopted was using the market forces to deliver the intended outcomes towards electricity generation. The National Renewable Energy Policy and Action Plan sets out the projected targets for renewable energy development in Malaysia, as follows: Electricity Capacity Mix: By 2020, total capacity from renewable energy is targeted to reach 2,065 MW or 11% of total peak electricity demand capacity by 2020; 240
  251. Electricity (Energy) Mix: By 2020, total electricity mix from renewable energy is targeted to reach 11.2 TWh/year or 9% of total electricity generated. Electricity Capacity Mix: By 2030, total capacity from renewable energy is targeted to reach 3,484 MW or 14% of total peak electricity demand capacity by 2030; Electricity (Energy) Mix: By 2030, total electricity mix from renewable energy is targeted to reach 16.5 TWh/year or 11% of total electricity generated. The targets are projected until year 2050 when renewable energy would constitute 11.5GW or 36% of total peak electricity demand capacity and 29.3 TWh/year or 15% of total electricity generated In respect of solar energy, Malaysia implemented the Net Energy Metering (“NEM”) programme commencing 1st November 2016 until 2020 with 100MW capacity limit a year in Peninsular Malaysia and Sabah. The NEM is a solar photovoltaic programme announced by the Prime Minister under the 2016 budget. This is to complement the current Feed-in Tariff (“FiT”) mechanism and encourage the deployment of renewable energy as meted out in Malaysia Eleventh Plan. NEM is executed by the Ministry of Energy, Green Technology & Water, regulated by the Suruhanjaya Tenaga, with Sustainable Energy Development Authority Malaysia as the implementing agency. (Source: National Renewable Energy Policy and Action Plan, Ministry of Energy, Green Technology & Water; Net Energy Metering, Sustainable Energy Development Authority Malaysia) 7.4 ELIGIBLE SRI PROJECT The Project is deemed to be an Eligible SRI projects pursuant to the LOLA Guidelines. Impact Objectives Tadau Energy is committed to contributing to the nation to reduce its dependence on power generated using fossil fuels. Through the use of the energy generated from the Project, Tadau Energy’s goal is to conserve the environment by providing an environmentally friendly, clean and sustainable power supply and being part of creating a sustainable world. Compliance Statement from the Issuer The Issuer hereby confirms that it has complied with the relevant environmental, social and governance standards relating to the Project which is an Eligible SRI project, and shall ensure continuing compliance with such governance standards throughout the tenure of the SRI Sukuk Tadau. [The remainder of this page is intentionally left blank] 241
  252. SECTION 8 - OTHER MATERIAL INFORMATION 8 .1 MATERIAL CONTRACTS As at 15 May 2017, there are no material contracts entered into by the Issuer save and except for the Project Documents set out in Section 1.5 of this Information Memorandum. 8.2 MATERIAL LITIGATION As at 15 May 2017, the Issuer is not engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and the Board of the Issuer is not aware of any proceedings pending or threatened against the Issuer or of any fact likely to give rise to any proceedings which may adversely affect the Issuer. 8.3 MATERIAL CONTINGENT LIABILITIES As at 15 May 2017, the Board of the Issuer is not aware of any material contingent liabilities, which may upon being enforceable, have a material adverse effect on the Issuer’s financial position or business. 