World’s largest green sukuk raised for Malaysian PV plants

The $237m Islamic bond helped Oslo-based Scatec Solar reach financial close on three power plants totalling 197MW capacity.

The world’s largest green sukuk issuance will help finance three solar power plants in Malaysia with a combined capacity of 197MW.

Scatec Solar, an Oslo-based energy firm, reached financial close on the 1.24 billion ringgit ($292 million; €249 million) project, with 1 billion ringgits raised through sukuk, or Shariah-compliant Islamic bond. Scatec partnered a consortium led by Itramas, a Malaysian engineering firm, for the project.

The plants, covering more than 180 acres each, will be located in Merchang, a city on the country’s east coast; Gurun in the north-west; and Jasin, a district south of Kuala Lumpur. The plants are under construction and expected to be completed in the next few months, according to Scatec.

The use of sukuk, a bond which complies with the Islamic prohibition against interest, has grown in prominence over the past decade. Islamic finance is now a close to $2 trillion industry, according to estimates cited by the World Bank.

This July, Malaysia’s securities commission announced the launch of its green sukuk initiative, citing “significant opportunity arising from strong global interest in green financing where innovative fundraising instruments like green and [socially responsible investment] sukuk is a viable solution”. The scheme earned praise from the World Bank, with Victoria Kwakwa, the group’s vice-president for the East Asia and Pacific region, saying the initiative will “take us one step closer towards our goal of sustainable and inclusive growth”.