strictly confidential – do not forward important: …

STRICTLY CONFIDENTIAL – DO NOT FORWARD IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING. THIS E-MAIL AND ANY ATTACHMENT HERETO ARE INTENDED ONLY FOR USE BY THE ADDRESSEE NAMED HEREIN AND MAY CONTAIN LEGALLY PRIVILEGED AND/OR CONFIDENTIAL INFORMATION. IF YOU ARE NOT THE INTENDED RECIPIENT OF THIS E-MAIL, YOU ARE HEREBY NOTIFIED THAT ANY DISSEMINATION, DISTRIBUTION OR COPYING OF THE INFORMATION CONTAINED IN THIS E-MAIL, AND ANY ATTACHMENTS THERETO, ARE STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS E-MAIL IN ERROR, PLEASE IMMEDIATELY NOTIFY US BY REPLY E-MAIL AND PERMANENTLY DELETE ALL COPIES OF THIS E-MAIL INCLUDING ALL ATTACHMENTS AND DESTROY ALL PRINTOUTS OF IT. BY OPENING AND ACCEPTING THIS E-MAIL CONTAINING THE INFORMATION MEMORANDUM, THE RECIPIENT AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS BELOW. IF YOU DO NOT AGREE TO ANY OF THE TERMS AND CONDITIONS, PLEASE DELETE THIS E-MAIL IMMEDIATELY. Attached please find an electronic copy of the information memorandum dated 17 July 2012 (the “Information Memorandum”), relating to the proposed issuance of up to RM1.16 billion in nominal value Islamic securities (“Sukuk Kimanis”) pursuant to a Sukuk issuance programme based on the Shariah principles of Istisna’ and Ijarah (“Sukuk Programme”) by Kimanis Power Sdn Bhd (“Issuer” or “KPSB”). The Information Memorandum is furnished on a strictly private and confidential basis and does not constitute an offer to any person or the public generally to subscribe for or otherwise purchase any of the Sukuk Kimanis in any jurisdiction in which such offer, solicitation or sale would be unlawful other than to the persons falling within the selling restrictions as set out below. Distribution of the Information Memorandum to any persons, other than the person receiving this e-mail from the Issuer, CIMB Investment Bank Berhad and HSBC Amanah Malaysia Berhad (collectively, “Joint Lead Arrangers/Joint Lead Managers”) is unauthorised. The person receiving this e-mail from the Issuer or the Joint Lead Arrangers/Joint Lead Managers is prohibited from disclosing the Information Memorandum, altering the contents of the Information Memorandum or forwarding a copy of the Information Memorandum or any portion thereof by e-mail or otherwise to any person. The Information Memorandum is not a prospectus and has not been registered nor will it be registered under the CMSA. The Information Memorandum has also not been registered, lodged or filed in any manner under the laws of any other jurisdiction. The Sukuk Kimanis may only be offered, sold, transferred or otherwise disposed of directly or indirectly to persons specified in Section 4(6) of the Companies Act 1965 and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within schedule 6 (or section 229(1)(b)) of the Capital Markets and Services Act, 2007 ("CMSA"), schedule 7 (or section 230(1)(b)) of the CMSA read together with schedule 9 (or section 257(3)) of the CMSA and to persons specified in Section 4(6) of the Companies Act 1965 and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within Schedule 6 or Section 229(1)(b), read together with Schedule 9 or Section 257(3) of the CMSA ("Selling Restrictions"). By accepting the e-mail and accessing the Information Memorandum, you shall be deemed to have represented to us that (1) you are persons falling within the Selling Restrictions; and (2) you consent to the delivery of the Information Memorandum by e-mail. You are reminded that the Information Memorandum has been delivered to you on the basis that you are a person into whose possession the Information Memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver or disclose the contents of the Information Memorandum to any other person. If this is not the case, you must return this Information Memorandum to us immediately. Transmission over the internet may be subject to interruptions, transmission blackout, delayed transmission due to internet traffic, incorrect data transmission due to the public nature of the internet, data corruption, interception, unauthorised amendment, alteration,

tampering, viruses or other technical, mechanical or systemic risks associated with internet transmissions. The Issuer,the Joint Lead Arrangers/Joint Lead Managers and any of their respective agents, directors, officers, employees or affiliates of any such person have not accepted and will not accept any responsibility and/or liability for any such interruption, transmission blackout, delayed transmission, incorrect data transmission, corruption, interception, unauthorised amendment, alteration, tampering or viruses or risks associated with internet transmissions or any consequences thereof. You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of destructive nature. The foregoing is in addition to and without prejudice to all other disclaimers and agreements which a recipient of the Information Memorandum shall be deemed to have agreed to or be bound by as provided in the Information Memorandum.

This Information Memorandum is not an offer to sell securities and is not soliciting an offer to buy securities described herein in any jurisdiction.

INFORMATION MEMORANDUM

KIMANIS POWER SDN BHD (Company No. 842208-H)

(Incorporated in Malaysia under the Companies Act 1965)

Proposed issuance of Sukuk (“Sukuk Kimanis”) pursuant to a Sukuk Programme with an aggregate nominal value of up to RM1.16 Billion (“Sukuk Programme”), based on the Islamic principles of

Istisna‟ and Ijarah

JOINT LEAD ARRANGERS / JOINT LEAD MANAGERS

CIMB Investment Bank Berhad

(Company No. 18417-M)

HSBC Amanah Malaysia Berhad

(Company No. 807705-X)

17 July 2012

KIMANIS POWER SDN BHD Page 1

RM1.16 Billion Sukuk Programme

contents

Section i

Section ii

Section iii

Section 1

Section 2

Section 3

Important Notice 3

Confidentiality 7

Glossary of Definitions & Abbreviations 8

Executive Summary 14

1.1 Issuer 14

1.2 Project Overview 14

1.3 Description of the Structure of the Sukuk Kimanis 15

1.4 Utilisation of Proceeds 20

1.5 Rating 20

Information on the Issuer 21

2.1 Incorporation 21

2.2 Principal Activity 21

2.3 Share Capital 21

2.4 Profile of Directors 21

2.5 Shareholders 23

2.6 Other Financing Arrangements 23

Information on the Project 24

3.1 The Project 24

3.2 Description of Power Plant 24

3.3 Project Construction Schedule 26

3.4 Project Economics 26

3.5 Summary of Project Agreements and Project Parties 26

3.5.1 Contractual Structure 26

3.5.2 Project Agreements 28

(a) PPA 28

(b) EPC Contract 39

(c) GSA 42

(d) DSA 45

(e) OMA 46

(f) CSA 48

(g) Sub-Lease Agreement 51

3.5.3 Project Parties 54

(a) Power Purchaser – SESB 54

(b) EPC Contractor 54

(c) Gas Supplier – PETRONAS 55

(d) Back-up Fuel Supplier – PDB 55



Section 4

Section 5

Section 6

Section 7

Appendix I

Appendix II

Appendix III

(e) Operator 55

(f) Specific Operator – GE Consortium 55

(g) Land Owner – Yayasan Sabah 55

(h) Pipeline Contractor 56

3.6 Project Insurance 56

Principal Terms and Conditions of the Sukuk Kimanis 60

Investment Considerations 114

5.1 Considerations Relating to the Sukuk Kimanis 114

5.2 Risks Relating to the Issuer 115

5.3 Project Risks 116

5.4 Financial Considerations 124

5.5 Other Considerations 125

Industry Overview 127

6.1 Outlook on the Malaysian Economy 127

6.1.1 Growth remained favourable in the fourth quarter 127

6.1.2 Monetary policy remained supportive of economic activity 128

6.1.3 Risks to financial stability remained manageable 129

6.1.3.1 Growth may moderate amidst more challenging external environment 129

6.2 Overview of the Utilities Sector 129

6.3 Power Generation Industry in Sabah 130

7.1 Borrowings 132

7.2 Contingent Liabilities 132

7.3 Litigation 132

7.4 Related Party Transactions 132

7.5 Potential Conflict of Interest Situations 133

7.6 Other Material Information 133

Cashflow Forecast and Projections 1334

Audited Financial Statements of Issuer for the FYE 2011 1411

Letter of Awareness 142



i

Important Notice

This Information Memorandum is in relation to the proposed issuance of, offer for subscription or purchase of, or invitation to subscribe for or purchase of up to RM1.16 billion in nominal value Islamic securities (“Sukuk Kimanis”) pursuant to a Sukuk issuance programme based on the Shariah principles of Istisna‟ and Ijarah (“Sukuk Programme”) by Kimanis Power Sdn Bhd (“Issuer” or “KPSB”). This Information Memorandum is being furnished on a private and confidential basis solely for the purpose of enabling prospective investors to consider the purchase of the Sukuk Kimanis. None of the information or data contained in this Information Memorandum has been independently verified by CIMB Investment Bank Berhad (“CIMB”) or HSBC Amanah Malaysia Berhad (“HSBC Amanah”) (collectively, “Joint Lead Arrangers” and “Joint Lead Managers”). Accordingly, no representation, warranty or undertaking, express or implied, is given or assumed by the Joint Lead Arrangers/Joint Lead Managers as to the authenticity, origin, validity, accuracy or completeness of such information and data or that the information or data remains unchanged in any respect after the dates stated herein or if no dates have been specifically stated, after the date of this Information Memorandum. The Joint Lead Arrangers/Joint Lead Managers have not accepted and will not accept any responsibility for the information and data contained in this Information Memorandum or otherwise in relation to the aforesaid proposed issuance of the Sukuk Kimanis and shall not be liable for any consequences of reliance on any of the information or data in this Information Memorandum, except as provided under Malaysian laws. The information in this Information Memorandum supersedes all other information and material previously supplied (if any) to the recipients. By taking possession of this Information Memorandum, the recipients are acknowledging and agreeing and are deemed to have acknowledged and agreed that they will not rely on any previous information supplied. No person is authorised to give any information or data or to make any representation or warranty other than as contained in this Information Memorandum and, if given or made, any such information, data, representation or warranty must not be relied upon as having been authorised by the Issuer, the Joint Lead Arrangers/Joint Lead Managers or any other person. This Information Memorandum is not and is not intended to be a prospectus. Unless otherwise specified in this Information Memorandum, the information contained in this Information Memorandum is current as at the date hereof. This Information Memorandum has not been and will not be made to comply with the laws of any other jurisdiction (“Foreign Jurisdiction”) other than Malaysia, and has not been and will not be lodged, registered or approved pursuant to or under any legislation of (or with or by any regulatory authorities or other relevant bodies of) any Foreign Jurisdiction and it does not constitute an issue, offer or sale of, or an invitation to subscribe or purchase the Sukuk Kimanis or any other securities of any kind by any party in any Foreign Jurisdiction. The distribution or possession of this Information Memorandum in or from certain jurisdictions may be restricted or prohibited by law. Each recipient is required to seek appropriate professional advice regarding, and to observe, any such restriction or prohibition. Neither the Issuer nor the Joint Lead Arrangers/Joint Lead Managers accept any responsibility or liability to any person in relation to the distribution or possession of this Information Memorandum in or from any Foreign Jurisdiction. By accepting delivery of this Information Memorandum, each recipient agrees to the terms upon which this Information Memorandum is provided to such recipient as set out in this Information Memorandum, and further agrees and confirms that (a) it will keep confidential all of such information and data, (b) it is lawful for the recipient to subscribe for or purchase the Sukuk Kimanis under all jurisdictions to which the recipient is subject, (c) it has complied with all applicable laws in connection with such subscription or purchase of the Sukuk Kimanis, (d) the Issuer, the Joint Lead Arrangers/Joint Lead Managers and their respective directors, officers, employees and professional advisers are not and will not be in breach of the laws of any jurisdiction to which the