8.4 CONFLICT OF INTEREST SITUATIONS AND APPROPRIATE MITIGATING MEASURES 8.4.1 Affin Hwang Investment Bank Berhad Affin Hwang IB is the Principal Adviser, the Lead Arranger, the Lead Manager, the Facility Agent for the SRI Sukuk Programme. Save as disclosed below, after making enquiries as were reasonable in the circumstances, Affin Hwang IB is not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of its roles as the Principal Adviser/Lead Arranger/Lead Manager, and the Facility Agent for the SRI Sukuk Programme. Affin Hwang IB and Affin Bank Berhad, a related corporation of Affin Hwang IB, have agreed to grant BG Facilities to the Issuer. The proceeds from the SRI Sukuk Programme may be utilised by the Issuer to pay expenses relating to such BG Facilities. Mitigating Measures The following mitigating measures will be adopted by Affin Hwang IB in order to mitigate or address any potential conflict of interest: (a) Affin Hwang IB will ensure that each of the abovementioned roles is governed by separate and legally binding agreements, specifying the respective functions, responsibilities procedures and priorities; 242
  253. 8 .4.2 (b) Affin Hwang IB will fully disclose to all prospective investors in the information memorandum on the multiple roles to be undertaken by Affin Hwang IB and they will undertake the roles on an arms’ length basis; and (c) Due diligence review pursuant to the SRI Sukuk Programme has been undertaken by professional advisers. Adnan Sundra & Low Adnan Sundra & Low are the solicitors to the Principal Adviser, the Lead Arranger and the Lead Manager for the SRI Sukuk Programme. As at the date hereof and after making enquiries as were reasonable in the circumstances, Adnan Sundra & Low are not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of their role as the solicitors to the Principal Adviser, the Lead Arranger and the Lead Manager for the SRI Sukuk Programme. 8.4.3 Malaysian Trustees Berhad Malaysian Trustees Berhad is the Sukuk Trustee and Security Trustee for the SRI Sukuk Programme. As at the date hereof and after making enquiries as were reasonable in the circumstances, Malaysian Trustees Berhad is not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of its roles as the Sukuk Trustee and Security Trustee for the SRI Sukuk Programme. 8.4.4 Dr Aznan Hasan Dr Aznan Hasan is the Shariah Adviser for the SRI Sukuk Programme. As at the date hereof and after making enquiries as were reasonable in the circumstances, Dr Aznan Hasan is not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of his roles as the Shariah Adviser for the SRI Sukuk Programme. 8.4.5 Jacobs Engineering Group Malaysia Sdn Bhd Jacobs Engineering Group Malaysia Sdn Bhd is the Independent Technical Adviser for the SRI Sukuk Programme. As at the date hereof and after making enquiries as were reasonable in the circumstances, Jacobs Engineering Group Malaysia Sdn Bhd is not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of its roles as the Independent Technical Adviser for the SRI Sukuk Programme. 243
  254. 8 .4.6 CIMB Howden Insurance Brokers Sdn Bhd CIMB Howden Insurance Brokers Sdn Bhd is the Insurance Adviser for the SRI Sukuk Programme. As at the date hereof and after making enquiries as were reasonable in the circumstances, CIMB Howden Insurance Brokers Sdn Bhd is not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of its roles as the Insurance Adviser for the SRI Sukuk Programme. 8.4.7 Christopher & Lee Ong Christopher & Lee Ong are the solicitors for the Issuer in relation to the SRI Sukuk Programme. As at the date hereof and after making enquiries as were reasonable in the circumstances, Christopher & Lee Ong are not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of their role as the solicitors for the Issuer in relation to the SRI Sukuk Programme. 8.4.8 Alex Pang & Co. Alex Pang & Co are the solicitors for Sabah land matters. After making enquiries as were reasonable in the circumstances, Alex Pang & Co. are not aware of any existing or potential conflict of interest or any circumstances which could give rise to a conflict of interest by virtue of their role as the solicitors for Sabah land matters in relation to the SRI Sukuk Programme. [The remainder of this page is intentionally left blank] 244
