Analytical contact:

Milly Leong (+603) 2717 2938

UiTM SOLAR POWER DUA SDN BHD

HALPRO ENGINEERING SDN BHD
RM100 MILLION GREEN SRI SUKUK
GREEN SRI SUKUK EXTERNAL REVIEW REPORT
GOLD
PRE-ISSUANCE GREEN SRI SUKUK ASSESSMENT
JUNE 2019
DECEMBER 2020
GREEN SRI SUKUK ASSESSMENT

Malaysian Rating Corporation Berhad has been engaged by UiTM Solar Power Dua Sdn Bhd as an independent
external reviewer for its proposed Green SRI Sukuk of up to RM100.0 million. This external review was
conducted according to the analytical framework in MARC’s Impact Bond Assessment (IBA) methodology that
is published on its website.

MALAYSIAN RATING CORPORATION BERHAD

199501035601 (364803-V)
 GREEN SRI SUKUK QUALIFYING ASSESSMENT
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SUMMARY
UiTM Solar Power Dua Sdn Bhd’s (UiTM Solar 2) Green SRI is a three-part analysis consisting of an
impact assessment of the project financed by the green sukuk; an assessment of the alignment of the
issuer’s Green SRI Sukuk Framework with SC’s SRI Sukuk framework and the International Capital
Market Association’s Green Bond Principles (GBP); and finally, an evaluation of the issuer’s
sustainability implementation capacity and performance.

In assessing the sukuk’s green credentials, MARC reviewed relevant public documents and non-public
information provided by the issuer, held conversations with the issuer’s representatives and
conducted a site visit to understand the issuer’s approach to environmental management and
mitigation of material project environmental and social (E&S) risks, as well as the high-level roadmap
for integrated sustainability.

The green SRI sukuk proceeds will be fully allocated to a completed and grid-connected 25MWac solar
photovoltaic (PV) power plant in Pasir Gudang, Johor (UiTM Solar Park II or the Project). MARC
understands that the Commercial Operation Date is expected to be December 2, 2020, pending
certification by Suruhanjaya Tenaga. The project falls under the renewable energy category of eligible
SRI projects identified by SC’s SRI Sukuk framework.

UiTM Solar 2’s Green SRI Sukuk Framework PTC complies with the four core components of the GBP
and SC’s SRI Sukuk framework corresponding to requirements for use of proceeds, process for project
selection and evaluation, management of proceeds, and reporting. Green sukuk proceeds will be
credited to a separately created Disbursement Account as defined and described in sukuk
documentation. Unallocated proceeds will be transferred to a Revenue Account upon the closing of
the Disbursement Account. UiTM Solar 2 has also committed to report on indicators applicable to the
project’s environmental objectives.

UiTM Solar 2 is a fully owned Special Purpose Vehicle (SPV) of UiTM Energy & Facilities Sdn Bhd
(UEFSB) which, in turn, is a wholly owned subsidiary of an investment holding company, UiTM Holdings
Sdn Bhd (UHSB). UITM Solar Park II is the second of two utility-scale solar projects under the UiTM
Group. Both renewable energy projects and the issuance of this type of sukuk to fund the projects are
demonstrative of a group-wide strategy to support sustainable development and climate change
mitigation. During the project’s construction and operation phases, UiTM Solar 2’s ability to identify
and manage the project’s environmental and social risks is supported by the implementation of
environmental health and safety management systems that extend beyond maintaining regulatory
compliance, either by the turnkey contractor or the operation and maintenance (O&M) operator.

Based on our review of the relevant documentation and assessment per our IBA methodology, UITM
Solar 2’s green SRI sukuk has been assigned a “Gold” IBA.

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Introduction

Incorporated as a private limited company under the name of UiTM Johor Services Sdn Bhd on 22 April
2004, the issuer was taken over by its present shareholder, UiTM Energy & Facilities Sdn Bhd (UEFSB).
On January 2, 2018, the principal activity of the company was changed to the development and
operation of solar photovoltaic power plant from retail and general trading. On 11 January 2018, the
company’s name was changed to its present name of UiTM Solar Power Dua Sdn Bhd (UiTM Solar 2).

UiTM Solar 2, a fully owned Special Purpose Vehicle (SPV) of UiTM Energy & Facilities Sdn Bhd (UEFSB),
holds a 21-year power purchase concession with Tenaga Nasional Berhad (TNB). Under the Power
Purchase Agreement (PPA) signed with TNB in March 2018, the national utility commits to purchase
from the UiTM Solar 2 all the electricity generated from a 25MWac solar photovoltaic (PV) power plant
in Pasir Gudang, Johor (UiTM Solar Park II or the Project) for a term of 21 years. In April 2018, the
issuer obtained a Letter of Award from Energy Commission (Suruhanjaya Tenaga) for the development
of the plant. In March 2020, the issuer was granted a generation license by Energy Commission (EC)
in relation to the plant.

UiTM Solar 2’s solar PV plant is the second of such projects that UEFSB is involved in, the first being a
50MWac solar photovoltaic power plant (UiTM Solar Park I) in Gambang, Pahang. UEFSB is a majority
shareholder in UiTM Solar Power Sdn Bhd (USPSB), the operator of UiTM Solar Park I and issuer of the
group’s first Green SRI Sukuk. UEFSB is a wholly owned subsidiary of an investment holding company,
UiTM Holdings Sdn Bhd (UHSB) which, in turn, is a wholly owned subsidiary of the largest public
university in Malaysia, Universiti Teknologi MARA (UiTM).