recipient is subject as a result of such subscription or purchase of the Sukuk Kimanis, and they shall not have any responsibility or liability in the event that such subscription or purchase of the Sukuk Kimanis is or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the Sukuk Kimanis can only be offered, sold, transferred or otherwise disposed of directly or indirectly in accordance with the relevant selling restrictions and all applicable laws, (f) it has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing or purchasing the Sukuk Kimanis, and is able and is prepared to bear the economic and financial risks of investing in or holding the Sukuk Kimanis, (g) it is subscribing or accepting the Sukuk Kimanis for its own account, and (h) it is a person falling within the categories of persons specified in Section 4(6) of the Companies Act 1965 as amended from time to time, and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within Schedule 6 or Section 229(1)(b), Schedule 7 or Section 230(1)(b) read together with Schedule 9 or Section 257(3) of the Capital Markets and Services Act, 2007 (“CMSA”), as amended from time to time; or a person falling within the categories of persons specified in Section 4(6) of the Companies Act 1965 as amended from time to time, and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within Schedule 6 or Section 229(1)(b), read together with Schedule 9 or Section 257(3) of the CMSA, as amended from time to time. Each recipient is solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions to which it is subject. For the avoidance of doubt, this Information Memorandum shall not constitute an offer or invitation to subscribe or purchase the Sukuk Kimanis in relation to any recipient who does not fall within the categories of persons specified in item (h) above. This Information Memorandum or any document delivered under or in relation to the issue, offer and sale of the Sukuk Kimanis is not, and should not be construed as, a recommendation by the Issuer and/or the Joint Lead Arrangers/Joint Lead Managers to subscribe or purchase the Sukuk Kimanis. This Information Memorandum is not a substitute for, and should not be regarded as, an independent evaluation and analysis and does not purport to be all-inclusive. Each recipient should perform and is deemed to have made its own independent investigation and analysis of the Issuer, the Sukuk Kimanis and all other relevant matters, and each recipient should consult its own professional advisers. All information and statements herein are subject to the detailed provisions of the respective agreements referred to herein and are qualified in their entirety by reference to such documents. Neither the delivery of this Information Memorandum nor the offering, sale or delivery of any Sukuk Kimanis shall in any circumstance imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date stated herein or if no dates have been specifically stated, subsequent to the date of this Information Memorandum or that any other information supplied in connection with the Sukuk Kimanis is correct as of any time subsequent to the date indicated in the document containing the same. Neither the Joint Lead Arrangers/Joint Lead Managers nor any other advisers undertake to review the financial condition or affairs of the Issuer or to advise any participants in the Sukuk Kimanis issue of any information coming to their attention. This Information Memorandum includes forward-looking statements and reflects projections of future events which may or may not prove to be correct. All of these statements are based on estimates and assumptions made by the Issuer and although believed to be reasonable, are subject to risks and uncertainties that may cause actual events or future results to be materially different than expected or indicated by such statements and estimates, and no assurance can be given that any such statements or estimates will be realized. In light of these and other uncertainties, the inclusion of forward-looking statements in this Information Memorandum should not be regarded as a representation or warranty by the Issuer, its advisers or any other persons that the future events as anticipated by the Issuer will occur. Any such statements are not guarantees of performance and involve risks and uncertainties, many of which are beyond the control of the Issuer. This Information Memorandum includes certain historical information, estimates, or reports thereon derived from sources mentioned in this Information Memorandum and other parties with respect to the Malaysian economy, the material businesses which the Issuer operates and certain other matters. Such information, estimates, or reports have been included solely for illustrative purposes. No representation or warranty is made as to the accuracy or completeness of any information, estimates and/or reports thereon derived from such sources or from other third party sources. This Information Memorandum may not be reproduced in whole or in part, or used for any other purpose, or shown, given, copied to or filed, in whole or in part, with any other person including, without limitation, any government or regulatory authority except with the prior consent of KPSB or as required under Malaysian laws, regulations or guidelines. Should this Information Memorandum, at the request of the recipient, be sent to the



recipient or is received or viewed by the recipient in an electronic format, the recipient is reminded that documents transmitted via this mode of transmission may be altered or changed during the process of electronic transmission and consequently the Issuer, the Joint Lead Arrangers, the Joint Lead Managers or any of their respective directors, officers, employees and any of their agents or affiliates do not accept any liability or responsibility whatsoever in respect of the difference between the Information Memorandum distributed to such recipient or viewed by such recipient in the electronic format and the hard copy version available to the recipient.

RESPONSIBILITY STATEMENT

This Information Memorandum has been approved by the directors of the Issuer and they collectively and individually accept full responsibility for the accuracy of the information given and confirm that, after having made all reasonable enquiries, and to the best of their knowledge, information and belief, there are no false or misleading statements or other material facts the omission of which would make any statement in this Information Memorandum false or misleading and that there are no material omissions in this Information Memorandum.

STATEMENTS OF DISCLAIMER – SECURITIES COMMISSION

In accordance with the Capital Markets and Services Act 2007, a copy of this Information Memorandum will be deposited with the Securities Commission, who takes no responsibility for its contents. The issue, offer or invitation in relation to the Sukuk Kimanis in this Information Memorandum are subject to the fulfilment of various conditions precedent including without limitation the approval from the Securities Commission. The Securities Commission has given its approval under Section 212 of the CMSA vide its letter dated 9 July 2012 and each recipient of this Information Memorandum acknowledges and agrees that the approval of the Securities Commission shall not be taken to indicate that the Securities Commission recommends the subscription for or purchase of the Sukuk Kimanis. The Securities Commission shall not be liable for any non-disclosure on the part of KPSB and assumes no responsibility for the correctness of any statements made or opinions or reports expressed in this Information Memorandum. EACH SUKUK KIMANIS ISSUE UNDER THE SUKUK PROGRAMME WILL CARRY DIFFERENT RISKS AND ALL INVESTORS SHOULD EVALUATE EACH SUKUK KIMANIS ISSUE ON ITS OWN MERITS. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL AND OTHER ADVISERS BEFORE SUBSCRIBING FOR ACQUIRING OR PURCHASING THE SUKUK KIMANIS.

STATEMENTS OF DISCLAIMER – JOINT SHARIAH ADVISERS

The transaction structure relating to the Sukuk Kimanis has been approved by CIMB Islamic Bank Berhad and HSBC Amanah Malaysia Berhad (collectively, “Joint Shariah Advisers”). Prospective holders of the Sukuk Kimanis should not rely on the approval referred to above in deciding whether to make an investment in the Sukuk Kimanis or whether each of the structure, the issue and the trading of the Sukuk Kimanis is in compliance with Shariah principles and should consult their own Shariah advisers as to whether the proposed transaction described in the approval referred to above is in compliance with Shariah principles. No representation, warranty or undertaking, express or implied, is given by the Issuer, the Joint Lead Arrangers and the Joint Lead Managers as to the status of the Sukuk Kimanis‟s compliance with Shariah principles and the Issuer, the Joint Lead Arrangers and the Joint Lead Managers shall not be liable for any consequences of such reliance and/or assumption of any such compliance.

DOCUMENTS INCORPORATED BY REFERENCE All supplements or amendments to this Information Memorandum circulated by the Issuer, if any, published or issued from time to time after the date hereof shall be deemed to be incorporated in, and to form part of, this Information Memorandum, save that any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in any such subsequent document which is



deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum.

[The rest of this page has been intentionally left blank]



ii Confidentiality

This Information Memorandum and its contents are strictly confidential and the information herein contained is given to the recipient strictly on the basis that the recipient shall ensure the same remains confidential. Accordingly, this Information Memorandum and its contents, or any information which is made available to the recipient in connection with any further enquiries, must be held in complete confidence. This Information Memorandum is submitted to selected persons falling within any one or more of the categories of persons specified in Section 4(6) of the Companies Act 1965 as amended from time to time, and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within Schedule 6 or Section 229(1)(b), Schedule 7 or Section 230(1)(b) read together with Schedule 9 or Section 257(3) of the Capital Markets and Services Act, 2007 (“CMSA”), as amended from time to time; or selected persons falling within the categories of persons specified in Section 4(6) of the Companies Act 1965 as amended from time to time, and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within Schedule 6 or Section 229(1)(b), read together with Schedule 9 or Section 257(3) of the CMSA, as amended from time to time. In the event that there is any contravention of this confidentiality undertaking or there is reasonable likelihood that this confidentiality undertaking may be contravened, KPSB may, at its discretion, apply for any remedy available to KPSB whether at law or equity, including without limitation, an injunction. KPSB is entitled to fully recover from the contravening party all costs, expenses and losses incurred and/or suffered by KPSB, in this regard. For the avoidance of doubt, it is hereby deemed that this confidentiality undertaking shall be imposed upon the recipient, the recipient‟s professional advisors, directors, employees and any other persons concerned with the Sukuk Programme. The recipient must return this Information Memorandum and all reproductions thereof whether in whole or in part and any other information in connection therewith to the Joint Lead Arrangers/Joint Lead Managers promptly upon the Joint Lead Arrangers‟/Joint Lead Managers‟ request, unless that recipient provides proof of a written undertaking satisfactory to the Joint Lead Arrangers/Joint Lead Managers to destroy these documents as soon as reasonably practicable after the said request from the Joint Lead Arrangers/Joint Lead Managers.




iii

Glossary of Definitions & Abbreviations

Except where the context otherwise requires, the following abbreviations apply throughout this Information Memorandum:

ACQ : Annual Contract Quantity, which refers to the quantity of natural gas expressed in Thousand Standard Cubic Meter to be made available by PETRONAS for delivery under the GSA for each contract year

Available Capacity Payment : a payment determined in accordance with Appendix G of the PPA to be made by SESB to KPSB during the term of the PPA for the Daily Available Capacity made available by KPSB to SESB

Billing Period : (a) the period beginning on the Initial Operation Date of the first (1st)

Generating Block and ending on the last day of the month in which that date occurs;

(b) each one month period thereafter during the term of the PPA; and

(c) the period beginning on the first day of the month in which the term of the PPA expires and ending on the day the term of the PPA expires

BOOT : Build, Own, Operate and Transfer

Bridging Financing Facility : the bridging financing facility of up to the amount of Ringgit Malaysia One Hundred and Sixty Million (RM160,000,000.00) granted or to be granted by CIMB Islamic Bank to KPSB

CIMB : CIMB Investment Bank Berhad

CIMB Islamic Bank : CIMB Islamic Bank Berhad

CMSA : Capital Markets and Services Act, 2007 as amended from time to time

COD : commercial operation date of a Generating Block

Contractual Available Capacity : with respect to:-

(a) each Generating Block, the availability in MW of that Generating Block declared by KPSB on or before COD for that Generating Block which shall be the lower of (i) the Nominal Capacity, and (ii) the availability of that Generating Block determined and established pursuant to the provisions of the PPA prior to the COD of that Generating Block; or

(b) the Power Plant, the sum of the Contractual Available Capacity of each Generating Block

CRF : Capacity Rate Financial

CSA : Contractual Services Agreement dated 23 December 2010 and made between KPSB and the GE Consortium, and includes any amendments, modifications, supplementals and variations thereto



Daily Available Capacity

:

on any day of a contract year with respect to:-

(a) each Generating Block, the hourly availability of that Generating Block in MW expressed for a 24 hour period commencing on 00:00 hours, which for each hour shall be the lowest of (i) the availability projected for that house in the agreed annual scheduled available capacity for that Generating Block, or (ii) the deemed declared available capacity for that Generating Block, or (iii) the most recent declared daily available capacity for that Generating Block; or

