China-owned water treatment company BEWG (M) on July 19 debuted in the Malaysian ringgit sukuk market with the first ever ringgit-denominated sukuk by a Chinese conglomerate by issuing 400 million ringgit (US$93.46 million) Islamic medium term notes. The sukuk wakala was fully subscribed at the point of launch, which allowed BEWG to achieve its target funding size and meet its financing objectives.

Zhejiang Taizhou Water Sewage Plant. Photo: BEWG.com.hk

Proceeds from the issuance will be used to partly finance the refurbishment and upgrade of the water treatment plant in Bukit Sah, Kemaman, where BEWG has been awarded the role of design & build contractor by the Terengganu state government. The project is expected to be completed in November 2018.

The landmark transaction also represented the first ever debt capital market instrument for BEWG, the first ringgit-denominated sukuk by a China-owned company for water infrastructure funding and the largest ringgit-denominated sukuk offering by a China-owned company to date.

BEWG is a wholly-owned indirect subsidiary of Beijing Enterprises Water Group Limited (BEWGL), which in turn is a subsidiary of Beijing Enterprises Holding, a state-owned company involved in water, sewerage and natural gas operations in China.

The issuance is an important milestone for BEWG in enhancing its profile and increasing its recognition among local investors, paving the way for future fundraising exercises in Malaysia. The sukuk has likewise enabled the Beijing Enterprises group to diversify its funding sources in Malaysia, which had so far been limited to bank loans.

Malaysian Rating Corporation views the project to have moderate construction risk, which is mitigated by the technical and financial support from BEWGL. During the construction phase, BEWGL will provide a corporate guarantee to meet any financial obligations under the terms of the sukuk.

CIMB Investment Bank and Maybank Investment Bank are the joint principal advisers and joint lead arrangers for the transaction, as well as joint lead managers along with Affin Hwang Investment Bank, Industrial and Commercial Bank of China (Malaysia) and RHB Investment Bank.

BEWG was incorporated to undertake water treatment projects in Malaysia and its first project was the construction of the centralized waste water treatment facility Pantai 2 sewerage treatment plant in Kuala Lumpur, which was completed in July 2015.