The Project

UiTM Pasir Gudang Campus

Research centre

Solar panel installations

UiTM Solar Park II, September 11, 2020. Photo credit: KY Chia

UiTM Solar Park II is sited on 112 acres of land within the UiTM Pasir Gudang campus, Daerah Johor
Bahru, Johor. The project site was selected based on environmental criteria, which include solar
radiation intensity, local physical terrain, environment, and climate, as well as its proximity to the grid
connection point. The site is sub-leased from UiTM. Also mitigating the risk in project siting is an initial
site assessment performed early in the project planning process to determine the project’s potential
environmental impacts and the significance of such impacts. An Environmental Management Plan

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(EMP) has also been drawn up by AMR Environmental Sdn Bhd, the issuer’s environmental consultant
to manage environmental compliance and risk.

Providing a sound basis for project implementation and key underlying arrangements such as the
Engineering, Procurement and Construction (EPC) and Operation and Maintenance (O&M) contracts,
and the project site sub-lease is the long-term take and pay, energy only PPA. The energy price is fixed
at 37.88 sen per kWh throughout the ‘build-own-operate’ concession. In December 2018, UiTM Solar
2 appointed SPIC Energy Malaysia Berhad (SPIC Malaysia) as EPC contractor for the design,
engineering, procurement, construction and installation, testing and commissioning of the plant. SPIC
Malaysia was also the EPC contractor for Malaysia’s first utility-scale solar project in Sabah, a 50MW
plant. SPIC Malaysia’s ultimate holding company is China’s State Power Investment Corporation
Limited, one of the largest state-owned electricity generators in China. Post-commissioning, the plant
will be operated and maintained by UEFSB.

The power plant is built using ground-mounted, polycrystalline silicon PV modules at fixed tilt with
string inverter topology to suit site-specific topography and geology. Shading, performance
degradation, and trade-offs between increased plant investment (including the cost of long-term
maintenance) and energy yield were important upfront considerations in the design of the PV plant.
The PV modules are mounted on fixed-angle frames that are less complicated to install, more
economical and require less maintenance. Arranged in string configuration, the inverters convert
direct current (DC) electricity generated by the PV modules into AC electricity, that is stepped up to
the grid connection point’s required grid voltage of 33kV by step-up transformers. The final main
component of the plant is the grid connection interface consisting of an intermediate renewable
energy (RE) substation (in which a 33kV incoming switchgear is housed) and 33kV underground supply
cables that will transmit the generated electricity to an existing TNB main distribution substation
located six kilometres away from the project site. The project’s Independent Technical Advisor (ITA)
estimates the plant’s initial year and long-term average annual electricity production at P90 to be
40,583 MWh and 37,032 MWh respectively.

MARC understands that the Commercial Operation Date is expected to be December 2, 2020, after
encountering delays outside the project’s control. Apart from delay caused by the permitting process,
government-imposed movement control measures to mitigate the COVID-19 pandemic had resulted
in a stoppage of construction work and supply chain disruptions that affected the delivery and
installation of critical project components, as well as the availability of ancillary services.

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CONTENTS

SUMMARY

01 IMPACT SIGNIFICANCE ANALYSIS .................................................................... 5

02 ASSESSMENT OF ALIGNMENT WITH SRI SUKUK FRAMEWORK AND

GREEN BOND PRINCIPLES ...........................................................................
8

03 ANALYSIS OF SUSTAINABILITY PERFORMANCE .......................................... 11

04 RATING SCALE ............................................................................................. 14

MARC……………………………………………………………………………………………………. 15

APPENDIX
ASEAN GREEN SRI SUKUK COMPLIANCE REVIEW FORM

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01 IMPACT SIGNIFICANCE ANALYSIS

Our qualitative analysis of impact is conducted in the context of the United Nations Sustainable
Development Goals (SDGs). As a globally accepted guidepost for transition to sustainable
development, the SDGs serve as a useful framework of reference for project impact analysis. The 17
SDGs are at the heart of a global sustainability agenda covering three broad areas of economic, social
and environmental development to be reached by 2030. The prominence given to SDGs in the national
development agenda and the national planning framework facilitates qualitative assessment as to
whether the project has a credible impact on national SDGs considered to be of the highest relevance.

Specifically, the project will also contribute towards the achievement of national priorities, notably
that of enhancing environmental sustainability through green growth and the strengthening of
infrastructure to support economic expansion.

UiTM Solar Park II’s fixed tilt ground-mounted solar panel polycrystalline silicon PV modules retains natural topography of undulating
site terrain. Photo credit: KY Chia

POSITIVE IMPACTS
The project impact is a reliable, affordable, secure, and sustainable energy supply that electricity utility
Tenaga Nasional Berhad has committed to purchase under a power purchase agreement (PPA) for 21
years. This project will increase solar power generation by an average of 37,742 MWh/year (at P90
energy production levels) to meet the country’s growing electricity demand and bolster renewable
energy penetration in Malaysia.

SDG Impact Assessment: Primary SDGs

The project will supply cost-competitive clean energy at a fixed tariff of

37.88 sen/kWh. Increased domestic deployment of renewable energy is
essential for the government to build a sustainable energy supply system,
enhance national energy security and curtail fossil fuel dependency. Fuel
prices are a major determinant of electricity tariffs where electricity
generation from fossil fuels is concerned.

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The project will have a direct positive impact on the achievement of SDG 7:
target 7.2 – increase the share of renewable energy in the global energy
mix by 2030. It will also contribute to Malaysia’s target of generating 20%
of its electricity with renewable sources by 2025.

According to the International Energy Agency (IEA), energy production and

use is the largest source of global greenhouse-gas (GHG) emissions, driven
largely by fossil fuel use. Electrification with renewable power is paramount
to mitigating climate change given its significant potential for GHG
emissions reduction. For solar projects, the lifecycle global warming
emissions come from the manufacturing, materials transportation,
installation, maintenance, and decommissioning and dismantlement
stages of the project. There are no emissions associated with generating
electricity from solar energy. Still, research findings suggest that the carbon
footprint of solar is many times lower than coal or gas with carbon capture
and storage even after accounting for indirect lifecycle emissions.