  255. $33(1',; %$6(&$6(&$6+)/2:352-(&7,216 Tadau Energy Sdn. Bhd. Cash Flow Forecast and Cash Flow Projection A) Information Memorandum Disbursement Account/Revenue Account ("DA"/"RA") All numbers rounded to nearest RM'000 Year Period Starting Period Ending 2017 1-Jul-16 30-Jun-17 2018 1-Jul-17 30-Jun-18 2019 1-Jul-18 30-Jun-19 2020 1-Jul-19 30-Jun-20 2021 1-Jul-20 30-Jun-21 2022 1-Jul-21 30-Jun-22 2023 1-Jul-22 30-Jun-23 2024 1-Jul-23 30-Jun-24 2025 1-Jul-24 30-Jun-25 2026 1-Jul-25 30-Jun-26 2027 1-Jul-26 30-Jun-27 2028 1-Jul-27 30-Jun-28 2029 1-Jul-28 30-Jun-29 2030 1-Jul-29 30-Jun-30 2031 1-Jul-30 30-Jun-31 2032 1-Jul-31 30-Jun-32 2033 1-Jul-32 30-Jun-33 Cash Flow from Operating Activities Receipts from customer: Energy revenue Changes in receivables Payment of operating expenses and others Operation & maintenance cost Direct labour Other direct costs Other expenses (utilities, assessment) Consultancy fee for clause 6 in PPA Generation license fee - pre-COD Generation license fee - post-COD Bank guarantee for performance bond Changes in payables Transfer to MRA (for maintenance cost build-up) New office renovation, furniture and fittings Transfer/release to/from land deposit Net GST claimed/(paid) Tax Net cash generated from/(used in) operating activities 5 5 13,069 (995) 12,074 45,787 (886) 44,901 45,621 10 45,631 45,300 14 45,314 44,980 14 44,994 44,659 14 44,673 44,338 14 44,352 44,018 14 44,032 43,698 14 43,712 43,376 14 43,390 43,056 14 43,070 42,736 14 42,750 42,415 14 42,429 42,094 14 42,108 41,774 14 41,788 40,237 114 40,351 (2,158) (200) (1) (53) (2,412) 6 (2,406) (133) (5,446) (85) (8,070) (8,065) (760) (349) (4,869) (51) (200) (28) (6,257) 318 (5,939) (1,000) (351) (1,451) (8,741) 3,333 (2,716) (1,252) (5,264) (140) (98) (9,470) 66 (9,404) 5,797 (334) (3,941) 40,960 (2,724) (1,258) (5,267) (140) (98) (9,487) 1 (9,486) (403) (9,889) 35,742 (2,720) (1,264) (5,269) (140) (98) (9,491) (9,491) (432) (9,923) 35,391 (2,722) (1,270) (5,273) (140) (98) (9,503) (9,503) (505) (10,008) 34,986 (2,724) (1,278) (5,328) (140) (98) (9,568) 2 (9,566) (559) (10,125) 34,548 (2,724) (1,284) (5,331) (140) (98) (9,577) (9,577) (27) (606) (10,210) 34,142 (2,726) (1,290) (5,333) (140) (98) (9,587) (9,587) (715) (611) (10,913) 33,119 (2,728) (1,296) (5,337) (140) (98) (9,599) (9,599) (1,374) (567) (11,540) 32,172 (2,730) (1,302) (5,344) (140) (98) (9,614) 14 (9,600) (1,511) (2) (496) (11,609) 31,781 (2,730) (1,310) (5,451) (140) (98) (9,729) 316 (9,413) (4,617) (17) (453) (14,500) 28,570 (2,732) (1,316) (5,454) (140) (98) (9,740) (325) (10,065) (491) (10,556) 32,194 (2,734) (1,322) (5,457) (140) (98) (9,751) (9,751) (2,106) (11,857) 30,572 (2,734) (1,330) (5,459) (140) (98) (9,761) (9,761) (2,453) (12,214) 29,894 (2,736) (1,336) (5,463) (142) (98) (9,775) (9,775) (2,488) (12,263) 29,525 (2,738) (1,342) (5,465) (142) (98) (9,785) (9,785) (2,457) (12,242) 28,109 (88,143) 355 (87,788) (175,075) 6,046 (169,029) (5,588) 1,392 (4,196) (10,672) 1,678 (8,994) 1,803 1,803 2,106 2,106 2,329 2,329 2,528 2,528 2,546 2,546 2,363 2,363 2,065 2,065 1,701 1,701 1,364 1,364 1,157 1,157 1,106 1,106 1,056 1,056 1,034 1,034 - - - - - - - - - - - - - Cash Flow from Investing Activities Payment to suppliers: Capital expenditures (excluding GST) Interest income Net cash (used in)/generated from investing activities Cash Flow from Financing Activities Receipts from: Equity injection Issuance of Sukuk Payment for: Transfer to FSA (for FSA Minimum Required Balance - principal) Bank guarantee fee - PPA Upfront fees (Sukuk) Annual recurring fees - Sukuk Programme Transfer to FSA (for FSA Required Profit Balance/FSA Minimum Required Balance - profit) Dividends 57,500 250,000 307,500 - - - Net cash (used in)/generated from financing activities (103) (1,656) (14,702) (16,461) 291,040 (215) (7,351) (7,566) (7,566) (14,000) (215) (14,338) (28,553) (28,553) (9,000) (215) (13,735) (22,950) (22,950) (15,000) (215) (13,092) (28,307) (28,307) (18,000) (216) (12,192) (30,408) (30,408) (19,000) (216) (11,165) (30,381) (30,381) (20,000) (216) (10,063) (3,800) (34,079) (34,079) (20,000) (216) (8,913) (9,937) (39,066) (39,066) (20,000) (216) (7,743) (13,903) (41,862) (41,862) (20,000) (216) (6,553) (16,640) (43,409) (43,409) (20,000) (216) (5,348) (19,230) (44,794) (44,794) (20,000) (216) (4,128) (15,477) (39,821) (39,821) (15,000) (216) (3,044) (13,566) (31,826) (31,826) (15,000) (217) (2,099) (14,892) (32,208) (32,208) (15,000) (217) (1,139) (14,549) (30,905) (30,905) (10,000) (217) (328) (34,250) (44,795) (44,795) Net