(b) the Power Plant, the sum of the Daily Available Capacity for each Generating Block

Daily Available Capacity (Actual)

: in respect of a Generating Block for each day in a contract year, the weighted average of the actual Daily Available Capacity for that Generating Block for that day made available by KPSB to SESB

Daily Available Capacity (Planned)

: in respect of a Generating Block for each day in a contract year, the weighted average of the hourly availability in MW for that day as set out in the most recently agreed annual scheduled available capacity for that contract year for that Generating Block

Design Limits : the design limits more particularly set out in the PPA

Despatch Instruction : an oral or written instruction or electrical signal (operation on Automatic Generation Control under the direct control of SESB or the Control Centre) communicated by KPSB to SESB or the Control Centre directing a Generating Block to commence, increase, decrease, maintain or cease the generation and delivery of electrical energy into the Grid System, in accordance with the provisions of the PPA

DOE : the Department of Environment of Sabah

DQ : Daily Quantity, which refers to the quantity of natural gas expressed in Thousand Standard Cubic Meter to be made available by PETRONAS for delivery under the GSA for each day in each contract year

DSA : Distillate Supply Agreement dated 31 October 2011 and made between KPSB and PDB, and includes any amendments, modifications, supplementals and variations thereto

EIA Approval : the environmental impact assessment approval dated 23 June 2009 issued by the EPD in respect of the Project

Emergency Condition : a condition or situation that is:-

(a) described or regarded as such in the Grid Code; or

(b) in the judgment of SESB, based on Prudent Utility Practices, either (i) presents an imminent physical threat of danger to life or property, or (ii) threatens the safety, integrity, stability or security of the Grid System, (iii) could reasonably be expected to cause a significant disrupt on the Grid System, or (d) could reasonably be expected to adversely affect the provision of safe, adequate and reliable electricity supply to end users, including other utilities with which the Grid System is connection

Energy Payment : a payment determined in accordance with Appendix G of the PPA to be



made by SESB to KPSB for the Net Electrical Output generated and delivered from a Generating Block pursuant to a Despatch Instruction or monitoring test

EPC Contractor : persons/consortium of persons appointed by KPSB to carry out the works under the EPC Contract, namely CTCI Corporation (a company incorporated under the laws of Taiwan), CTCI Overseas Corporation Limited (a company incorporated under the laws of Hong Kong), CTCI Malaysia Sdn Bhd, Synerlitz (Malaysia) Sdn Bhd (formerly known as Steamline (Malaysia) Sdn Bhd) and SCHB Engineering Services Sdn Bhd and includes each of their respective successors in title

EPD : Environment Protection Department, Sabah

EUR : the lawful currency of the Eurozone

Facilities : the Power Plant, the fuel facilities, the Said Lands, the Interconnection Facilities and associated facilities

Financial Close : the date of execution of the trust deed in respect of the Sukuk Programme

GE Consortium : the consortium of persons comprising GE Energy Parts International, LLC, a company organised under the laws of the state of Delaware, USA and GE Power Systems (Malaysia) Sdn Bhd, a company organised under the laws of Malaysia

Generating Blocks

:

the electricity generating facility comprising one gas turbine and one steam turbine including one heat recovery steam generator with an aggregate nominal capacity of 65MW when operating in open cycle mode (if instructed in writing by SESB) and 95MW when operating in combined cycle mode, as more specifically described in Appendix A of the PPA and includes any part or combination thereof and any modification thereto which has been approved in writing by SESB

GJ : gigajoule

Grid Code : the Malaysian Gride Code, as may be applicable in Sabah and as amended from time to time in accordance with applicable law

Grid System : the bulk power network controlled or used by SESB for the purpose of transmitting and distributing electricity to end users and that portion of the Interconnection Facilities to be transferred to SESB under the PPA

GSA : Gas Supply Agreement dated 28 June 2011 and made between KPSB and PETRONAS, and includes any amendments, modifications, supplementals and variations thereto

HSBC : HSBC Amanah Malaysia Berhad

Independent Engineer : Sinclair Knight Merz

Initial Operation Date : the date on which electrical energy is first generated and delivered from the Power Plant to the Grid System

Interconnection Facilities : all of the facilities to enable SESB to receive electrical energy from the Power Plant and to maintain the stability of the Grid System and to enable the control centre to communicate with KPSB and to despatch



gas

IPP Licence : independent power producer licence pursuant to Section 9 of the Electricity Supply Act 1990 obtained or to be obtained by KPSB for purposes of owning and operating the Power Plant and selling electrical energy and generating capacity to SESB

Issuer or KPSB : Kimanis Power Sdn Bhd

Joint Lead Managers : collectively, CIMB and HSBC

Joint Principal Advisers : collectively, CIMB and HSBC

Joint Shariah Advisers : collectively, CIMB Islamic Bank Berhad and HSBC Amanah Malaysia Berhad

kWh : kilowatt-hour

LHV : lower heating value

MW : megawatts

Net Electrical Output : with respect to a Generating Block, for any period, the electrical energy generated and delivered to the Grid System at the applicable interconnection point from that Generating Block by KPSB as measured in kWh by the metering equipment or as otherwise determined in accordance with the provisions of the PPA during such period

Nominal Capacity : 95MW in respect of a Generating Block

NRG : NRG Consortium (Sabah) Sdn Bhd

OMA : Operation and Maintenance Agreement dated 29 March 2012 and made between KPSB and the Operator, and includes any amendments, modifications, supplementals and variations thereto

Operator : Kimanis O&M Sdn Bhd

PDB : Petronas Dagangan Berhad

PETRONAS : Petroliam Nasional Berhad

PGB : Petronas Gas Berhad

Pipeline Agreement : Pipeline Agreement dated 21 February 2012 and made between KPSB and the Pipeline Contractor, and includes any amendments, modifications, supplementals and variations thereto

Pipeline Contractor : TMM Engineering Services Sdn Bhd and Bayulink Sdn Bhd

Power Plant : the electricity generating facility with a nominal capacity of 285 MW comprising three Generating Blocks in Kimanis, Sabah

PPA : Power Purchase Agreement dated 16 February 2012 and made between KPSB and SESB, and includes any amendments, modifications, supplementals and variations thereto

Project : the financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and



maintenance of the Facilities

Prudent Utility Practices : the practices, methods and standards generally followed by the electricity supply industry in Malaysia, during the applicable period, with respect to the design, construction, testing, operation and maintenance of electricity generating and transmission equipment of the type used by the Power Plant, which practices, methods and standards generally conform to applicable laws, the operation and maintenance standards recommended by the Power Plant‟s equipment suppliers and manufacturers, the International Electrotechnical Commission standards and the Grid Code

Rating Agency : Malaysian Rating Corporation Berhad or its successor in such capacity or any other rating agency as may be appointed in respect of the Sukuk Programme

RM : the lawful currency of Malaysia

Said Lands : the parcel of land upon which the Power Plant is to be constructed and located, as more specifically described in Appendix A of the PPA

SESB : Sabah Electricity Sdn Bhd

SOGT : Sabah Oil & Gas Terminal

Sponsors : PGB and Yayasan Sabah

Sponsors‟ Undertaking : shall have the meaning ascribed to it in Section 3.5.1(i) of this Information Memorandum

Start-up Payment : a payment determined in accordance with Appendix G of the PPA to be made by SESB to KPSB for start-ups of a Generating Block

Sub-Lease Agreement : Sub-Lease Agreement dated 20 October 2011 and made between KPSB and Yayasan Sabah, and includes any amendments, modifications, supplementals and variations thereto

Sukukholders : holders of the Sukuk Kimanis pursuant to the Sukuk Programme

Sukuk Programme : the Sukuk issuance programme of up to RM1.16 billion in aggregate nominal value based on the Shariah principles of Istisna‟ and Ijarah

Test Energy : (a) the Net Electrical Output in connection with the start-up and commissioning of a Generating Block prior to the Commercial Operation Date of that Generating Block, or

(b) throughout the term of the PPA, the Net Electrical Output during a (i) revalidation test and subsequent retest, or (ii) after any outage, where there is re-commissioning of that Generating Block by KPSB, or (ii) during any test under the grid code or requested by KPSB

Test Energy Payment : a payment determined in accordance with Appendix G of the PPA to be made by SESB to KPSB for the Test Energy generated by a Generating Block

TNB : Tenaga Nasional Berhad

USD : the lawful currency of the United States of America



MOL Facilities : the multi-option line Islamic financing facilities of up to the aggregate amount of Ringgit Malaysia One Hundred and Fifty Million (RM150,000,000.00) only granted or to be granted by CIMB Islamic Bank to KPSB to finance the working capital requirements of KPSB




Section 1

Executive Summary

1.1 Issuer KPSB is a limited liability private company incorporated in Malaysia on 22 December 2008 under the Companies Act, 1965 under the name of Unik Kuasa Sdn Bhd, which was thereafter changed to Kimanis Energy Venture Sdn Bhd. KPSB assumed its present name with effect from 8 September 2009. KPSB is a 60:40 joint venture between PGB and NRG. NRG is a wholly-owned subsidiary of Innoprise Corporation Sdn Bhd, which in turn is a wholly-owned subsidiary of Yayasan Sabah. The principal activity of KPSB is the generation and sale of electricity. KPSB proposes to design, construct, own, operate and maintain an electricity generating facility with a nominal capacity of 285 MW to be located in Kimanis, District of Papar, Sabah. On 16 February 2012, KPSB entered into a PPA with SESB to generate and sell electrical energy and make generating capacity available to SESB for a term of 256 months from the COD of the first Generating Block, after which the ownership of the Facilities (save for the Interconnection Facilities) may be transferred to SESB upon the terms and subject to the conditions thereof.

1.2 Project Overview

KPSB was set up to develop, design, construct, own, operate and maintain the Power Plant to meet the growing demand for electricity in Sabah. The Power Plant will be structured as a standalone independent power producer and will be developed by KPSB on a BOOT basis. At the option of SESB, the Facilities may be transferred to SESB at the end of the term of the PPA, except for the Interconnection Facilities which will be transferred immediately to SESB upon the completion of its construction. The scheduled CODs of each Generating Block are:

(a) the first Generating Block – 1 December 2013;

(b) the second Generating Block – 1 February 2014; and

(c) the third Generating Block – 1 April 2014.

The construction of the Power Plant commenced in April 2011. As at 31 May 2012, the Power Plant has

achieved approximately 66% completion. The Power Plant is located in Kimanis, District of Papar, Sabah and its location within the Sabah state

can be depicted as follows:




1.3 Description of the Structure of the Sukuk Kimanis

The Sukuk Programme is for an aggregate nominal value of up to RM1.16 billion based on the Shariah principles of Istisna‟ and Ijarah. The Sukuk issued under the Sukuk Programme are referred to as “Sukuk Kimanis” and the holders of the Sukuk Kimanis are collectively referred to as “Sukukholders”.

The Sukuk Programme shall have a tenure of 16 years from the date of first issue of the Sukuk Kimanis under the Sukuk Programme and the Sukuk Kimanis shall have a tenure of more than one year and up to 16 years provided that the Sukuk Kimanis mature on or prior to the expiry of the Sukuk Programme. It is expected that the Sukuk Programme will consist of two series, as follows: (i) Series 1: comprising such serial tranches, with tenures of up to 16 years, with an aggregate

nominal amount of RM860.0 Million; and

(ii) Series 2: comprising such serial tranches, with tenures of up to 10.5 years, with an aggregate nominal amount of RM300.0 Million.