In helping to decarbonise the national electricity grid, the project will

contribute towards Malaysia’s delivery of the emissions reductions
required by the Paris climate agreement to keep temperature increases
resulting from heat-trapping emissions to less than 2°C. The project will
also have a direct positive impact on meeting the aspirations of SDG 13:
target 13.3 on building knowledge and capacity on climate change
mitigation, adaptation and impact reduction.

SDG Impact Assessment: Related SDGs

The project will foreseeably have indirect positive impacts on the achievement of other SDGs as
follows:
SDG 3: target 3.9 - reduce illnesses and death from hazardous chemicals and pollution;
SDG 4: target 4.3 - ensure equal access for all women and men to affordable and quality technical,
vocational and tertiary education, including university;
SDG 8: target 8.4 - improve resource efficiency in consumption and production to decouple
economic growth from environmental degradation; and
SDG 9: target 9.4 - promote inclusive and sustainable industrialization and raise industry’s share of
employment and gross domestic product (GDP).
The project will also stimulate private sector investment, new job creation and economic growth.
It is expected to create around 400 jobs during plant installation as well as in operations and
maintenance including eight permanent positions when completed.

The project is expected to generate lifetime revenue of RM300 million at P90 energy production
levels. The resulting dividend stream for UiTM will enable higher education to make a fuller
contribution to sustaining the economic, environmental and intellectual well-being of national and
local communities.

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NEGATIVE IMPACTS

The siting of the project on land with low environment concern and the consideration given to the
existing site contour in the project’s planning has helped lay the base for an environmentally sound
project. The project’s environmental management plan (EMP) has identified and evaluated
potential environmental impacts of projects as per the project cycle and proposed measures to
mitigate the negative impacts on local communities and the environment. An important tool in the
integrating environmental management approach in the planning, construction and operating
stages of the project, the EMP promotes the protection and conservation of the environment and
natural resources.

Site-specific assessments are necessary to analyse the context dependent impacts of ground-
mounted PV panels on local ground‐level microclimate, plant–soil carbon cycling, greenhouse gas
emissions and existing flora and fauna. In general, shading and changes to wind flow are anticipated
which, and in principle, will likely affect temperature and rainfall distribution over the land.
Validation or certification of the climate effects of the project are excluded from the scope of
MARC’s external review.

Overall Impact Significance

Very Significant This level of impact significance is assigned where underlying projects are expected
to generate very visible positive ground level impact. Projects at this level support
the realisation of long-term integrated visions of sustainable development that are
consistent with global sustainability goals, as well as national sustainable
development goals and priorities.
Significant This level of impact significance is assigned where underlying projects are expected
to generate a visible positive ground level impact. Projects at this level have the
potential to facilitate adjustments towards a more sustainable development
trajectory and to meaningfully advance national level sustainable development
goals.
Fairly Significant This level of impact significance is assigned where underlying projects are expected
to generate a ground level impact which, although at a lower magnitude than that
expected for higher assessment levels, is still considered noteworthy.

Marginal This level of impact significance is assigned where underlying projects are expected
to generate a positive but limited ground level impact.

Not Significant This level of impact significance is assigned where underlying projects are expected
to have negligible ground level impact.

The project, UiTM Solar Park II, aligns with national goals of reducing the environmental impact of
energy consumption and meeting electricity demand sustainably by increasing the share of renewables
in the country’s generation mix. Apart from meeting the objectives of sustainable energy development
and energy security, the project’s positive impacts extend to bolstering employment growth during the
construction phase and improving the wellbeing and life quality of people (through cutting air pollutant
emissions). Other potential social and economic benefits of the project that could ultimately drive a
much greater impact include revenue diversification for the UiTM group, as well as innovation and
research in renewable energy technology.

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02 ALIGNMENT WITH SRI SUKUK FRAMEWORK AND

GREEN BOND PRINCIPLES

Proceeds will be solely allocated to a nominated renewable energy project

with positive environmental benefits falling into the category of eligible
sustainable and responsible investment (SRI) projects under Securities
Commission Malaysia’s Guidelines on the Lodge and Launch (LOLA)
Framework. As an eligible green (climate change mitigation) project, the
sukuk falls into the category of Standard Green Use of Proceeds Bond under
ICMA’s Green Bond Principles.
Malaysia’s SRI Sukuk
Framework: Utilisation The proceeds would be used for the Shariah-compliant partial funding of a
of Proceeds utility scale solar photovoltaic power plant. Proceeds from UiTM Solar 2’s
GBP: Use of Proceeds Issuance will be used exclusively to:

i. Part-finance and part-reimburse parent UEFSB a total of up to 80% of

the project’s development cost including costs incurred in the
submission of the bid to Energy Commission in August 2017;
ii. Pay all fees and expenses in relation to the issuance of the Green SRI
Sukuk; and
iii. Pre-fund the Green SRI Sukuk Finance Service Reserve Account.

Unallocated proceeds will be transferred to a revenue account upon the

project achieving Commercial Operation Date (COD).

