PNB Merdeka Ventures Sdn Berhad – Green Sukuk

PNB Merdeka Ventures Sdn Berhad – Green Sukuk

PNB Merdeka Ventures Sdn Berhad (PNBMV) was set up as a wholly-owned subsidiary of Permodalan Nasional Berhad (PNB) to undertake the Warisan Merdeka project which comprises a 118-storey iconic tower, retail mall and service apartments. The tower is named Merdeka PNB118, comprising 83-storey office space, a luxury hotel and an observation deck. Upon completion, the Merdeka PNB118 Tower will be the tallest building in South East Asia, standing at approximately 630 meters high.

In December 2017, PNBMV issued an unrated Sukuk under the Shariah principles of Murabahah via Tawarruq arrangement and Wakalah (Merdeka ASEAN Green SRI Sukuk) pursuant to a Sukuk programme of up to RM2 billion in nominal value (Merdeka ASEAN Green SRI Sukuk Programme). Proceeds from the Merdeka ASEAN Green SRI Sukuk will be utilised towards partial funding of the 83-storey office space at Merdeka PNB118 Tower, and the remainder of the proceeds will go towards supporting activities.

The Merdeka ASEAN Green SRI Sukuk is the first adopter of the ASEAN Green Bond Standards (AGBS) developed by the ASEAN Capital Markets Forum (ACMF), and it also follows the Sustainable and Responsible Investment (SRI) Sukuk Framework by the Securities Commission of Malaysia.

Framework
To ensure transparency, disclosure and integrity for the issuance of the Green Sukuk, PNBMV developed a Green Sukuk Framework (the Framework). The Framework is built upon the International Capital Market Association (ICMA)’s Green Bond Principles with the following components:

  1. Use of Proceeds
  2. Sustainability Features
  3. Management of Proceeds
  4. Reporting

The Centre for International Climate Research (CICERO) was engaged to provide a second party opinion on the Framework. In their report, CICERO rated PNBMV’s Green Sukuk Framework as a medium green. This rating suggests that the Framework represent steps towards the long-term vision but are not quite there yet because while the energy models show improved efficiency, the Framework does not include an explicit energy target and there are no energy-related targets at the corporate level.

For further information, please refer to CICERO’s Second Opinion on Merdeka PNB118 Green Sukuk Framework dated 30 October 2017.

i. Use of Proceeds

Category: Green Building

Eligible Project: Merdeka PNB118 Tower

The development and construction of Merdeka PNB118 is deemed to be an:

  1. eligible SRI project pursuant to the Guidelines on LOLA Framework under paragraph 7.04(c)(v) (community and economic development – project relating to sustainable building projects) of the Guidelines on LOLA Framework; and
  2. eligible Green Project pursuant to the ASEAN GBS under paragraph 4.1.5 (x)(green buildings which meet regional, national or internationally recognised standards or certifications) of the ASEAN GBS

Details of the utilisation of proceed: Towards partial funding of the 83-storey office space of the Merdeka PNB 118 Tower and the remainder of the proceeds will go towards supporting activities.

Details of issuance:

No. Issue Date Amount Issued (Million) Currency Tenure (Years) Sukuk Listing
1
29 December 2017
10
MYR
5
Not listed
2
29 December 2017
20
MYR
6
Not listed
3
29 December 2017
30
MYR
7
Not listed
4
29 December 2017
60
MYR
8
Not listed
5
29 December 2017
570
MYR
15
Not listed
6
28 June 2019
65
MYR
7
Not listed
7
28 June 2019
70
MYR
8
Not listed
8
28 June 2019
90
MYR
9
Not listed
9
28 June 2019
220
MYR
13
Not listed
10
27 December 2019
100
MYR
10
Not listed
11
27 December 2019
105
MYR
11
Not listed
12
27 December 2019
120
MYR
12
Not listed
13
27 December 2019
110
MYR
13
Not listed

Total

1,570

MYR

ii. Sustainability Features

Key features:

  • The building has been pre-certified according to Green Building Index (GBI) and GreenRe at the Platinum level.
  • The building will be certified according to Leadership in Energy and Environmental Design (LEED) 2009 Core and Shell at the Gold or Platinum level.
  • Building energy performance is estimated to be over 30% more efficient than the baseline of ASHRAE 90.1‐2007
  • Sustainable site planning and management
  • Water efficiency fixtures certified under the Water Efficiency Labelling and Standards (WELS)
  • Material resource conservation through waste management program and prescribed recycle content of materials

The Project would also have social benefits such as the creation of additional employment opportunities, positive multiplier effect to the whole country, and it would also support the growth of local suppliers and service providers. Additionally, the market value of the real properties in the surrounding area would also increase because of the Project. It would also stimulate the growth of the tourism sector with its Iconic tower complete with Skydeck, which will be a new tourist attraction for Kuala Lumpur.

iii. Management of proceeds

The management of proceeds under the Green Sukuk is monitored by a Facility Agent to keep track of the proceeds flowing under the Designated Accounts.

The proceeds from the Green Sukuk will be deposited in a Shariah-compliant “Proceeds Account 1.” The Proceeds Account 1 shall also capture the equity contributions from PNB, any amount or payment paid by PNB arising from the call of completion guarantee and any facilitation fund proceeds (if the funds received during construction period).

Funds from Proceeds Account 1 will then be transferred to:

  • Project Account 1 to meet the construction cost;
  • Profit & Expense Account 1 to meet the recurring fees, profit payment obligations and Completion Guarantee fee;
  • Finance Service Reserve Account 1 to meet the Minimum Required Balance, which is equivalent to the next six (6) months profit payment amount to be deposited 14 days before the scheduled completion date

The diagram below shows the flow of funds during construction and operation

Source: PNB Merdeka Ventures Sdn Berhad Green Sukuk Framework

iv. Reporting

According to the Principle Terms and Condition of the Merdeka ASEAN Green SRI Sukuk Programme, PNBMV shall provide annual reporting and the external review on the annual reporting to the Sukuk holders throughout the tenure of the Merdeka ASEAN Green SRI Sukuk Programme on the following:

  1. the original amount earmarked for the Eligible SRI Project
  2. the amount utilised for the Eligible SRI Project
  3. the unutilised amount and where such unutilised amount is placed or invested pending utilisation
  4. Impact indicators (to the extent possible):
    • Energy consumption
    • Water use
    • CO2 emission
    • Total construction waste (tonnes)
    • Total recycled waste (tonnes)

External assurance
For FY2018 and FY2019, PNBMV engaged Ernst & Young Advisory Services Sdn. Bhd. (“EY”) to provide independent verification via Independent Limited Assurance Report on the management proceeds and the reporting use of proceeds. The opinion of the external auditor and the investor letter is available on PNBMV’s website at www.pnbmerdekaventures.com.my.