Series 1 will be issued by the Issuer within two years from the date of SC‟s approval or prior to the Scheduled Commercial Operation Date (as defined in the PPA) of the first Generating Block, whichever is earlier. Series 2 will be issued by the Issuer no later than two years from the first issue date of the Sukuk Kimanis under Series 1, or prior to the Scheduled Commercial Operation Date of the first Generating Block, whichever is earlier. The issuance of the Sukuk Kimanis shall be effected as follows:- (a) Pursuant to a Trust Deed entered into by KPSB and the Trustee, the Trustee agrees and

declares that it shall act for and on behalf of all the Sukukholders in respect of the Sukuk Kimanis issued or to be issued pursuant to the Sukuk Programme and in connection therewith to enter into the following agreements in respect of the Sukuk Programme on behalf of the Sukukholders of all series of the Sukuk Kimanis on an undivided basis:-



(i) Istisna‟ Agreement; (ii) Ijarah Agreement; (iii) Service Agency Agreement; and (iv) Purchase Undertaking. The Trustee shall then declare a trust over the Trust Assets (as defined below) for the benefit of all Sukukholders on an undivided basis. The Trust Assets comprise the rights, interest and benefit in, to and under the Istisna‟ Agreement, the completed Asset (as defined below), the Ijarah Agreement and the Purchase Undertaking.

(b) The Trustee (acting on behalf of the Sukukholders) shall enter into an Istisna‟ Agreement with KPSB (in its capacity as Contractor), to effect the following:-

1. the Contractor will build, construct and deliver the Power Plant (“Asset”) for the

Sukukholders for an Istisna‟ Price which is equivalent to the aggregate proceeds to be raised from issuance of all series of the Sukuk Kimanis. The Contractor may appoint a sub-contractor to construct and deliver the Asset. The Istisna‟ Price shall be determined prior to issuance of Series 1 and paid in instalments as specified in the Istisna‟ Agreement. The Istisna‟ Price shall be in compliance with the asset pricing requirement stipulated under the Islamic Securities Guidelines (Sukuk Guidelines) issued by the SC as may be replaced, substituted, amended or revised from time to time (“Assets Pricing Guidelines”);

2. Upon completion of construction and delivery of the Asset, the Contractor shall

accordingly notify the Trustee of the completion and delivery of the Asset. Thereafter, the Istisna‟ Agreement will complete in accordance with the terms thereof;

3. Upon declaration of a Dissolution Event (as defined in Section 4 herein) when the Asset

has not been completed and delivered to the Trustee (on behalf of the Sukukholders) under the Istisna‟ Agreement, the Istisna‟ Agreement shall be terminated immediately whereupon the Contractor shall:-

(.1) refund the Istisna‟ Price, and (.2) be liable to pay the Sukukholders the Compensation Amount as compensation

for failure to complete the construction and delivery of the Asset to the Trustee, which amount shall be equivalent to the aggregate Periodic Distribution Amount (as defined in Section 4 of this Information Memorandum) paid and any Periodic Distribution Amount accrued but remain unpaid up to the date of declaration of Dissolution Event.

The Compensation Amount shall be set off against the Advance Rental that has been paid to the Sukukholders up to the date of declaration of Dissolution Event.

(c) The Trustee (acting on behalf of the Sukukholders) will enter into an Ijarah Agreement with

KPSB, whereby:- 1. the Trustee (as “Lessor”) agrees to lease and the Issuer (as “Lessee”) agrees to take on

the lease of the Asset (under the concept of Ijarah Mawsufah Fi Zimmah i.e. Forward Lease), in a proportionate and undivided basis. In consideration of the Trustee agreeing to grant to the Lessee a forward lease in respect of the Asset to be completed and delivered, the Lessee shall pay advance rental at a pre-determined rental amount (“Advance Rental”) at such times and in the manner as provided in the Ijarah Agreement. The Advance Rental shall be equivalent to the Periodic Distribution Amounts



which is to be channeled to the Sukukholders as Periodic Distributions in proportion to their Sukukholdings prior to completion of the construction of the Asset;

2. Upon completion and delivery of the Asset up to maturity of the lease (corresponding to

the maturity date of the last outstanding tranche of the Sukuk Kimanis) (“Lease Period”), the Lessee will pay pre-determined rental amounts (“Lease Rentals”). The Lease Rentals for each tranche shall be equivalent to the Periodic Distribution Amounts which is to be channeled to the Sukukholders as Periodic Distributions in proportion to their sukukholdings;

3. Upon the (i) payment in full of the Lease Rentals for each tranche of the Sukuk Kimanis;

and (ii) maturity date of each tranche of the Sukuk Kimanis, it is hereby agreed that the Issuer, in its capacity as Lessee, shall not be liable to pay any future Lease Rentals in respect of the maturing tranche of the Sukuk Kimanis.

4. In the event the Asset is not completed and delivered to the Trustee by the Contractor

pursuant to the provisions of the Istisna‟ Agreement, the total Advance Rental paid shall be refunded by the Lessor to the Lessee and the Ijarah Agreement will thereafter be terminated.

(d) Upon the occurrence of a Total Loss Event (as defined below), the Ijarah Agreement will be

terminated. The Sukuk Kimanis will be redeemed using the proceeds of takaful/insurance.

(e) KPSB then issues the Sukuk Kimanis, where the Sukuk Kimanis shall represent the Sukukholders‟ interest, rights and entitlements under the Trust Assets, including proportionate undivided ownership of the Asset upon completion and delivery of the same. The Sukuk Kimanis proceeds shall be utilised to pay KPSB (in its capacity as Contractor) the Istisna‟ Price under the Istisna‟ Agreement. The Istisna‟ Price will be paid in accordance with the issuance of Series 1 and Series 2 of the Sukuk Kimanis as contemplated under the Sukuk Programme.

(f) Pursuant to a Service Agency Agreement:-

1. the Trustee (acting as agent of the Sukukholders) shall appoint KPSB as “Servicing Agent” throughout the Lease Period;

2. the Servicing Agent shall perform all repairs, replacements, acts and maintenance works and pay ownership expenses in respect of the Asset (“Ownership Expenses”) during the Lease Period. The Ownership Expenses will be set-off against the Exercise Price payable by the Issuer pursuant to the Purchase Undertaking upon the expiry of the Ijarah Agreement;

3. the Servicing Agent shall be responsible to procure takaful/insurance that provides sufficient proceeds for the redemption of the Sukuk Kimanis under a Total Loss Event. If the takaful/insurance proceeds are insufficient to cover the redemption amount due under the Sukuk Kimanis and Ownership Expenses (if any) under a Total Loss Event (as defined herein), the Servicing Agent shall be liable to make good the difference. Any excess from the takaful/insurance proceeds over the amount required to redeem the relevant Sukuk Kimanis and the Ownership Expenses, if any, shall be paid to the Servicing Agent as an incentive fee.

(g) KPSB (as “Purchaser”) will then grant a purchase undertaking (“Purchase Undertaking”) to the

Trustee, whereby the Purchaser irrevocably undertakes to purchase the proportionate undivided ownership in the Asset from the Trustee acting for the Sukukholders of the relevant tranche of the Sukuk Kimanis, upon occurrence of certain events (“Dissolution Events”) (save for a Dissolution Event due to a Total Loss Event) or upon the maturity of each tranche of the Sukuk Kimanis, whichever is earlier, at the relevant Exercise Price, subject to the Asset being completed and delivered to the Trustee (on behalf of the Sukukholders) under the Istisna‟ Agreement.



(h) On the maturity date of each tranche of the Sukuk Kimanis or upon declaration of a Dissolution Event (save for a Dissolution Event due to a Total Loss Event), the Trustee (acting for the Sukukholders) shall invoke the Purchase Undertaking upon which the Purchaser will purchase the proportionate undivided ownership in the completed Asset from the Trustee, at the relevant Exercise Price, by entering into a sale agreement.

(i) Upon invocation of the Purchase Undertaking on the maturity of the relevant tranche of the

Sukuk Kimanis by entering into a sale agreement, the proportionate undivided ownership in the completed Asset to which such tranche relates will be transferred to the Issuer whereupon the Issuer will be co-owner of the Asset together with the Sukukholders of the remaining outstanding tranches of Series 1 and 2.

“Total Loss Event” is the total loss or destruction of, or damage to the whole (and not part only) of the completed and delivered Asset under the Ijarah Agreement or any event or occurrence that renders the whole (and not part only) of the Asset permanently unfit for any economic use and the repair or remedial work in respect thereof is wholly uneconomical. The Contractor shall procure takaful/insurance covering defaults that may occur due to natural disasters (e.g. acts of God). If the Contractor fails to procure such takaful/insurance coverage, the Contractor will indemnify the Sukukholders for all such losses. In relation to the Purchase Undertaking, the Exercise Price for the purchase of the completed Asset from the Trustee acting for the Sukukholders is as follows:

(a) upon declaration of a Dissolution Event (save for a Dissolution Event due to a Total Loss Event),

the Exercise Price shall be equal to the nominal value of all outstanding Sukuk Kimanis plus Ownership Expenses in respect of the Asset plus all accrued but unpaid Lease Rentals up to the date of the declaration of the Dissolution Event; or

(b) upon maturity of the tranche of the Sukuk Kimanis, the Exercise Price shall be equal to the nominal value of such tranche of the Sukuk Kimanis plus the Ownership Expenses in respect of the Asset.

The Exercise Price payable shall be set off against the reimbursement of any Ownership Expenses payable to the Servicing Agent. For any particular periodic distribution payment period, the Periodic Distribution Amount shall be equivalent to the nominal value of the relevant Sukuk Kimanis multiplied by the applicable periodic distribution rate multiplied by the periodic distribution basis (as defined herein). Please see below the diagrammatic illustration of the underlying transaction.




At Inception and during construction

Fund flow

Process

6

Istisna’

Price

(Sukuk

Proceeds)

Sukuk

Issue

Trustee (acting on behalf of the Sukuk holders)

Construct

and deliver

of Asset

24

Kimanis

(Contractor/Purchaser/Issuer)

Kimanis

(Lessee)

Pu

rch

ase U

nd

ert

akin

g

Istisna’

Agreement

Ijarah Agreement

Advance Lease

3

Trustee (as Lessor) appoints Kimanis as

its agent for major maintenance

Service Agency Agreement5

Trust Deed1

Advance Rental

Refund of Istisna’ Price and

payment of Compensation

Amount

Post-completion and at Maturity

Lease Lease

Rental

Kimanis

(Contractor/Lessee)

Notify

completion and

delivery of Asset

7

Kimanis

(Purchaser)Exercise Price

9


Fund flow

Process

Istisna’

Agreement

Ijarah

Agreement8




1.4 Utilisation of Proceeds

The proceeds of the Sukuk Kimanis shall be utilised for Shariah-compliant purposes as follows:

(a) to part finance all costs associated with the Said Lands, development, design, construction, and initial operations of the Project (as described below) and any other Project related costs, including consultant fees, takaful contributions and contingencies;

(b) to pay Periodic Distributions (as defined in Section 4 herein), fees, expenses, commissions and all other amounts payable under the Sukuk Kimanis prior to the COD of all Generating Blocks and to fund the initial deposit into the Finance Service Reserve Account (as defined in Section 4 herein) and the first Minimum Required Balance (as defined in Section 4 herein) and to fund the initial deposit into the Maintenance Reserve Account (as defined in Section 4 herein);

(c) to meet the working capital requirements of the Issuer in relation to the Project;

(d) to refinance any bridging or interim financing incurred for funding the purposes stated in paragraphs (a) to (c) above (including without limitation, any amount due under the Bridging Financing Facility); and

(e) any costs and expenses incurred by KPSB in implementing and maintaining the Sukuk Programme.

