ChemOne Group, a conglomerate based in Singapore specializing in petrochemicals, green energy, and natural resources, has introduced an innovative financing approach for the Pengerang Energy Complex (PEC) project.
This unique structure involves establishing an Islamic tranche within the Export Credit Agency (ECA) backed project financing for PEC. As the project moves closer to Financial Close, this pioneering financing model enables Islamic Banks to participate alongside traditional commercial banks in funding the project. The Islamic tranche for PEC is set to reach up to or more than US$375 million.
The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IsDB) Group, has proposed credit default insurance cover for the financing facilities provided by Islamic Banks.
This initiative has attracted significant interest from the Middle East and South-East Asian region. Additionally, the Islamic Corporation for the Development of the Private Sector (ICD), a multilateral development financial institution within the IsDB Group, has expressed interest in participating in the PEC Islamic tranche through a direct loan facility, eliminating the need for credit insurance cover.
Both ICIEC and ICD recognize the substantial positive impact of the PEC project on Malaysia’s economy, including high employment generation, a low carbon footprint, and 100% revenue derived from exports.
In August 2023, senior officials from ICIEC and ICD conducted a thorough due diligence mission, including a visit to the PEC project site in Pengerang, Malaysia, and multiple meetings with key stakeholders and Islamic banks in Singapore and Malaysia. Both ICIEC and ICD, along with various Islamic banks, are in the final stages of processing approvals for the PEC project.
PEC recently unveiled engineering-driven improvements that are expected to set new industry standards. The Export Credit Agencies (ECAs) are set to present these developments to their respective boards within the next two months.
PEC aims to complete its financial closing by the end of 2023, with banks and financial institutions currently in the process of renewing or finalizing their credit approvals. Additionally, a significant accounts receivables facility has been secured with a prominent Japanese bank.
The debt financing for PEC is supported by international ECA-backed bank funding totaling US$3 billion. These international ECAs are in the final stages of obtaining credit approvals, anticipated to be finalized by the end of this year. The Islamic finance component complements the ECA-backed debt, forming the complete senior debt structure of PEC.