changes in Disbursement Account/Revenue Account for the financial year Cash in Disbursement Account/Revenue Account at beginning of financial year Cash in Disbursement Account/Revenue Account at end of financial year 195,187 4,872 200,059 (173,262) 200,059 26,797 8,212 26,797 35,008 3,798 35,008 38,806 8,888 38,806 47,694 6,685 47,694 54,378 6,497 54,378 60,875 2,591 60,875 63,466 (3,400) 63,466 60,066 (7,327) 60,066 52,739 (9,563) 52,739 43,177 (14,523) 43,177 28,654 (6,263) 28,654 22,392 (97) 22,392 22,295 (1,208) 22,295 21,087 (324) 21,087 20,763 (15,652) 20,763 5,112 14,702 - 14,702 7,351 (14,702) 7,351 7,351 14,338 14,000 (14,702) (14,000) 6,987 6,987 13,735 9,000 (13,974) (9,000) 6,748 6,748 13,092 15,000 (13,497) (15,000) 6,343 6,343 12,192 18,000 (12,687) (18,000) 5,848 5,848 11,165 19,000 (11,697) (19,000) 5,316 5,316 10,063 20,000 (10,633) (20,000) 4,746 4,746 8,913 20,000 (9,493) (20,000) 4,166 4,166 7,743 20,000 (8,333) (20,000) 3,576 3,576 6,553 20,000 (7,153) (20,000) 2,976 2,976 5,348 20,000 (5,953) (20,000) 2,371 2,371 4,128 20,000 (4,743) (20,000) 1,756 1,756 3,044 15,000 (3,513) (15,000) 1,288 1,288 2,099 15,000 (2,575) (15,000) 811 811 1,139 15,000 (1,623) (15,000) 328 328 328 10,000 (655) (10,000) - 27 0 27 27 715 0 742 742 1374 0 2,116 2,116 1,511 (165) 3,462 3,462 4,617 (3958) 4,122 4,122 0 0 4,122 4,122 0 0 4,122 4,122 0 0 4,122 4,122 0 0 4,122 4,122 0 0 4,122 49,615 2.83 35,147 2.35 B) Finance Service Account (FSA) FSA cash flow movements are as follows: FSA Balance b/f Transfer from DA/RA to FSA (for FSA Required Profit Balance/FSA Minimum Required Balance - profit) Transfer from RA to FSA (for FSA Minimum Required Balance - principal) Release from FSA (for Profit Payment) Release from FSA (for Principal Redemption) FSA Balance c/f C) Maintenance Reserve Account (MRA) MRA cash flow movements are as follows: MRA Balance b/f Transfer from RA to MRA (for maintenance cost build-up) Release from MRA (for payment of heavy maintenance cost) MRA Balance c/f Cash balance c/f (DA/RA/FSA/MRA) FSCR (times) 14,702 - - - - - - - 214,760 N/A 34,148 3.32 41,995 2.46 45,555 2.98 54,037 2.90 60,227 2.96 66,191 3.16 24 5 68,240 3.23 64,974 3.20 58,432 3.06 28,269 2.14 27,704 2.50 26,020 2.48 25,212 2.52 9,233 1.87
  256. APPENDIX 2 SUMMARY OF SOURCES AND USES OF FUNDS OF THE PROJECT Base Case sources and utilisation of funds Sources of funds Proposed Sukuk Equity Total Amount (RM Million) 250.00 62.50 312.50 Uses of funds EPC Contract Price and other Project Costs Amount (RM Million) 249.58 Contingency sum 29.90 Goods and Services Tax (GST) 14.98 Profit payment during construction 14.70 Financing expenses 1.81 Specific contingency sum 1.53 Total 312.50 [The remainder of this page is intentionally left blank] 246
  257. APPENDIX 3 ASSUMPTIONS OF BASE CASE CASHFLOW PROJECTIONS Tadau Energy Sdn Bhd (“Tadau Energy”) or the (“Issuer”) The principal bases and assumptions upon which the cash flow projections have been approved by the Board of Directors of Tadau Energy are as follows: GENERAL ASSUMPTIONS 1. There will be no significant changes in the terms and conditions of the Power Purchase Agreement dated 15 December 2016 entered between Tadau Energy and Sabah Electricity Sdn Bhd (“SESB”) in connection with Unit 1 (as defined below), and includes any amendments, variations and/or supplemental made or entered into from time to time (“PPA 1”) and the Power Purchase Agreement dated 15 December 2016 entered between Tadau Energy and SESB in connection with Unit 2 (as defined below), and includes any amendments, variations and/or supplemental made or entered into from time to time (“PPA 2”), collectively referred as (“PPAs”) in relation to the new 50 MWac solar photovoltaic generating facilities (“Solar PV Plants”) to be located in Kudat, Malaysia (“Project”). 