1.5 Rating

The Rating Agency has assigned an indicative rating of AA- to the Sukuk Programme.




Section 2

Information on the Issuer

2.1 Incorporation

KPSB is a private limited company incorporated under the Companies Act, 1965 on 22 December 2008 under the name of Unik Kuasa Sdn Bhd, which was thereafter changed to Kimanis Energy Venture Sdn Bhd. KPSB assumed its present name with effect from 8 September 2009. Its registered office is at Level 19, Menara Tun Mustapha, Yayasan Sabah Headquarters Complex, Teluk Likas, 88400 Kota Kinabalu, Sabah.

2.2 Principal Activity

The principal activity of KPSB is to carry out the business of generating and selling electricity.

2.3 Share Capital

As at 30 April 2012:-

Authorised share capital : RM500,000,000.00 divided into 500,000 ordinary shares of RM1,000.00 each

Issued and paid up share capital : RM320,000,000.00 comprising 320,000 shares of RM1,000.00 each

2.4 Profile of Directors

As at 30 April 2012, the board of directors of KPSB comprises the following persons:- 2.4.1 Samsudin bin Miskon

Samsudin bin Miskon, a Malaysian aged 52, was appointed as a director of KPSB on 23 February 2009. He is the Chairman of KPSB. He graduated in Chemical Engineering from the University of Aston, UK.

Samsudin began his career with PETRONAS in 1983 as a process engineer and was involved in the operations, design and project implementation of gas processing facilities in PGB until 1992.

He has held several positions in the PETRONAS group of companies including serving as General Manager in the Plant Division of OGP Technical Services Sdn. Bhd. where he was responsible for the project management of gas processing and petrochemical plants until 2000. He then served as General Manager of Malaysia LNG Sdn. Bhd., where he managed the operations of the PETRONAS LNG Complex in Bintulu, Sarawak until 2005.

Samsudin is currently the Managing Director / Chief Executive Officer of PGB. Prior to his current appointment, Samsudin was the Senior General Manager of Leadership and Capability Development Department of Human Resource Management Division in PETRONAS.

He obtained a Masters of Science in Project Management from Reading University, UK in 1994. In 2005, Samsudin attended the Advanced Management Program at Harvard Business School.

Samsudin currently sits on the board of several companies in the PETRONAS group of companies.



2.4.2 Datuk Dr. Johan Arriffin bin Datuk Hj. A. Samad

Datuk Dr. Johan Arriffin bin Datuk Hj. A. Samad, a Malaysian aged 60, was appointed as a director of KPSB on 23 February 2009. He is currently the Deputy Director of Yayasan Sabah group of companies, a leading government linked organization in Sabah. He holds a Doctorate in Business Administration from the University of South Australia, Master of Business Administration in Strategic Marketing from the University of Hull (UK), and a Post Graduate Diploma in Advance Marketing from Bristol Polytechnic (UK), and is also a Fellow of the Chartered Institute of Marketing (UK). Datuk Dr. Johan Arriffin has extensive work experience at senior management levels with multinationals such as Harpers Giffillian Holdings, Inchcape Malaysia Berhad and ExxonMobil (Esso), where he served 16 years prior to joining Yayasan Sabah. His wide experience covers marketing of consumer and industrial goods, construction and project management, downstream oil and gas sales and marketing, and new business start ups. Datuk Dr. Johan Arriffin joined the Yayasan Sabah group of companies in 2004, and sits on the board of several other companies including Shell Timur Sdn. Bhd., NRG, and Yayasan Shipping Sdn Bhd. Apart from the education and social agenda assigned to him by the Yayasan Sabah group of companies, Datuk Dr. Johan Arriffin has been entrusted to spearhead new ventures in the oil and gas, and energy sector to complement the government industrialisation effort. His academic interest covers business process improvements, benchmarking of best practices and using "soft system methodology" in problem solving and initiating change.

2.4.3 Datuk Dr. Mohd Yaakub Hj. Johari J. P

Datuk Dr. Mohd Yaakub Hj. Johari J. P, a Malaysian aged 57, was appointed as a director of KPSB on 23 February 2009. He graduated with a Bachelor of Science (Hons) from the University of Sussex and a Master of Science (Liberal Studies) from the University of Manchester, England. In 1982, he obtained his PhD in Sociology from the University of Salford, England.

He began his career as a part-time lecturer in Political Science at the MARA Institute of Technology and in 1983, he joined the Sabah State Civil Service as an Assistant Director (Research and Consultancy) in the Sabah Chief Minister‟s Department. He was made the Principal Assistant Director (Management Development) in 1984. He joined the Institute of Development Studies, Sabah (IDS) as an Associate Director (Social Affairs) in 1985 and later moved up to Deputy Chief Executive / Senior Research Fellow in 1991. In 1994, he was promoted again as the Executive Director of the Institute for Development Studies (Sabah). In 2009, he was appointed as the Chief Executive of the Sabah Economic Development and Investment Authority (SEDIA).

He sits on the board of corporate bodies, including Suria Capital Holdings Bhd, Warisan Harta Sabah Sdn Bhd and Institute for Development Studies (Sabah).

2.4.4 Mohd Sukri bin Ibrahim

Mohd Sukri bin Ibrahim, a Malaysian aged 49, was appointed as a director of KPSB on 1 August 2009. He is the General Manager of Centralised Utility Facilities Division (“CUF”), PGB. He holds a Bachelor Degree of Science in Petroleum Engineering from the West Virginia University, USA.

Upon graduation, he started his career as a Service Engineer with a drilling company serving Esso Production Malaysia Inc. and Sarawak Shell Berhad. His career in PETRONAS started in



1991 as a shift supervisor in PGB where he was involved in the project implementation of several gas plants. In 1997, he was assigned to the project engineering, construction, commissioning and operations at the CUF. Prior to his current position, he was assigned to Gas Processing Plant B as Senior Manager of plant operations.

He assumed his current position in CUF in August 2009. In addition to his current roles, he also serves as a Director of Industrial Gases Solution Sdn. Bhd.

2.4.5 Ezhar Yazid bin Mat Jaafar

Ezhar Yazid bin Mat Jaafar, a Malaysian aged 47, was appointed as a director of KPSB on 27 May 2009. He is the Head of Malaysian Gas Management, Gas & Power Business, PETRONAS. He holds a Bachelor Degree of Engineering (Civil) from University of Wollongong, Australia and also a Master of Business Administration from Mt. Eliza Business School, University of Queensland, Australia. He has been with PETRONAS for over 20 years. His current role involves development of strategies and execution of strategic studies relevant to PETRONAS gas business. Previously he has been involved in business development initiatives worldwide related to gas business. Other experience includes large-scale project development covering feasibility studies, planning and project implementation in oil, gas and petrochemical industry. He is also experienced in planning, design, construction supervision, operation and maintenance of port and marine facilities.

2.5 Shareholders

2.5.1 Petronas Gas Berhad

PGB has 60% equity stake in KPSB. As at 30 April 2012, PGB holds 192,000 ordinary shares of RM1,000 each in KPSB.

2.5.1 NRG Consortium (Sabah) Sdn Bhd

NRG has 40% equity stake in KPSB. As at 30 April 2012, NRG holds 128,000 ordinary shares of RM1,000 each in KPSB.

2.6 Other Financing Arrangements

KPSB will also be entering into the following financing arrangements, whereby the security required to be created to secure the Sukuk Programme are to be shared on a pari passu basis in point of priority and security with the following financing facilities.

2.6.1 MOL Facilities

CIMB Islamic Bank has, vide a letter of offer dated 20 March 2012 and issued to KPSB, agreed to grant to KPSB the multi-option line Islamic financing facilities of up to the maximum aggregate amount of RM150.0 Million comprising the following financing facilities:-

(a) bank guarantee-i facility;

(b) documentary credit-i facility; and

(c) shipping guarantee-i facility.

The MOL Facilities are to finance KPSB‟s working capital requirements.

2.6.2 Hedging Arrangements

KPSB has agreed to enter, or has entered into, hedging arrangements with CIMB Islamic Bank and HSBC Bank Malaysia Berhad respectively, via derivative instruments which may result in net exposure on a marked-to-market basis, to hedge the foreign exchange exposure arising from payments under the applicable Project Documents.



Section 3

Information on the Project

3.1 The Project

On 8

th June 2009, via a letter issued by the Economic Planning Unit, Prime Minister‟s Department to

PGB, the Government of Malaysia awarded a concession to PGB and Yayasan Sabah to undertake the generation and sale of electricity to SESB. KPSB was set up to develop, design, construct, own, operate and maintain the Power Plant to meet the growing demand for electricity in Sabah.

KPSB shall construct, own and operate the 285MW gas-fired combined cycle power plant and the associated facilities on a BOOT basis. KPSB has engaged the EPC Contractor to carry out the design, engineering, procurement, construction and commissioning of the Facilities pursuant to the Letter of Award issued by KPSB to the EPC Contractor on 23 December 2010 and the EPC Contract. KPSB has proceeded to issue the Limited Notice to Proceed to the EPC Contractor on 23 December 2010 for the order of long lead equipments and subsequently, the Notice to Proceed to the EPC Contractor to commence the works effective on 1 April 2011. KPSB has entered into the PPA with SESB on 16 February 2012. Under the terms of the PPA, the Facilities may be transferred to SESB at the end of the term of the PPA upon the terms and subject to the conditions thereof except for the Interconnection Facilities which will be transferred to SESB immediately upon completion of construction of the same.

3.2 Description of Power Plant

3.2.1 Layout

The Power Plant is sited on the coastal area of Kimanis Bay, approximately 65km in the south-west direction from Kota Kinabalu City. It is located adjacent to the Sabah Oil & Gas Terminal ("SOGT") in the southern direction, separated by the existing Sungai Kelatuan. Natural gas is intended to be supplied via the pipeline connecting the SOGT to the Power Plant. Petronas Carigali Sdn Bhd is responsible for the construction of the SOGT. The SOGT is currently under construction, which, as at 31 May 2012, has achieved 76% completion and is expected to be completed in December 2012, approximately six months before the gas is required for testing and commissioning. The site measures approximately 16.89 ha (41 acres) in area and sits on two pieces of land, one known as Parcel 1 and the other as Parcel 2, with Jabatan Keretapi Negeri Sabah‟s (“JKNS”) railway track running in between the said two pieces of land (“Said Lands”). Pursuant to a private crossing agreement dated 23 March 2010 and made between KPSB and JKNS, JKNS has granted an approval to KPSB to construct and use a private crossing across the said railway track. Such private crossing is to grant KPSB easier access to commute from one parcel to the other and the operation of the Power Plant does not depend on such private crossing. The Power Plant is located on West side of the piece of land known as Parcel 2 whilst the other piece of land known as Parcel 1 accommodates the Interconnection Facilities.



Red line indicates railway tracks Purple line indicates road

3.2.2 Plant Process and Technology

The Power Plant comprises three Generating Blocks with each block consisting of one Gas Turbine Generator (“GTG”), one Heat Recovery Steam Generator (“HRSG”), one Steam Turbine Generator (“STG”) and its own auxiliaries. Each Generating Block has a nominal capacity of 95MW. Each Generating Block shall produce electricity through the energy efficient combined cycle process which electricity is generated from both the GTG and the STG. The GTG burns natural gas to produce approximately 66% of the electricity. The waste heat from the GTG exhaust is utilised by the HRSG to produce the steam which in turn is used by STG to generate the remaining 44%. This electricity is then evacuated via the 275/132kV transmission system using the Interconnection Facilities. Although the GTG shall operate primarily on natural gas, it may also be required to operate on distillate fuel oil as standby fuel. Standby fuel, through automatic changeover, shall only be used during interruptions of natural gas supply or other circumstances as specified in the PPA. The equipment installed uses technology sourced from established original equipment manufacturers including the GE Consortium.



