Tenaga Said to Be Planning to Sell $1.2 Billion of Sukuk

Tenaga Nasional Bhd., Malaysia’s biggest power producer, plans to sell as much as 3.7 billion ringgit ($1.2 billion) of sukuk to part-finance the building of a new plant, according to two people with knowledge of the deal.

The state-owned corporation hired BNP Paribas SA and CIMB Group Holdings Bhd. to manage the offering, said the people who asked not to be named as the information is private. Tenaga is seeking to sell the Islamic notes as soon as this month, said one of the people. Azman Mohd, the company’s chief executive officer, and Baharin Din, vice president of distribution, couldn’t be immediately reached for comment by telephone.

The electricity provider is tapping the Shariah-compliant debt market as borrowing costs approach unprecedented levels. The yield on the government’s 10-year Islamic bonds climbed 80 basis points, or 0.80 percentage point, this year to 4.41 percent, and reached a record high of 4.44 percent on Dec. 6, according to a central bank index.

Tenaga has raised funds via the Islamic debt market twice this year. It sold 1.62 billion ringgit of sukuk in May with maturities ranging from four to 23 years, and 2 billion ringgit in July due in one to 13 years, according to stock exchange filings. The 4.03 percent 2023 notes issued in May yielded 4.34 percent when they were last traded on Oct. 23, data compiled by Bloomberg show.

Malaysia is the world’s biggest issuer of sukuk, which pay returns on assets to comply with Islam’s ban on interest. Sales of corporate Shariah-compliant notes in the country dropped 60 percent in 2013 to 37.4 billion ringgit, after reaching a record 95.8 billion ringgit last year, according to data compiled by Bloomberg.

The Bloomberg-AIBIM Bursa Malaysia Corporate Index, which tracks the most-traded local-currency notes, gained 2.8 percent this year to 105.11, the highest level since its inception in February 2012.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net; Katrina Nicholas at knicholas2@bloomberg.net

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