2. The construction of solar Photovoltaic (“PV”) energy generating facility to be located at Site Yong East with a capacity of 2 MWac and ancillary equipment and facilities as described in the PPA 1 (“Unit 1”) and the construction of Solar PV energy generating facilities to be located at Site Yong East, Site Bak Bak and Site Yong West with an aggregate capacity of 48 MWac and ancillary equipment and facilities as described in the PPA 2 (“Unit 2”) are expected to be completed on the scheduled commercial operation dates (“Scheduled CODs”) of the respective Solar PV Plants as detailed below and assuming no receipts of liquidated damages from the EPC Contractor under EPC Contract 1 and EPC Contract 2. Based on PPA 1 and PPA 2, the Scheduled COD for Unit 1 is 30 June 2017 and for Unit 2 is on 31 March 2018. 3. There will be no significant changes in the present legislation and Government regulations, rates and duties, tariffs, levies and taxes, which will adversely affect the operations of Tadau Energy and the market in which it operates. 4. Tadau Energy will operate as planned and there are no factors which would significantly affect its operations. 5. There will be no expropriation or events leading to the termination of the PPAs prior to the end of the agreement period. 6. There will be no significant changes to the prevailing economic and political conditions and unforeseen weather, natural disaster or civil unrest in Malaysia and elsewhere that will have direct or indirect effects on Tadau Energy. 7. There will be no material litigation against Tadau Energy during the cash flow projection period. 8. There will be no significant changes in costs of spares and the major operating costs. 247
  258. KEY PROJECT COSTS ASSUMPTIONS 1 . The Project Costs for the Solar PV Plants comprises the following costs: Project Costs (i) EPC* Contract Price and other Project Costs** (excluding GST) Contingency sum # Goods and Services Tax (GST) on item (i) above Profit payment during construction*** Financing expenses Specific contingency sum ^ Total (ii) (iii) (iv) (v) (vi) Projected Payment Total RM’ million 249.58 29.90 14.98 14.70 1.81 1.53 312.50 Notes: * EPC denotes Engineering, Procurement, Construction and Commissioning Contract. ** Other Project costs include project management and other administrative expenses. *** Includes the profit payment prefunded up to the next immediate Periodic Distribution Date post Scheduled COD of Unit 2. 2. # The contingency sum is estimated based on an assumption rate of approximately 12% of the EPC Contract sums (including a special incentive to the EPC contractor for early delivery of commercial operation date) and other Project costs. ^ The contingency sum of RM1.53 million includes operations and maintenance costs of Unit 1 and Unit 2 of approximately 2.5 months as well as operating expenses to be incurred prior to achieving commercial operations of Unit 1 and Unit 2. This specific contingency sum is assumed to be unutilised and would be reflected as surplus cash balances in the Disbursement Account. This specific contingency sum is to provide for any unforeseen circumstances and to facilitate smooth day-to-day operations of Tadau Energy. The sources of fund for the Project Costs are as follows: RM' million Facility SRI Sukuk Programme 250.00 Equity Shareholder’s Equity Contribution 62.50 Total 312.50 Shareholder’s equity contribution is expected to be in the form of ordinary shares, shareholders’ advances and/or redeemable convertible preference shares. 248