3.3 Project Construction Schedule

The construction of the Facilities is undertaken by the EPC Contractor on a fixed price lump sum turnkey basis to achieve the following scheduled CODs: (a) the first Generating Block – 1 December 2013;

(b) the second Generating Block – 1 February 2014; and

(c) the third Generating Block – 1 April 2014. The construction of the Power Plant commenced in April 2011. As at 31 May 2012, the Power Plant has achieved approximately 66% completion.

3.4 Project Economics

3.4.1 Base Case Cashflow Projections and Key Assumptions

The Base Case Cashflow Projections and key assumptions of the Base Case Financial Projections are set out in Appendix I.

3.5 Summary of Project Agreements and Project Parties

3.5.1 Contractual Structure

The proposed structure of the key contractual relationships between the parties involved in the Project is shown below.




KPSB

SESB

Sukukholders

PETRONAS

EPC Contractor NRG PGB

Joint-venture agreement, equity contribution

Sukuk

Petronas Yayasan Sabah

100% 100%

60% 40%

Operator

GE Consortium

EPC Contract

OMA

PDB

GSA

CSA

Yayasan Sabah

PPA

Sub-Lease Agreement

Pipeline Contractor

DSA

Pipeline Agreement

Innoprise

100%



KPSB has entered into the following Project Documents: (a) the PPA with SESB for a term of 256 months from the COD of the first Generating Block;

(b) the Sub-Lease Agreement with Yayasan Sabah for a period of 30 years from 30 April 2009;

(c) the EPC Contract with the EPC Contractor;

(d) the OMA with the Operator for a term of 256 months from the COD of the first Generating Block;

(e) the GSA with PETRONAS for a period of 21 years commencing from the day after the

completion of the Initial Delivery Period; (f) the CSA with the GE Consortium for a period of either the completion of the third major

inspection of all covered units, or 24 years from the contract effective date;

(g) the DSA with PDB for a period of one year from the commencement date subject to an automatic annual renewal unless otherwise terminated in accordance with the terms thereof; and

(h) the Pipeline Agreement with the Pipeline Contractor.

3.5.2 Project Agreements

(a) PPA

General Overview

KPSB and SESB have entered into the PPA dated 16 February 2012 whereby KPSB has agreed to sell and SESB has agreed to purchase Test Energy, Net Electrical Output and Daily Available Capacity generated by KPSB at the Power Plant upon the terms and subject to the conditions therein contained.

Term of PPA

The PPA shall be valid for a period of 256 months from the COD of the first Generating Block, unless earlier terminated in accordance with the terms thereof.

Critical Milestones

(i) The Initial Operation Date of the first Generating Block shall occur no later than 10 August 2013;

(ii) The Initial Operation Date of the second Generating Block shall occur no later than 10 October 2013; and

(iii) The Initial Operation Date of the third Generating Block shall occur no later than 10 Dec 2013.

The failure to meet any of the above milestones does not tantamount to an event of default by KPSB under the PPA.

Critical Events

Each of the following Critical Events set out in the PPA has to be achieved by KPSB on or prior to the corresponding date (“Walk Away Date”) as more particularly set out below:-

(i) the date of the execution of all financing documents relating to the financing of the total costs of construction of the Facilities and the date that all conditions precedent contained therein

: 16 June 2012

(please see note below)



have been satisfied or waived (“Financial Close”)

(ii) issuance of Notice To Proceed under the EPC Contract

: 16 June 2012

Note: In respect of the Walk Away Date in relation to the Financial Close, following KPSB‟s request for an extension, vide its letter dated 22 June 2012 to SESB, SESB has agreed in writing to extend the same to 31 August 2012.

KPSB has issued the Notice to Proceed to the EPC Contractor to commence the works effective on 1 April 2011. Failure by KPSB to achieve any of the abovementioned Critical Events by the respective Walk Away Dates will entitle SESB to terminate the PPA in accordance with its terms.

Exceptions to SESB’s Obligations to Accept Net Electrical Output

Upon the occurrence and continuance of any of the following circumstances, SESB shall not be obliged to accept and purchase Net Electrical Output from KPSB:-

(i) an Emergency Condition occurs within the Grid System as a result of which the Grid System is unable to accept energy from the Power Plant;

(ii) the Net Electrical Output delivered to SESB does not conform to the electrical characteristics set out in the PPA; or

(iii) SESB intentionally interrupts the acceptance of electricity from the Power Plant to conduct the necessary maintenance of the Interconnection Facility, SESB's relevant metering equipment or the Grid System.

Notwithstanding the occurrence of the circumstances described in sub-paragraph (i) or (iii) above but subject to the provisions of the PPA (including the provisions on force majeure), SESB shall be obliged to continue making available capacity payments unless such occurrence is due to KPSB‟s default or breach of the PPA. Furthermore, SESB shall reimburse KPSB for any reasonable costs incurred as a result of a rapid shutdown of the Power Plant provided that such shutdown results from the occurrence of the circumstances described in sub-paragraph (i) or (iii) above.

Suspension of KPSB’s Sale Obligations

KPSB is not obliged to sell and deliver Net Electrical Output for so long as KPSB cannot, in a manner which is consistent with the Design Limit and Prudent Utility Practice, generate and deliver the same due to a condition which constitutes as an Emergency Condition under the PPA.

Tariff

KPSB is entitled to receive revenues from SESB pursuant to the tariff mechanism more particularly set out in Appendix G of the PPA whereby SESB shall pay KPSB available capacity payments for available capacity, test energy payments for test energy, energy payments for electrical energy generated and delivered to the Grid System and start-up payments for start-ups.

Available Capacity Payment (“ACP”)

The ACP is a function of the Fixed Availability Payment (“FAP”) which may be adjusted for unavailable capacity beyond the unscheduled outage limit. The FAP calculation is based on the Capacity Charge Rate (as defined under Appendix G of the PPA) which in turn is based on the CRF and Fixed Operating Rate (“FOR”). The CRF is designed to cover the debt service obligations of KPSB and to yield a prescribed rate of return on the project. The FOR is designed to cover the fixed operation and maintenance costs of KPSB. The PPA provides for indexation of the FOR at a rate of 4% on the first day of each of the 49

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following the month in which the COD of the first Generating Block occurs.

Appendix G of the PPA provides the following for the calculation of ACP:-



The Available Capacity Payment for each day of a Billing Period and for the Generating Block shall be calculated in accordance with the formulae set out in (1), (2) or (3) below as applicable, where, if for day i in the Billing Period:

(1) DACAW ≥ DACPW,

AVAILABLE CAPACITY PAYMENT ACPi = FAP

(2) (i) DACAW < DACPW; and

(ii) (∑k (DACPWk – DACAWk) x 1000 x 24) ≤ UOL,

AVAILABLE CAPACITY PAYMENT ACPi = FAP

(3) (i) DACAW < DACPW; and

(ii) (∑k (DACPWk – DACAWk) x 1000 x 24) > UOL,

AVAILABLE CAPACITY PAYMENT ACPi = [FAP X ((DACAW + (TAACGB – DACPW))/TAACGB)] – P

The Available Capacity Payment for the Billing Period for each Generating Block shall be calculated as the aggregate of the Available Capacity Payments for each day in the Billing Period, determined as follows:

AVAILABLE CAPACITY PAYMENT (FOR THE BILLING PERIOD)

n

ACP = ∑i ACPi

i-1

The terms used above shall have the meanings set out below:-

ACP = Available Capacity Payment (in RM) for the Billing Period

ACPi = Available Capacity Payment (in RM) for each day i in the Billing Period

FAP = Fixed Availability Payment (in RM) for each Generating Block for that day calculated as follows:

CCR x GBx for each Generating Block in its first contract year; and

CCR x GBx for each Generating Block subsequent to its first contract year;



except for the duration when there is in effect a deemed declare available capacity in respect of that Generating Block and the provisions of Clause 13.7(c) of the PPA apply, in which case:

FAP for such duration = CCR x GB x

AACGB = Weighted average of the actual Daily Available Capacity (in MW) for the relevant Generating Block made available by KPSB to SESB for each day i in the Billing Period, for the duration when there is in effect a in respect of that Generating Block and the provisions of Clause 13.7(c) of the PPA apply

CCR = Capacity Charge Rate (in RM/kW/day);

= (CRF + FOR) 12;

N

CACGB = Contractual Available Capacity for the relevant Generating Block (in MW)

TAACGB = Tested Annual Available Capacity for the relevant Generating Block for that contract year (in MW)

CRF = Capacity Rate Financial for that Billing Period (in RM/kW/month)

FOR = Fixed Operating Rate for that Billing Period (in RM/kW/month)

DACAW = Daily Available Capacity (Actual) (in MW) of each Generating Block for such day

DACPW = Daily Available Capacity (Planned) (in MW) of each Generating Block for such day

N = (a) 365, for any contract year during the term of the PPA which has less than 365 days; or

(b) the actual number of days in the prevailing contract year for all intervening contract years

n = total number of days in the Billing Period

i = day i of the Billing Period

P = the factor used to reflect the performance of the Generating Block for such day (in RM), determined as follows:

(DACPW – DACAW) x 1000 x CCR

UOL = the unscheduled outage limit (in kWh) for each Generating Block, determined in accordance with the following equation:

UOL = UOR xTAACGB x1000 x 8760

UOR = the unplanned outage rate (expressed as a percentage) for each Generating Block which has the value of 4 %

∑k(DACPWk – = the aggregate of the difference between DACPW and DACAW



DACAWk) for each day k (in MW), subject to the following provisions:

(a) beginning from the Commercial Operation Date of the first (1

st) Generating Block and continuing for the term

of the PPA, the difference between DACPW and DACAW for each day k prior to the Commercial Operation Date of the Generating Block shall be deemed to be equal to zero (0); and

(b) beginning from the Commercial Operation Date of the first (1

st) Generating Block and continuing for the term

of the PPA, the difference between DACPW and DACAW for each day k shall be equal to zero (0) if DACPW is less than or equal to DACAW for such day k

k = an index representing each of the previous 365 days prior to day i

Test Energy Payment (“TEP”)

For each month beginning from the Initial Operation Date of each Generating Block and throughout the term of the PPA, SESB will pay TEP for Test Energy generated by the Power Plant. The TEP shall be equal to the fuel payment (in RM) calculated for Net Electrical Output generated as Test Energy based on heat rates in accordance with the terms of the PPA provided that such fuel payment does not exceed an amount equal to the cost of natural gas used by KPSB to generate such Test Energy.

Energy Payment (“EP”)

Without any duplication of any payment made for Test Energy, SESB shall pay EP for Net Electrical Output delivered during the relevant Billing Period. The EP consists of fuel payment (“FP”) as defined in the PPA and the Variable Operating Rate (“VOR” in RM/kWh) multiplied by Net Electrical Output (in kWh) delivered during the relevant billing. The VOR is designed to cover KPSB‟s variable operating costs and is subject to indexation at a rate of 4% on the first day of each of the 49

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first Generating Block occurs.