UiTM Solar 2’s green SRI sukuk is a single project sukuk, the proceeds of
which will be fully allocated to the development of a 25 MWac solar PV
plant in Pasir Gudang. The project is sited in proximity of the grid and on
land previously covered with old and unproductive oil palm trees. A
preliminary site assessment (Penilaian Awal Tapak or PAT) was submitted
to the Johor state Department of Environment (DOE) office prior to the
confirmation of the project site.
Malaysia’s SRI Sukuk
Framework: Eligible SRI
A well-defined process for project evaluation and selection has been
Projects
followed in the bidding process for the country’s second cycle of Large-
GBP: Process for Project
Scale Solar (LSS2) scheme. The project has been evaluated on all the
Evaluation and Selection
pertinent technical, economic, environmental and social dimensions to
ensure its sustainability and reduce the project’s technical and financial
risks. The approach taken by UiTM Solar 2 to develop the PV plants is to
assign turnkey responsibility to the EPC contractor. SPIC Malaysia has
provided to the issuer copies of the certificates attesting to the ISO
certification of parent CPI Power Engineering Co. Ltd’s quality and
environmental management systems for general contracting and
management of electric power engineering construction. Implementation
of ISO 9001:2015 and ISO14001:2015 across group units ensures that
appropriate processes and procedures are in place to manage
subcontractors as well as to quantify, monitor and control the ongoing
environmental impact of construction operations.

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Optimising the plant’s design and performance helps to drive down

Levelised Cost of Electricity (LCoE); during MARC’s site visit, it was
additionally brought to MARC’s attention that the plant’s design features
such as the tilting angle, mounting systems, inverters and module
arrangement follow the site’s topography and take its soil conditions into
conisderation. The reduction in cut and fill earthworks is significant from
an environmental as well as an economic perspective in that this could
otherwise alter rain runoff patterns on the site, pose erosion problems and
increase the civil engineering cost component of site development.
Nothing was observed that currently presents a material environmental
hazard. the plant’s use of decentralized inverters requires less specialised
maintenance skills and increases its reliability; in case of failure of one or
more inverters, electricity production can continue without interruption.

The issuer’s evaluation and selection of the nominated project is

supplemented by MARC’s IBA. Positive covenants featured in the green SRI
sukuk include the requirement to maintain compliance with all
environmental laws pertaining to the project including laws and regulations
concerning occupational or public health and safety.

Proceeds of the green SRI sukuk will be credited to a Disbursement Account

(DA) and will be utilised for payments towards project cost. The DA will be
closed post-completion of the project and any unutilised amount will be
transferred into a Revenue Account (RA). The PTC allows for the investment
of unutilised funds held in the DA in permitted investments pending
utilisation. The designated accounts will be maintained and operated by
the Security Trustee. The processes for management of proceeds are in line
with established practices for project sukuk.
Principle Three:
Management of An amount equal to the net proceeds of a green SRI will be allocated to the
Proceeds funding of the nominated project. Payments from designated accounts are
to be made only to the extent permitted under the sukuk transaction
documents. Unallocated proceeds can be invested in deposits and
investment accounts with licensed banks and/or development financial
institutions, Islamic banker acceptances, Islamic bills, Islamic money
market instruments issued by licensed financial institutions with a, Islamic
money market funds approved by the SC, Islamic principal guaranteed
structured investments approved by Bank Negara Malaysia (BNM) and
issued by licensed financial institutions with a short-term rating of MARC-
1/P1 or minimum long-term rating of AA-/AA3 or its equivalent or their
local or foreign equivalents; and/or Islamic treasury bills, Islamic money
market instruments, and sukuk issued by BNM or the Government of
Malaysia.

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UiTM Solar 2 will publish on UEFSB’s website prior to or at the time of the
issuance, the project’s sustainability objectives, the utilisation of the sukuk
proceeds, the process for project evaluation and selection, and how the
project fits into the eligible SRI projects categories. UiTM Solar 2 will
provide annual reporting via UEFSB’s website of the original amounts
allocated to the project, as well as the project’s sustainable impacts as
follows:

Principle Four: Sustainability Objective Indicator

Reporting To promote the use of Renewable electricity produced (MWh)
renewable energy
To reduce greenhouse gas CO2 avoided (metric tonnes)
emissions
To improve the quality of life for i. Permanent, local employment
the society. directly tied to plant operations
(number of positions)
ii. Revenues generated (RM)

Overall Assessment
Clarity of Issuance Process and Total Score
Disclosure

High 10- 12 points

Good 7 -9 points
Satisfactory 4 – 6 points
Low Below 4 points

Equal weighting is given to each of the four principles in arriving at the total score which is then expressed
on the above four-point descriptive scale which ranges from High to Low.

Assessment Grade High Good Satisfactory Low

3 2 1 0

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03 ANALYSIS OF SUSTAINABILITY PERFORMANCE

As UiTM Solar 2 is a newly established project company, our analysis of its sustainability performance
has been primarily informed by the governance of its immediate parent entity UEFSB and ultimate
holding company UiTM Holdings Sdn Bhd (UHSB) around environmental risks and opportunities. UHSB
is a wholly-owned investment arm of Malaysia’s largest public university, Universiti Teknologi MARA
(UiTM). UEFSB is also a majority shareholder of UiTM Solar Power Sdn Bhd (USPSB) the operator of a
50MWac (MW) large scale solar PV power plant in Gambang, Pahang, which commenced operations
in March 2019.

UiTM is integrating sustainability in its academic mission, as well as the university’s governance and
planning. In 2018, the university established a sustainability committee to support its efforts in
advancing sustainable development through research, education, public engagement, and campus
operations. This follows the relatively recent introduction of the concept of sustainable universities
and the broad global consensus that universities are uniquely placed to lead the cross-sectoral
implementation of the UN SDGs and advance the 2030 agenda. UiTM was ranked 401-600 out of 766
universities in the global higher education sector by Times Higher Education in its University Impact
Rankings 2020. The Impact Rankings are intended to convey universities’ impact on society based on
their success in delivering the UN SDGs.