  259. KEY FINANCING ASSUMPTIONS 1 . The SRI Sukuk Tadau will be issued to partly finance the Project Costs. The assumed profit rates ranges from 5.20% to 6.55% per annum. 2. It is expected that the SRI Sukuk Programme will consist of fifteen tranches, with tenures ranging from two (2) to sixteen (16) years. 3. The profit payments are expected to commence six months from the date of issuance of the SRI Sukuk Tadau whereas the payment of principal obligations is assumed to commence in the period ending 30 June 2019. 4. All payments in respect of the SRI Sukuk Programme will be made on a timely manner. 5. All the financial covenants will be met:(a) Finance to Equity Ratio of not more than 80:20; and (b) Finance Service Cover Ratio is not less than 1.25 times. KEY REVENUE ASSUMPTIONS 1. Tadau Energy is assumed to achieve the following operational performance for the first year of operation: Description Plant Capacity Annual Energy Production (kWh) * Unforeseen Outages Probability of exceedance scenario Unit 1 2 MWac 3,228,000 1% P90 Unit 2 48 MWac 76,414,000 1% P90 Note: * The assumptions used in the report to forecast energy projections from solar resource by PVsyst include (but are not limited to) the following variables such as soiling loss, thermal loss, module quality loss, mismatch loss, external transformer loss and inverter loss. From the second year of operations, the energy production of each Solar PV Plants are projected after taking into consideration unforeseen outages of 1% per annum and annual degradation of 0.7% per annum. 2. The energy rate is assumed at the rates as stated in the PPAs (which have not taken into account any potential adjustments thereto) which will be billed to SESB and paid in accordance with the terms of the PPAs. 3. The Solar PV Plants will perform at planned production levels. 4. Management presumes that unforeseen outages will not exceed the anticipated rate of 1% of total output. 5. Debtors turnover period is assumed to be thirty (30) days. 6. Interest income is assumed to be earned at a rate of 3.5% per annum from average cash balances for the respective year. 249
  260. KEY COST AND EXPENSES ASSUMPTIONS 1 . The operating expenses comprise: (a) Operation and maintenance cost; (b) Direct labour; (c) other direct costs; and (d) other miscellaneous expenses. 2. A heavy maintenance reserve amounting to RM4.1 million (i.e. RM0.1 million in respect of Unit 1 and RM4.0 million in respect of Unit 2) will be build up semiannually in six (6) equal instalments commencing on the seventh (7th) year after the commercial operation date of Unit 1 and the commercial operation date of Unit 2 from which maintenance is expected to be undertaken over operating year ten (10) of the respective Solar PV Plants. It is assumed that there would be no major breakdown of the equipment which are not covered by warranty, insurance or the stocked spare parts inventory as provided in EPC Contract 1 and EPC Contract 2. 3. Creditors turnover period is assumed to be thirty (30) days. TAX, DIVIDEND, INFLATION & EXCHANGE RATES ASSUMPTIONS Key Corporate Income Tax Assumptions 1. The corporate tax rate is assumed at the current Malaysian corporate income tax rate of 24% and is payable every month based on taxable profit in the respective financial years. 2. It is assumed that the Project qualifies to claim Investment Tax Allowance at the rate of 100% of qualifying capital expenditure incurred (until year of assessment 2020). The allowance can be used to set off against 70% statutory business income. Any unutilised allowance can be carried forward indefinitely. 3. For capital allowances purposes, it is assumed that all qualifying expenditure would fall within the category of plant and machinery. Capital allowances will be claimed in the year of assessment where the company commences its business activity, at the following rates: Category Initial allowance (%) Annual allowance (%) Plant and machinery 20 14 4. Capital allowance is assumed to be permitted to be carried forward indefinitely to offset future taxable statutory income in accordance with current tax regulations in Malaysia. 5. It is assumed that the business commences (for tax purposes) on commercial operation date (“COD”). All expenditure incurred prior to the commencement of business do not qualify for a tax deduction. 6. Interest income is taxable as a separate income source under Section 4(c) of the Income Tax Act 1967. 250