The FP will be calculated for each half-hour of operation for each day of a Billing Period and is a function of the fuel price for the half hour period (in RM/GJ) using the applicable fuel price, the heat rate of the Generating Block applicable for the half hour period (as defined in the PPA) and the Net Electrical Output (in kWh) from the Generating Block during the half hour period (excluding Test Energy paid). Depending on the type of fuel used, the applicable fuel price can be the fuel price for natural gas or the fuel price for distillate fuel oil.

The applicable fuel price for natural gas shall be the lower of:

(i) The prevailing price for such natural gas as may be determined by the relevant government entity responsible for the supervision of the energy sector; and

(ii) The weighted average fuel price for natural gas by dividing the aggregate amount paid by

KPSB to PETRONAS for natural gas consumed during the relevant Billing Period by the aggregate GJ of such natural gas consumed.

The applicable fuel price for distillate fuel oil is determined as weighted average stock price in RM/litre multiplied by a million (1,000,000) divided by the weighted average stock gravity multiplied by the weighted average calorific value of the distillate fuel oil.

Except to the extent necessitated by a force majeure event, KPSB shall ensure that the Power Plant is available using natural gas. In the event the Power Plant is not available on natural gas



otherwise then due to a force majeure event, then the applicable fuel price used shall be the lower of the fuel price of the natural gas and the fuel price for distillate fuel oil.

Start-Up Payment (“SUP”)

SESB shall pay KPSB a SUP for each start-up (requiring re-connection to the Grid System) of each Generating Block requested pursuant to a Despatch Instruction following a prior Despatch Instruction to shut down (excluding such Despatch Instruction to shut down made as a result of KPSB‟s request to shut down or any scheduled outage)(“Requested Start”) beyond a pre-determined number of Requested Starts for each type of start up in a contract year as set out in the second column in the table below. For each Requested Start of each Generating Block beyond the pre-determined number shown opposite each type of start-up in the table below, SESB shall pay KPSB an amount set out opposite such type of start-up in the third column in the table below.

Type of Start-up Number of Requested Starts per Contract Year for which

all associated costs are borne by IPP

Payment per Requested Start

(RM)

Hot

48

23,000

Warm 23,000

Cold 23,000

The SUP for each Requested Start as set out in the third column of the table above shall include all costs associated with such start-up except the cost of fuel which is payable by SESB to KPSB through EP. Savings and/or Incentives Pursuant to the terms of the PPA, SESB and the Energy Commission are entitled to amend the prevailing Base Case Project Model to determine the cost savings upon the occurrence of an Adjustment Event (as described below). Notwithstanding the aforesaid, any cost savings determined will not affect the CRF. The determination of cost savings is upon the occurrence of (i) COD of the third Generating Block, (ii) one year after the COD of the third Generating Block; and (iii) failure by KPSB to deliver relevant input data (“Input Data”) in accordance with the PPA or failure by KPSB to grant access to SESB and the Energy Commission the Review Documents (i.e. all the documents, data, records and materials required to support and verify the contingency incurred by KPSB) (each event referred to as an “Adjustment Event”). Upon determination of the cost savings by SESB and the Energy Commission, KPSB shall pay SESB 60% of such cost savings received by KPSB in respect of the construction of the Project and 100% of cost savings received by KPSB in respect of the financing of the Project. If KPSB receives any tax benefit or incentive from the date of the PPA up to one year after the COD of the third Generating Block, KPSB is required to pay SESB an amount equal to 100% of the tax benefit. If KPSB fails to deliver Input Data in accordance with the PPA or if KPSB fails to grant access to SESB and the Energy Commission the Review Documents, the prevailing Base Case Project Model shall be revised so that the CRF shall be 75% of the then prevailing CRF which rate shall be applicable for the remainder of the term of the PPA.



Contingency

Prior to the contingency being incurred, KPSB shall notify SESB in writing that the contingency would be incurred up to the COD of the third Generating Block and provide an estimate of the amount of contingency that would be incurred. Such estimate would be subject to SESB‟s approval, which shall not be unreasonably withheld or delayed. Within 30 days of such notice, SESB shall notify KPSB as to whether it wishes to pay for contingency on an arising basis or whether it wishes for the CRF to be adjusted to address the same.

Where SESB elects to adjust the CRF to address the contingency, KPSB shall furnish SESB the full details and accounts of the amounts actually and properly incurred by KPSB in respect of the contingency to be entered into the Base Case Project Model provided that the total liability of SESB for any contingency shall not exceed the total aggregate amount of RM50.0 Million. Following the review of the Review Documents and agreement on the inputs into the Base Case Project Model, SESB shall amend the Base Case Project Model using such inputs to determine the CRF. Upon determination of the CRF, the CRF shall be adjusted to reflect such determination with effect from the month following the determination, and shall apply for the remainder of the term of the PPA.

Billing and Payment

The energy payments, available capacity payments and start-up payments (if any) are payable by SESB to KPSB within 30 days of SESB‟s receipt of the relevant billing statement to be issued by KPSB on a monthly basis. All other amounts due to either party shall be paid within 30 days following receipt by the relevant party of an itemised statement from the other party requesting payment.

Interest is chargeable at 1% above the base lending rate then in effect at the principal office of Malayan Banking Berhad on any undisputed amount which has not paid when due (on a compounding basis).

Liquidated Damages

KPSB shall be obliged to pay to SESB liquidated damages in the following amounts upon occurrence of any of the following events:-

(i) KPSB fails to achieve the scheduled CODs as stipulated in the PPA – If the COD for each of the Generating Blocks does not occur on or before the scheduled COD of each Generating Block, KPSB shall pay to SESB liquidated damages at the rate of RM240,000 (“PPA Delay LDs”) per day for each day of delay of the affected Generating Block following the scheduled COD until the earlier of (i) the COD of the affected Generating Block, (ii) the date on which the PPA is terminated by SESB, and (iii) 180 days after the scheduled COD of the affected Generating Block;

(ii) if KPSB abandons the Project after the relevant effective date of the PPA, KPSB shall pay to SESB liquidated damages in the amount of RM43.2 Million;

(iii) If the contractual available capacity (i.e. the availability of a Generating Block as declared by KPSB) is less than the nominal capacity of 95MW for any Generating Block, KPSB shall pay to SESB liquidated damages in the amount of RM5,000 per kW (or part thereof) multiplied by the difference (expressed in kW) between the nominal capacity and the contractual available capacity of that Generating Block;

(iv) if KPSB fails to comply with a despatch instruction issued by SESB or fails to maintain the despatch level specified in such despatch instruction in certain circumstances set out in the PPA, then KPSB shall pay to SESB liquidated damages in the amount of RM100,000 for each of such failure; or

(v) if KPSB fails to comply with or operate in conformity with any of the operating standards or characteristics set out in the PPA, KPSB shall pay to SESB liquidated damages in the amount of RM100,000 for each failure.

The aggregate of liquidated damages payable by KPSB under (i) and (ii) shall not exceed RM43.2 Million in respect of each Generating Block.



Maintenance Reserve

KPSB is to maintain a reserve account (“Maintenance Reserve”) of not less than RM8.0 Million be built up over a two year period from the COD of the first Generating Block at a rate of RM4.0 Million a year to fund the maintenance expenses of the Power Plant. However, if a similar reserve is required to be maintained under the relevant financing documents, then such reserve will discharge KPSB‟s obligation to maintain the Maintenance Reserve under the PPA.

In the event that monies are withdrawn from the Maintenance Reserve, the same shall be replenished within a three month period until the required funding level has been reached.

Insurance

KPSB shall maintain or procure to be maintained the following insurance policies and coverage with respect of the Power Plant, and where applicable the Interconnection Facilities:

(a) from the commencement date until the COD, “Erection All Risks” insurance and physical

loss insurance against damage to the Power Plant and the Interconnection Facilities in amounts not less than the erection cost of such facilities and on a replacement cost basis subject to deductible of no more than RM3.8 million each and every occurrence;

(b) COD of the first Generating Block until the end of the term of the PPA, “Industrial All

Risks” and “Machinery Breakdown” insurance as appropriate having regard to the Prudent Utility Practices;

(c) throughout the term of the PPA, “Public Liability” insurance with combined single limits

for bodily injury and property damage of at least RM30.0 million each and every occurrence, including coverage for “Operational Liability”;

(d) throughout the Term, “Comprehensive Automobile Liability” or “Motor Vehicle Liability”

insurance or similar insurance with combined single limit for third party property damage of at least RM3.0 Million per occurrence and in aggregate, where applicable, covering vehicles owned, hired and non-owned and unlimited liability for bodily injury; and

(e) throughout the Term, “Workmen‟s Compensation” and/or “Employer‟s Liability” insurance

that complies with the laws of Malaysia.

All amounts referred to above shall be reviewed on an annual basis and may be revised subject to mutual agreement by the parties. If any of the insurances referred to above are not available on reasonable commercial terms, KPSB shall provide SESB detailed information as to the maximum amount of available coverage that it is able to purchase and shall be required to obtain SESB‟s consent as to the adequacy of such coverage. KPSB shall, where applicable, cause the insurers to amend or endorse each of policy to include SESB, its directors and officers as additional insured and that such insurance is primary with respect to SESB‟s interests; a waiver of all rights of subrogation against SESB, its directors and officers; a severability of interest provision; and at least a 60 days written notice to SESB prior to cancellation, termination, non-renewal or material change of any such insurance coverage.

KPSB shall apply the proceeds of any such insurance policies received following a claim for loss or damage to the Power Plant in accordance with the requirements of the relevant financing documents and otherwise to repair the Power Plant.

Force Majeure and the Consequences

If a party is unable to perform its obligations due to a force majeure event, the affected party will be excused from performing those obligations.



The scheduled COD shall be extended by one day for each day the COD is delayed by a force majeure event. If the force majeure event affecting SESB occurs before the scheduled COD and delays the COD, SESB shall pay KPSB the cost of servicing debt and any unavoidable cost incurred (to the extent not covered by insurance proceeds). If a force majeure event occurs post-COD affecting KPSB, SESB shall make available capacity payments to KPSB to the extent the relevant Generating Block is available to deliver electrical energy to SESB. If the force majeure event affects SESB post COD, SESB shall also pay KPSB the difference between: (i) the costs of servicing debt (drawn down and expended in accordance with the terms of

the relevant financing documents) after the date such force majeure event occurred (but not including the Sponsor‟s gross equity contributions, the Sponsor‟s equity repayment or any cost relating thereto) and any unavoidable costs KPSB necessarily and reasonably incurs for such duration; and

(ii) the total available capacity payments due to KPSB for the period a force majeure event

persists and any insurance proceeds which reimburse it for any costs for the period and any insurance proceeds received.

If a force majeure event prevents either party from substantially performing its material obligations under the PPA for a period in excess of 180 days, either party may terminate the PPA by providing 30 days written notice to the other party. If the force majeure event cannot be remedied within 180 days, then this period shall be extended for a further 180 days. After the extended notice period, there are mechanisms for further consultation on how the PPA is to be terminated.

