OCBC, MFP Solar conclude agreement for green term loan rated gold
KUCHING:OCBCBank(Malaysia) Bhd (OCBC Bank) and Malaysian Rating Corporation Bhd (MARC) yesterday announced the closing of an externally reviewed multitranche Green Term Loan Facility (Facility) for MFP Solar Sdn Bhd (MFP Solar).
The agreement facilitates the establishment of a RM100 million Facility between OCBC Bank and MFP Solar which will be utilised to finance the development of multiple rooftop solar photovoltaic plants under a single master facility structure.
MARC had earlier performed a ‘green loan assessment’ on the loan facility offered to MFP Solar by OCBC Bank and assigned it a “gold” assessment.
Each tranche of the Facility will be a standalone term loan that will exclusively finance the project cost of an eligible rooftop solar photovoltaic plant.
The loan documentation for the facility meets core criteria set out in the Loan Market Association’s Green Loan Principles (GLP) 2020 regarding the use of proceeds, processes for project evaluation and selection, and management of proceeds.
MFP Solar is a 55 per centowned subsidiary of Mega First Corporation Bhd, with the remaining 45 per cent held by Pekat Teknologi Sdn Bhd. A solar pure play, MFP Solar’s business model entails tendering and securing rooftop solar photovoltaic projects under its business model of Solar Power Purchase Agreement.
MFP Solar is a registered Solar PV Investor with the Sustainable Energy Development Authority (SEDA).
OCBC Bank managing director of senior banker client coverage and head of investment banking, Tan Ai Chin, said: “This transaction marks a key milestone in the development of the domestic market for sustainable financing, particularly in promoting the importance of green loans.
“As a bank which is fully committed to supporting sustainable development, we actively support businesses which are at the forefront of promoting technologies engineered towards mitigating climate change-associated risks.
“We have taken a step further towards validating the green loan structure by procuring the assessment from MARC and I am glad that we have achieved the highest gold standard, a testament to our robust structuring capability in sustainable financing.”
In August 2020, MFP Solar commissioned the inaugural project that was financed under the Facility by developing a 1.5 MWp solar plant for VAT Manufacturing Sdn Bhd, a high precision valve manufacturer based in Batu Kawan, Penang.
The closing of the transaction attests to the pivotal role that banks are playing alongside the capital markets in supporting the nation’s transition to a lowcarbon economy.
GLP-aligned loans are a positive step in the direction of mainstreaming green finance and ensuring that a globally consistent methodology is applied to identify loans as “green”.
Banks have been stepping up efforts to internalise sustainability goals in their lending strategy, a trend MARC believes will bode well for the resilience of the domestic banking sector to climate and other environmental, social and governance risks.