The UiTM Group’s energy strategy and road map consists of facilitating Malaysia’s transition to a low-
carbon future through the development of utility scale solar PV power plants, as well as using
renewable energy sources and driving energy efficiency in UiTM campuses. The group, through UEFSB,
intends to grow its stable of domestic utility scale solar assets to drive business value. In addition,
UiTM’s involvement in solar power plant development advances its goal of promoting academic
research in renewable power technology. Locating the solar PV plants near the university campuses
fosters a knowledge creating community and talent pool with the requisite experience in relevant
technologies. The university has established a solar research centre at its Gambang PV power plant
project site as a centre of excellence for the innovation, development and commercialisation of
renewable energy.

Going forward, the group’s energy strategy also entails pursuing strategic partnerships to develop
renewable energy projects on available unproductive land where solar resources are most favourable.
Its recent participation in the bidding process for the country’s fourth cycle of Large-Scale Solar (LSS4)
scheme signals its continued commitment to the strategic development of renewable energy. The
group’s energy strategy complements its other sustainability strategies; apart from managing the
environmental and climate impacts of its energy use and corresponding risks, the revenue stream
generated from its portfolio of solar assets will ultimately provide dividends to the public university
that will benefit its financial sustainability.

MARC considers UiTM Solar 2 and UEFSB to have maintained a proactive and informed approach to
addressing the environmental and social (E&S) risks in many aspects of the overall project
development process including site identification, plant design, energy yield, permits/licenses, and
contractual arrangements. The environmental management plan identifies the environmental
management concerns of the project and establishes practices to minimise the project’s impact on
the environment and to maintain compliance with environmental regulations. The issuer has
appointed an independent technical advisor (ITA) to review the geotechnical and soil study, the design
of the plant and main equipment warranty terms, as well as undertake an energy yield assessment.

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The plant’s PV modules are sourced from JA Solar while its string inverters are sourced from Huawei
Technologies. JA Solar is ranked in the world’s top five module manufacturers by volume shipped for
the last three years while Huawei is the world’s largest inverter supplier from 2015 to 2019 for the
fifth consecutive year. Both companies have documented quality, environmental management and
occupational health and safety management systems aligned to internationally recognized best
practice.

SPIC Malaysia, as turnkey contractor, will be responsible for maintaining the project’s environmental
performance during the construction of the plant including the transmission cables and
interconnection point to the grid. SPIC Malaysia is responsible for ensuring subcontractors and
suppliers’ compliance with environmental requirements, amongst others. The quality and
environmental management systems of SPIC Malaysia’s immediate parent entity, CPI Power
Engineering Co. Ltd, are certified to ISO standards, imparting credibility to the aligned internal
processes, procedures and standards of the project’s turnkey contractor. Based on our high-level
review of the project’s environmental management plan and site visit observations, we opine that this
should adequately support the identification and management of the project’s environmental risks.
During the project’s operations phase, UEFSB, as O&M operator, will have primary responsibility for
preventing or reducing potentially negative environmental impacts. UEFSB is in the process of
formalising a Safety, Health and Environment (SHE) policy and an Environmental Sustainability policy
which will apply to UiTM Solar 2 and USPSB, the drafts of which were provided to MARC.

Overall, MARC is of the view that UiTM Solar 2’s Green SRI Sukuk Framework aligns with UiTM Group’s
positioning of sustainability as an intentional and aspirational strategy and its ongoing transition
towards greater environmental and social responsibility in its governance approach.

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Sustainability Performance Assessment

Excellent/Highest The issuer positions itself as a sustainability leader in its industry, ranking in the "top
Assurance tiers" of performance across multiple categories of engagement, ranging from supply
chain management to environmental performance. Sustainability-related risks and
opportunities are integrated with the business strategy. Well-defined sustainability
policies and practices are augmented by strong accountability systems which allow
for a benchmarking of the issuer’s performance against stated objectives and the
incorporation of external assurance in its sustainability reporting framework.

Very Good/High The issuer has integrated risk-based sustainability considerations in its operations and
has a robust process for assessing significant sustainability risks exposures to minimise
adverse impacts on its business. The focus of the issuer’s sustainability performance
monitoring and evaluation is on managing risk exposures to minimise downside risk.
Globally-recognised best practice reporting frameworks guide the issuer’s
sustainability reporting.

Good/Medium The issuer has adopted a CSR-centric sustainability strategy that prioritises
stakeholder engagement and goodwill building. Sustainability is a small part of the
issuer’s business strategy, nonetheless there is evidence to suggest that its
sustainability performance has progressed beyond maintaining regulatory
compliance. The issuer has implemented general sustainability reporting to investors.

Fair/Basic The issuer has a policy of regulatory compliance but has yet to incorporate
sustainability considerations into its business operations. At this performance level,
the goal of sustainability management is to achieve and maintain compliance with
health, safety, and environmental requirements mandated by government laws and
regulations.

Poor/Weak The issuer has a record of poor sustainability performance or operates in

unsustainable industries.

MARC’s assessment of the issuer’s sustainability implementation capabilities and performance is

expressed on a five-level descriptive scale that runs from “Excellent” to “Poor” which corresponds to
five levels of assurance (Highest, High, Medium, Basic and Weak). The assurance level can be
interpreted as a measure of MARC’s confidence in the issuer’s continuing performance of its
sustainability obligations in line with marketplace expectations and in compliance with its
sustainability framework for the bonds or sukuk issuance.

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04 RATING SCALE

GRADE DESCRIPTION

Bonds assessed at this level are judged to offer very significant environmental
and/or social sustainability impact based on the projects supported or expected to
be supported by the bond issuance. The processes used or to be used for the
GOLD allocation and administration of proceeds, decision making process of eligible
projects and the reporting of performance indicators are consistent with the core
principles of the GBP and/or SBP and applicable market guidance or standards and
should support high standards of accountability and transparency.