  261. 7 . A tax deduction has been claimed for the following expenses on the basis that it is wholly and exclusively incurred in the production of gross business income and it is not a capital expenditure:  Operations and maintenance cost  Labour  Other Direct Costs  Other Expenses (Utilities, Assessment)  Generation License Fee – post –COD  Bank Guarantee for Performance Bond  Interest payment post commencement of business (based on amount payable / accrued instead of the amortised amount) 8. SRI Sukuk Tadau profit payment incurred during construction neither qualifies for a tax deduction nor capital allowances. 9. Heavy maintenance cost which has been capitalised in the balance sheet is a qualifying capital expenditure and capital allowance has been claimed accordingly. 10. Expenditures which are not wholly and exclusively incurred in the production of gross income are not tax deductible. Key Indirect Tax Assumptions 1. The current Malaysian goods and services tax (“GST”) rate of 6% is adopted throughout the cash flow projection period. 2. Taxable goods and services purchased from local GST registered suppliers are subject to GST at 6%. 3. Importation of goods is subject to GST at 6%. 4. Input tax incurred on acquisitions which is directly attributable to the making of taxable supplies and acquired for the course or furtherance of the business will be claimable based on holding valid tax invoices or import documentations to substantiate the input tax claims (unless identified specifically as disallowed under Regulation 36 of the GST Regulations 2014). It has been assumed that the input tax incurred on EPC Contract Price is fully claimable. 5. Any net output tax will be paid in the month following the end of every taxable period. 6. All the items to be imported into Malaysia will qualify for the preferential tariff rate of 0% (based on the tariff codes provided and the representation that the goods were to be imported from China). 251
  262. TAX , DIVIDEND, INFLATION & EXCHANGE RATES ASSUMPTION (continued) Dividend Assumptions 1. The distribution of dividend is at the discretion of Tadau Energy after fulfilling all the conditions of the SRI Sukuk Programme, including the Distribution FSCR is not less than 1.5 times prior to making any transfer from the Revenue Account to the Distribution Account. 2. The maximum distributable dividend is expected to be the lower of net dividend declarable from retained earnings and cash available to pay dividends. Inflation Assumptions 1. It is assumed that the inflation rate is 0.50% for salaries and 0.05% for operation and maintenance and other costs per annum. [The remainder of this page is intentionally left blank] 252
  263. APPENDIX 4 AUDITED FINANCIAL STATEMENT OF THE ISSUER FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 253
  285. APPENDIX 5 SITE MAP OF THE SOLAR PV PLANTS Figure 1 : Sabah State and the Location of Kudat District 254
  286. Figure 2 : Location of Sites in Kudat District 255
  287. ISSUER TADAU ENERGY SDN BHD Lot 4 , 3rd Floor Block A, Damai Plaza Phase IV, Jalan Damai 88300 Kota Kinabalu Sabah PRINCIPAL ADVISER, LEAD ARRANGER AND LEAD MANAGER AFFIN HWANG INVESTMENT BANK BERHAD 27th Floor, Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur Malaysia SHARIAH ADVISER DR. AZNAN HASAN SOLICITORS TO THE PRINCIPAL ADVISER, LEAD ARRANGER AND LEAD MANAGER SOLICITORS TO THE ISSUER ADNAN SUNDRA & LOW Level 11, Menara Olympia, No.8 Jalan Raja Chulan, 50200 Kuala Lumpur CHRISTOPHER & LEE ONG Level 22, Axiata Tower, No. 9, Jalan Stesen Sentral 5, Kuala Lumpur Sentra, 50470 Kuala Lumpur FACILITY AGENT SUKUK TRUSTEE AFFIN HWANG INVESTMENT BANK BERHAD 27th Floor, Menara Boustead, 69 Jalan Raja Chulan, 50200 Kuala Lumpur Malaysia MALAYSIAN TRUSTEES BERHAD Level 11, Tower 1, RHB Centre Jalan Tun Razak, 50400 Kuala Lumpur Malaysia