With the government relying in large part on private investments to fuel its star development project, the Sarawak Corridor of Renewable Energy (SCORE), recent reports that banks are beginning to line up to provide financing for its projects bodes well for the state’s vision of becoming a high-income economy.
In late July, local media reported that Maybank Investment Bank (Maybank IB) and RHB Bank have jointly arranged to loan Press Metal Bintulu (PMBintulu) RM400 million (US$133 million) to finance the first of a two-phase expansion plan to the company’s aluminium smelting project in Samalaju Industrial Park, one of SCORE’s centrepiece works.
The expansion, which will have a total production capacity of 120,000 metric tonnes (MT), is expected to be completed by the third quarter of 2012 and cost a total of RM1.5 billion to RM2 billion (US$499 million to US$665 million).
The second phase of the expansion is scheduled for completion in the second quarter of 2013, pending financing.
Maybank IB is acting as the sole book-runner for the syndicated term loan facility for PMBintulu, a subsidiary of Press Metal (PMB).
It is also the joint mandated lead arranger, together with RHB Bank. The lenders are Malayan Banking (Maybank), RHB Bank and Alliance Bank.
Maybank will lend RM250 million (US$83.1 million); RHB Bank, RM100 million (US$33.3 million); and Alliance Bank, RM50 million (US$16.6 million).
The plant’s expansion is expected to triple PMB’s smelter capacity in Malaysia to 360,000MT when fully commissioned, consolidating its standing as one of South-east Asia’s leading aluminium producers.
Maybank’s president and CEO, Abdul Wahid Omar, told local press that to achieve PMB’s financing objectives, the syndication was structured as a conventional loan to offer maximum cost-efficiency and flexibility.
“It comes with competitive rates commensurate with PMB’s credit standing and has a tenure of up to eight years,” he said.
“The loan proceeds will have a drawdown period of up to 24 months and will be used to part-finance the project’s cost for the development of the plant.”
Bintulu Port, a crucial component of SCORE, will serve the energy-intensive industries to be set up in Samalaju Industrial Park.
The port registered a total cargo throughput of 40.6MT last year, up from 38MT in 2009, and projections call for a slight increase to 41MT this year.
So far, four major investors have confirmed they are setting up manufacturing facilities in Samalaju Industrial Park.
These include Japan’s Tokuyama Corporation, which is constructing a manufacturing plant to produce polycrystalline silicon for solar panels, and OM Holdings and Asia Mineral, both of which will set up manganese smelters in the park.
The fourth investor is PMB, which is investing RM5 billion (US$1.66 billion) in its smelter project at Samalaju.
The new smelter is expected to have an estimated yearly capacity of 240,000MT.
The four companies’ proposed plants are expected to begin commercial production in 2012 and 2013.
Meanwhile, Danajamin Nasional, Malaysia’s first financial guarantee insurer, has guaranteed a RM380 million (US$126.4 million), 20-year Islamic medium-term notes programme for Senari Synergy, whose activities focus on the development, operation, management and maintenance of port facilities – mainly services related to oil, gas, petro- and oleo-chemicals.
Fully issued and subscribed on August 2, the Islamic bond, or sukuk, programme constitutes the longest guarantee by the country’s financial guarantee insurer to date.
Senari Synergy is also the first company in Sarawak to be given Danajamin Nasional’s financial guarantee, which provides credit enhancement for bonds and sukuk issuances to facilitate non-AAA-rated companies to access the private debt securities market.
“This transaction further reinforces the important role that Danajamin plays in providing companies access to the longer-end of the sukuk market, which is less liquid, as well as facilitating the development of Malaysia as a leading Islamic financial centre,” Danajamin’s CEO, Ahmad Zulqarnain Onn, said in an August 3 statement to the press.
Senari Synergy’s CEO, Mohammad Aris Yusop, said Danajamin’s guarantee showed a strong endorsement of the company and its development projects, which include the Assar Senari Industrial Complex II (known as ASIC 2) at the Tanjung Manis Halal Hub, a 77,000 hectare agricultural centre in Sarawak.
“Upon completion of ASIC 2, Senari is poised to become Sarawak’s flagship entity that is focused on strategically important activities in the oil and gas as well as palm oil industries,” Aris Yusop said.
In addition to the private sector, the federal and state governments are offering various investment incentives to attract foreign direct investment (FDI) to Tanjung Manis, as well as all of its SCORE developments.
To date, more than RM2 billion (US$665 million) of FDI has been committed to Tanjung Manis, funds which are expected to fuel more than RM10 billion (US$3.33 billion) worth of FDIs in 10 to 20 years.
Indeed, with the completion of the Sibu-Tanjung Manis road this year, various SCORE industries in the hinterland will receive more support.
With expectations set for Tanjung Manis and other centres to attract substantial amounts of FDI, the pursuit of financing for Sarawak’s most important developments seems to be well under way.