Bonds assessed at this level are judged to offer significant environmental and/or
social sustainability impact based on the projects supported or expected to be
supported by the bond issuance. The processes used or to be used for the allocation
SILVER
and administration of proceeds, decision making process of eligible projects and
the reporting of performance indicators are consistent with the core principles of
the GBP and/or SBP and applicable market guidance or standards and should
support good standards of accountability and transparency.

Bonds assessed at this level are judged to offer fairly significant environmental
and/or social sustainability impact based on the projects supported or expected to
be supported by the bond issuance. The processes used or to be used for the
BRONZE allocation and administration of proceeds, decision making process of eligible
projects and the reporting of performance indicators are consistent with the core
principles of the GBP and/or SBP and applicable market guidance or standards and
should support satisfactory standards of accountability and transparency. Minor
shortcomings exist in the areas assessed but none of major concern.

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
DECEMBER 2020

MARC

Incorporated in October 1995, MARC is a full-service domestic credit rating institution. MARC's ratings
are recognized and accepted in the Malaysian capital markets. MARC is recognized by Bank Negara
Malaysia and Securities Commission, respectively, as an External Credit Assessment Institution (ECAI)
under Basel II and as a bond rating agency regulated under the Guidelines on the Registration of Credit
Rating Agencies issued by the Securities Commission on 30 March 2011. MARC adopts practices and
procedures for Domestic Credit Rating Agencies based on the guidance on the Code of Conduct
Fundamentals provided by the International Organisation of Securities Commissions (IOSCO) and the
Association of Credit Rating Agencies in Asia (ACRAA). MARC has consulted international best practices
and the International Capital Market Association’s Guidelines for Green, Social and Sustainability
Bonds External Reviews in its conduct of external reviews, particularly in relation to the organisation
and content of external reviews.

Following a series of outreach and external reviewer capacity building initiatives jointly undertaken by
domestic market regulators and World Bank Group, MARC published for public comment its proposed
criteria for rating green, social or sustainability bonds in April 2018. The version that was adopted in
July 2018 after public consultation can be accessed on MARC’s website at
https://www.marc.com.my/images/Rating_Methodologies/8/Impact_Bond_Assessments_20180713
.pdf. As explained in the criteria, MARC’s analytical framework consists of three components that
provide insight to the green, social and sustainability credentials of green, social and sustainability
bonds: (1) an assessment of environmental and/or social benefits of the underlying funded project(s);
(2) an assessment of compliance with internationally recognised principles and market standards for
the evaluation of such bonds; and (3) an evaluation of the issuer’s sustainability strategy and
performance. Bonds which meet the minimum thresholds in each of the three analytical components
will be rated Gold, Silver or Bronze.

For more information, visit https://www.marc.com.my/ or contact us at [email protected].

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
DECEMBER 2020

Review of Compliance with ICMA’s Green Bond Principles (GBP) 2018 and
SC’s Sustainable and Responsible Investment (SRI) Sukuk Framework

Issuer: UiTM Solar Power Dua Sdn Bhd

Proposed Green SRI Sukuk

Criteria Compliance with criteria Remarks/Scope of Work Undertaken

Issuer
SRI Sukuk Framework
7.03
An issuer must not– The issuer is a qualified issuer under
(a) use or adopt the term “SRI provision 7.03 premised on the
sukuk”; or compliance of its proposed issuance
(b) hold itself out as an issuer of with the Guidelines. The issuer is a
such SRI sukuk, resident-controlled company.
unless the issuance of the SRI sukuk
has complied with these Guidelines.

7.04
An issuer who wishes to issue an SRI The issuer has established a Green SRI
sukuk must establish policies and Sukuk Framework.
processes to ensure compliance with
the SRI Sukuk Framework as set out
in these Guidelines.
Use of Proceeds
GBP
The utilisation of proceeds from the The Principal Terms and Conditions Review of the PTC of the sukuk.
Bonds should be appropriately (PTC) of the sukuk describes the use of
described in the documentation for net proceeds as to exclusively fund
issuance of the bonds. payments towards up to 80% of the
project costs of a 25MWAc solar PV
plant at UiTM Pasir Gudang, Bandar
Seri Alam, Masai, Johor, Malaysia.

All designated green projects must The green project provides clear The P90 energy production estimate of
provide clear environmental environmental benefits: (i) promote the solar PV power plant that will be
benefits, which will be assessed and, the use of renewable energy and (ii) financed is 792,582 MWh of clean energy
where feasible, quantified by the reduce greenhouse gas emissions that over its 21-year life span or an average
issuer. are outlined in the issuer’s Green SRI 37,742 MWh annually. This translates
Sukuk Framework. into potential avoided carbon emissions
In the event that all or a proportion of 26,193 tonnes every year based on an
of the proceeds are or may be used emissions factor of 0.694 metric tonnes
for refinancing, it is recommended A proportion of the proceeds will be of CO2 per MWh*.
that Issuers provide an estimate of used to part reimburse parent
the share of financing and company, UiTM Energy & Facilities Sdn
refinancing, and where appropriate, Bhd (UEFSB), for project development * estimated emission factor for Peninsular
also clarify which investments of costs incurred since 2017; the expected Malaysia provided by Malaysian Green
project portfolios may be refinanced look-back period is three years. Technology and Climate Change Centre’s
and, to the extent relevant, the (MGTC) carbon calculator.
expected look-back period for
refinanced green projects.

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
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Criteria Compliance with criteria Remarks/Scope of Work Undertaken

Cont’d

“Look-back period” refers to a maximum

period in the past that an Issuer will look
back to identify assets/earlier
disbursements to such eligible green
projects that will be included in the green
bond reporting.

The GBP explicitly recognise several The project contributes to

broad categories of eligibility for environmental objectives such as
green projects, which contribute to climate change mitigation and
environmental objectives such as: pollution prevention and control by
climate change mitigation, climate providing clean and sustainable
change adaptation, natural resource energy. The project also falls within the
conservation, biodiversity renewable energy eligible green
conservation, and pollution project category listed in the GBP.
prevention and control.

SRI Sukuk Framework

7.02
SRI sukuk refers to sukuk in which its The sukuk proceeds will be applied
proceeds will be applied exclusively exclusively for funding of activities or
for funding of any activities or transactions relating to eligible SRI
transactions relating to projects.
the Eligible SRI projects.

7.07
Eligible SRI projects refer to projects The project satisfies (a) through (e) of Increasing the supply of renewable
that aim to: the aims listed in paragraph 7.07 energy would allow replacement of non-
(a) preserve and protect the except for (b). renewable carbon-intensive energy
environment and natural resources; sources. Even when “life cycle” emissions
(b) conserve the use of energy; from the manufacturing, materials
(c) promote the use of renewable transportation, installation,
energy; maintenance, and decommissioning and
(d) reduce greenhouse gas emission; dismantlement stages of the project are
or considered, the global warming
(e) improve the quality of life for the emissions associated with renewable
society. energy are minimal.

7.08(a)
Eligible SRI projects listed (amongst Renewable energy projects which are
others) include green projects that listed as eligible green SRI projects.
relate to renewable energy.

7.10
An issuer must ensure that the The proceeds raised from the sukuk
proceeds raised from the issuance of will be used to fund an eligible green
the SRI sukuk are utilised only for SRI project as defined in paragraph
funding any activities or transactions 7.07.
relating to the Eligible SRI projects.

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
DECEMBER 2020

Criteria Compliance with criteria Remarks/Scope of Work Undertaken

Process for Project Evaluation and
Selection

GBP
The issuer should clearly
communicate to investors:
(i) The environmental The issuer will clearly communicate (i), To assess the alignment of the process
sustainability objectives; (ii) and (iii) in its Green SRI Sukuk for project evaluation and selection with
(ii) The process by which the Issuer Framework. both the GBP and SC’s SRI Sukuk
determines how the projects fit Framework MARC has reviewed the
within the identified eligible following documentation from the issuer:
green project categories; and • Lenders Technical Advisor report
(iii) The related eligibility criteria, dated May 2020
including, if applicable, • Environmental Management Plan
exclusion criteria or any other (EMP) and Preliminary Site
process applied to identify and Assessment Application dated July
manage potentially material 2017
environmental and social (E&S) • Safety, Health and Environment (SHE)
risks associated with the Policy and Environmental
selected projects. Sustainability Policy Statement,
currently in draft form and developed
centrally by parent UEFSB. These
policies are required to be
implemented across the entire group.

A positive covenant in the PTC requires

the issuer to comply with all
environmental laws pertaining to the
project including laws and regulations
regarding occupational or public health
and safety. Environmental laws, as
defined in the PTC, means all laws and
regulations including the Environmental
Quality Act, 1974 which pertains to the
prevention, abatement and control of
pollution. The Act covers atmospheric,
noise, land and inland water pollution.

Issuers are encouraged to position The issuer has outlined its process for The PTC provides as a condition
this information within the context project evaluation and selection and its precedent for the issuance amongst
of the Issuer’s overarching alignment with UiTM group-level others, an external review by MARC on
objectives, strategy, policy and/or objectives for renewable energy the SRI-eligibility of the project.
processes relating to environmental business as well as its strategy, policy
sustainability. Issuers are also and processes relating to
encouraged to disclose any green environmental sustainability in its
standards or certifications Green SRI Sukuk Framework.
referenced in project selection.

It is recommended that the Issuer’s

process for project evaluation and
selection be supported by an
external review.

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
DECEMBER 2020

Criteria Compliance with criteria Remarks/Scope of Work Undertaken

Management of Proceeds

GBP
The net proceeds of the Bonds, or an Designated accounts will be
amount equal to these net proceeds, established into which net proceeds
should be credited into a sub- will be credited and managed by the
account, moved to a sub-portfolio or Security Trustee in accordance with the
otherwise tracked by the Issuer in an PTC. The PTC provides for net proceeds
appropriate manner and attested of the sukuk to be paid into a
to by a formal internal process. Disbursement Account (DA) to be used
exclusively for payments towards up to
project cost. The DA will be closed
post-completion of the project and any
unutilised amount will be transferred
into the Revenue Account (RA).

So long as the Bonds are The Commercial and Finance

outstanding, the balance of the departments of UEFSB will ensure that
tracked net proceeds should be proceeds are only used for the eligible
periodically adjusted to match activities and will be responsible for
allocations to eligible projects made recording on an ongoing basis the
during that period. allocation of net proceeds to the
project.

The Issuer should make known to Permitted investments, as defined in

investors the intended types of the PTC, comprise deposits and
temporary placement for the investment accounts with licensed
balance of unallocated net proceeds. banks and/or development financial
institutions, Islamic banker
acceptances, Islamic bills, Islamic
money market instruments issued by
licensed financial institutions with a
short-term rating of MARC-1/P1 or
minimum long-term rating of AA-/AA3,
Islamic money market funds approved
by the SC, Islamic principal guaranteed
structured investments approved by
Bank Negara Malaysia and issued by
licensed financial institutions with a
short-term rating of MARC-1/P1 or
minimum long-term rating of AA-/AA3
or its equivalent or their local or
foreign equivalents; and/or Islamic
treasury bills, Islamic money market
instruments, and sukuk issued by BNM
or the Government of Malaysia.

It is recommended that the Issuer’s The appointment of an external

management of proceeds be auditor to review the allocation of
supplemented by the use of an funds until full allocation of the sukuk
auditor, or other third party, to verify net proceeds is recommended but not
the internal tracking method and the mandatory.
allocation of funds from the green
bond proceeds.

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
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Criteria Compliance with criteria Remarks/Scope of Work Undertaken

SRI Sukuk Framework
7.13
An issuer must ensure that the The proceeds allocated for the Eligible
proceeds allocated for the Eligible SRI projects will be credited into
SRI projects are credited into a designated accounts that will be
designated account or otherwise maintained and operated by the
tracked in an appropriate manner. Security Trustee.

Reporting
GBP
Issuers should make, and keep, The PTC provides for annual reporting
readily available up to date on the utilisation of proceeds, and as
information on the use of proceeds necessary thereafter in the event of
to be renewed annually until full any material development.
allocation, and on a timely basis in
case of material developments.

The annual report should include a The issuer will commit to report on Full allocation of the sukuk proceeds is
list of projects to which green bond expected impact in its Green SRI Sukuk expected to take place within three
proceeds have been allocated, as Framework. months of the sukuk issuance.
well as a brief description of the
projects and the amounts allocated,
and their expected impact.

It is recommended that Issuers use The issuer will commit to annual

qualitative performance indicators, impact reporting in its Green SRI Sukuk
and where feasible, quantitative Framework.
performance measures (e.g. energy
capacity, electricity generation,
greenhouse gas emissions
reduced/avoided, number of people
provided with access to clean power,
etc.) and disclose the key underlying
methodology and/or assumptions
used in the quantitative
determination.

Issuers with the ability to monitor

achieved impacts are encouraged to
include those in their regular
reporting.

SRI Sukuk Framework

7.14
An issuer must provide the following The issuer has committed to provide
information to the sukukholders sukukholders via newsletters, website
annually through a designated updates, annual report or any other
website: communication channels on the
a) The original amount allocated following: original amount earmarked
for the Eligible SRI projects; for the eligible SRI project, the amount
b) The amount utilised for the utilised, the unutilised amount and
Eligible SRI projects; where it is placed or invested pending
c) The unutilised amount and utilisation, and on a best efforts basis,
where such unutilised amount the project’s impact objectives.
is placed or invested pending
utilisation; and assumptions
used to determine impact; and

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
DECEMBER 2020

Criteria Compliance with criteria Remarks/Scope of Work Undertaken

c) The unutilised amount and
where such unutilised amount
is placed or invested pending
utilisation; and assumptions
used to determine the impact
or expected impact; and
d) The list of the Eligible SRI
projects in which the SRI sukuk
proceeds have been allocated
to and a brief description of the
said Eligible SRI projects and
their impact or expected
impact, including the key
underlying methodology or
assumptions used to determine
the impact or expected impact.

7.15
Where an issuer is unable to make This is a single project financing.
available comprehensive information
as specified in paragraph 7.14 above
due to confidentiality agreements or
competitive considerations, such
issuer may provide the information
in generic terms or on an
aggregated portfolio basis.

Disclosure Requirements

SRI Sukuk Framework

7.16
The following information must be
included:
a) The overall SRI objectives that the This will be included in the issuer’s Paragraph 7.07 of the SC’s SRI Sukuk
issuer intends to achieve; Green SRI Sukuk Framework. Framework provides a listing of SRI
b) The utilisation of proceeds from The required disclosure for projects objectives.
the issuance of the SRI sukuk. involving refinancing under the
Where all or part of the proceeds Framework mirrors that in the GBP.
are used for refinancing, an issuer
must provide the amount of
proceeds being allocated for
refinancing and which Eligible SRI
projects to be refinanced;
c) The Eligible SRI projects in which This is a single project financing in
the proceeds will be allocated; which the project has been identified.
d) The details of the Eligible SRI Complied.
projects and to the extent
possible, impact objectives from
the Eligible SRI projects;
e) The processes used by the issuer Refer to assessment of compliance
to evaluate and select the Eligible with GBP in “Process for Project
SRI projects; Evaluation and Selection” on page 2.
f) The criteria used by the issuer to Refer to assessment of compliance
identify and manage material with GBP in “Process for Project
environmental or social risks Evaluation and Selection”.
associated with the Eligible SRI
projects;

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
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Criteria Compliance with criteria Remarks/Scope of Work Undertaken

Cont’d

g) The processes used by the Items (g) and (h) will be incorporated
issuer to manage the in the issuer’s Green SRI Sukuk
proceeds from the issuance Framework.
of the SRI sukuk; and
h) A statement that the issuer
has complied with the
relevant environmental,
social and governance
standards or recognised
best practices relating to
the Eligible SRI projects.

External Review

GBP
Issuers are recommended to appoint Malaysian Rating Corporation Berhad MARC has established a transparent
(an) external review provider(s) to (MARC) has been engaged as an score-based framework for its green,
confirm the alignment of their bond independent external reviewer. The social and sustainability bond
or bond programme with the four review conducted by MARC is a full assessments analysis that is published on
core components of the GBP. review and addresses alignment with our website. The differentiated approach
all four components of the relevant taken recognises that some projects offer
standards. more environmental and/or social
benefits than others.
The GBP encourage external review MARC is registered with the Securities
providers to disclose their credentials Commission Malaysia as a credit rating
and expertise and communicate agency. The scope of MARC’s external
clearly the scope of the review(s) review is set out in MARC’s Impact
conducted. Bond Assessment (IBA) methodology
that is publicly accessible from its
corporate website.

SRI Sukuk Framework

7.17
If an external reviewer is appointed MARC will provide this in the external
to assess and provide report on the review report. The external review
Eligible SRI projects or the issuer’s report will be made available on the
compliance with the requirements designated website.
under these Guidelines, such
external reviewer’s report must be
made available on the designated
website.

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 GREEN SRI SUKUK QUALIFYING ASSESSMENT
DECEMBER 2020

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committee. This opinion is based on established Impact Bond Assessment criteria that MARC has published and
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