Events of Default

Upon occurrence of, inter alia, any of the following, SESB shall be entitled to terminate the PPA by giving written notice to KPSB in accordance with the terms thereof:-

(i) KPSB fails to pay any amount of substantial nature due and payable to SESB after receipt of notice of non-payment;

(ii) KPSB fails to comply with or operate in conformity with any obligation of the PPA and such failure is not cured within a period of 90 days after receipt of notice of such failure;

(iii) the insolvency of KPSB and other similar credit-related events affecting KPSB;

(iv) the COD of each Generating Block fails to occur within 6 months of the scheduled COD;

(v) KPSB abandons the Project after the effective date of the PPA and fails to resume activities within a period of time agreeable to SESB;

(vi) the IPP Licence is suspended or revoked or terminated or expired due to KPSB‟s default, and the IPP Licence has not been reinstated or renewed either (aa) within the shorter of 365 days and the legally permissible period for such reinstatement or renewal, or (bb) after having exhausted all available administrative or legal appeals and applications for such reinstatement or renewal;

(vii) without the prior written approval of the Federal Government of Malaysia, the aggregate Bumiputera interest in KPSB becomes less than 80% after the COD of the first Generating Block; or

(viii) any of the following events occur prior to the 7th anniversary of the COD of the first

Generating Block, without the prior written approval of the Federal Government of Malaysia:-

A. KPSB sells, conveys, transfers or otherwise disposes of the Project or any material part or any interest in it or enters into an agreement to do so; or



B. any shareholder of KPSB sells, transfers or otherwise disposes of any share of KPSB or PGB (including for this purpose the assignment of the beneficial interest therein the creation of any charge or other security interest over, such share or the renunciation or assignment of any right to receive or to subscribe for such share) or any interest in such share or enters into an agreement to do so; or

C. there is a change in control of KPSB.

Upon occurrence of, inter alia, any of the following, KPSB shall be entitled to terminate the PPA by giving written notice to SESB in accordance with the terms thereof:-

(i) SESB fails to pay any amount of substantial nature due and payable to KPSB after receipt of notice of non-payment;

(ii) SESB fails to comply with or operate in conformity with any obligation of the PPA and such failure is not cured within a period of 90 days after receipt of notice of such failure; or

(iii) the insolvency of SESB and other similar credit-related events affecting SESB.

Termination of PPA by SESB

SESB has the further right to terminate the PPA, by giving notice in writing, in the event that the following events do not occur by the following dates:-

(i) 31 August 2012 in respect of the Financial Close; and

(ii) 16 June 2012 in respect of issuance of notice to proceed under the EPC Contract.

If SESB terminates the PPA as a result of an event of default by KPSB, SESB shall have the option but not the obligation, exercisable by notice in writing, to purchase the Project in the manner determined in accordance with the provisions of the PPA and for the purchase price set out below.

The purchase price of the Project for termination by SESB for KPSB‟s default would be an amount equal to

(i) the Outstanding Indebtedness1; plus

(ii) RM10.00; plus

(iii) the Transfer Costs2; less

(iv) the Retained Sum3.

Termination of PPA by KPSB

If KPSB terminates the PPA as a result of an event of default by SESB, KPSB shall have the option but not the obligation, exercisable by prior notice in writing, to sell the Project to SESB, in the manner determined in accordance with the provisions of the PPA and for the purchase price set out below.

The purchase price of the Project for termination due to SESB default would be determined as follows:

(i) If termination occurs prior to the COD of the third Generating Block:

1 "Outstanding Indebtedness" is defined as the lesser of (i) all amounts owing to the Financing Parties (other than KPSB's shareholders

and their affiliates), under the initial Financing Documents and as amortised in accordance with the Initial Financial Model, and (ii) the

aggregate amount at the Calculation Date of all amounts owing to the Financing Parties (other than KPSB's shareholders and their

affiliates) as incurred by KPSB under the Financing Documents, including any reasonable costs and fees related to accelerated repayment

and other financing termination costs, but excluding costs and fees related to the Sponsor's gross equity contribution. “Calculation Date”

is defined as the date of termination of the PPA. 2 "Transfer Costs" is defined as an amount equal to all reasonable costs and expenses of the Project Company which are incurred or

suffered as a result of purchase of the Project by SESB, including any termination payments or novation fees on contracts, taxes,

reasonable breakage costs, registration fees). 3 "Retained Sum" is defined as the aggregate of all cash balances at bank and in hand and liquid securities held by the Project Company

and to be retained after the Calculation Date.



a. the Outstanding Indebtedness; plus b. the Sponsor‟s gross equity contribution; plus c. Interest on the Sponsor‟s gross equity contribution (at 1% above the base lending

rate then in effect at Malayan Banking Bhd); plus d. the Transfer Costs; minus e. the Retained Sum

(ii) If termination occurs after the COD of the third Generating Block:

a. the Outstanding Indebtedness; plus b. Purchase Price “B”

4, being a return on equity at a predetermined level; plus

c. the Transfer Costs; minus d. the Retained Sum

On payment by SESB of the relevant purchase price, KPSB is required to transfer all of the assets of the Project and all other rights, title and interest in the Project to SESB including access rights.

The purchase price payable by SESB will be adjusted as follows:

(i) reduced by any amount paid to KPSB between the calculation date and the transfer date

to avoid double-counting;

(ii) increased to reflect the carrying costs of the transfer amount, for any amounts unpaid between the calculation date and the transfer date; and

(iii) SESB is entitled to withhold and use the Maintenance Reserve for a period of 12 months

after the transfer date and shall return any unutilised part within 30 days of the end of such 12 month period.

Step-in rights of SESB and the Energy Commission

SESB has the right, but not the obligation to assume partial or complete operational responsibility for the Power Plant in place of KPSB on the occurrence and continuance of an event of default by KPSB, which could be reasonably expected to materially and adversely affect KPSB's ability to operate and maintain the Power Plant. SESB may not exercise this step-in right until any applicable cure period has expired, unless the financing parties request SESB to step-in. Within six months of stepping-in, SESB may return the operational responsibility for the Power Plant to KPSB, provided that SESB returns it in no worse a state than it received it (ordinary wear and tear excepted). Subject to the relevant financing documents, if the Energy Commission exercises its statutory right to operate the Power Plant, the event of default and termination provisions under the PPA shall continue to apply to SESB and KPSB; and SESB will continue to make energy payments for net electrical output despatched by the Grid System Operator and available capacity payments to KPSB as permitted by law, provided that any payment to the Energy Commission by SESB where required by law is deemed to be payment to KPSB for the purposes of the PPA.

4 “Purchase Price B” is defined as QR + SEC-SER, provided that if it results in a negative number, the “B” Purchase Price shall be zero,

where:

SEC = the sum of all the Sponsor’s Gross Equity Contribution paid to the Project Company prior to the Calculation Date.

SER = the sum of all Sponsors Equity Repayment paid on or prior to the Calculation Date.

QR = the quarterly return on the SEC.



For so long the relevant financing documents remain in effect, SESB shall not exercise its step-in rights if the operation of the Power Plant has been assumed by any of the financing parties within the cure period.

(b) EPC Contract

General Overview

KPSB has entered into the EPC Contract dated 30 March 2011 with the EPC Contractor pursuant to which KPSB has appointed the EPC Contractor for the design, engineering, procurement, construction and commissioning of the Facilities (“Works”) at an agreed fixed lump sum price (which includes USD portion, EUR portion RM portion) (“EPC Contract Price”) and the EPC Contractor has accepted such appointment upon the terms and subject to the conditions contained therein.

Contract Price

The EPC Contract Price is subject to adjustment as a result of any variation order (either by way of addition or reduction, as the case may be) and is exclusive of any import duties or any other taxes or duties payable in Malaysia for the importation of equipment and materials into Malaysia for permanent incorporation into the Works. The EPC Contract Price shall be inclusive of any withholding taxes payable in Malaysia for the Works and all rentals, royalties, fees, charges, taxes, levies or other duties of whatever nature required to be paid in connection with the Works and/or payment of the EPC Contract Price.

KPSB shall only make payment of the invoice issued by the EPC Contractor (which invoice shall be issued within 14 days of achieving each milestone activity) after determination/verification of such amount (which verification is to be done within 30 days) together with the Independent Engineer. Payment by KPSB of such approved amount shall be made by KPSB within 15 days of its determination.

EPC Contractor’s Obligations

The EPC Contractor‟s obligations include, inter alia, the following:-

(i) design, engineer, procure, supply, construct, install, test commission, complete and warrant the Works on a turnkey basis;

(ii) design the Power Plant, the fuel structures and the Interconnection Facilities to provide for an economic life of 25 years from the date of taking over of the third Generating Block and design the Power Plant to provide for sufficient redundancy to meet the performance parameters stated in the EPC Contract and the guaranteed performance (but excluding the guaranteed completion dates); and

(iii) start-up, test and commission each of the Generating Blocks and the Interconnection Facilities in accordance with the Contract and Prudent Operating and Maintenance Practices.

Completion

Subject to any extension permitted under the EPC Contract, the EPC Contractor is to ensure that the relevant Works achieve substantial completion by the following timelines:

(i) 1 July 2013 in respect of the Interconnection Facilities;

(ii) 1 December 2013 in respect of the first Generating Block;

(iii) 1 February 2014 in respect of the second Generating Block;

(iv) 1 April 2014 in respect of the third Generating Block.

The final completion of the Works is to be attained no later than 24 months after substantial completion of the third Generating Block.

Warranties

The EPC Contractor warrants for each Generating Block (except for normal wear and tear of the components thereof) a warranty period of two years. If there is a breach of this warranty, the



EPC Contractor shall remedy such breach at its own cost and expense and the warranty period shall be extended for a further period of one year in relation to such portion of the Works remedied. In the event KPSB discovers any latent defects in respect of any major component of the Works including design defect which affects the performance of the Power Plant, fuel structures and/or the Interconnection Facilities, within a period of three years after expiry of the warranty period or the extended warranty period, as the case may be, and such latent defects were due to any act or omission of the EPC Contractor, the EPC Contractor shall make good such defect at its own cost and expense provided that such defect could not have been discovered by reasonable examination prior to the expiry of such relevant warranty period. Any warranty obligation including latent defect shall not exceed seven years after substantial completion of each Generating Block and the Interconnection Facilities, respectively.

Performance Guarantees

The guaranteed net output and net heat rate for each Generating Block is 100,230kW and 7,078kj/kWh LHV respectively for gas fuel and 95,485kW and 7,815kj/kWh LHV respectively for distillate fuel oil.

Liquidated Damages

The EPC Contractor shall be obliged to pay to KPSB liquidated damages in the following events:-

(i) if there is a delay in achieving substantial completion of:-

1. the Interconnection Facilities beyond the guaranteed date, the EPC Contractor shall pay a sum of RM20,000 for each day of delay as liquidated damages;

2. each of the Generating Blocks beyond its guaranteed completion date, the EPC Contractor shall pay a sum of RM240,000 for each day of delay as liquidated damages.

The amount of liquidated damages payable by the EPC Contractor to KPSB for such delay shall not in any case, however, exceed 10% of the EPC Contract Price;

(ii) if any of the Generating Block does not achieve the following level of performance guaranteed under the EPC Contract:-

1. the output established in the performance test of each of the Generating Block is below 100,230kW, the EPC Contractor shall pay a sum of RM6,500 for each kW of shortfall below 100,230kW;

2. the net heat rate of each Generating Block established in the performance test is more than the guaranteed generating block net heat rate, the EPC Contractor shall pay a sum of RM240,000 for each kj/kWh that is more than the guaranteed generating block net heat rate.

The start-up time of each Generating Block established in the performance test is more than the guaranteed generating block start-up time, the EPC Contractor shall pay a sum of RM1,000 for each minute that is more than the guaranteed generating block start-up time.

The amount of liquidated damages payable by the EPC Contractor to KPSB for performance shall not exceed 20% of the Contract Price.

The amount of liquidated damages payable by the EPC Contractor to KPSB shall not in any case exceed 30% of the Contract Price and shall be payable within 30 days upon demand in writing by KPSB.

Termination by KPSB

Upon occurrence of, inter alia, any of the following KPSB shall be entitled to terminate the EPC Contract by giving written notice to the EPC Contractor in accordance with the terms thereof:-

(i) the EPC Contractor is dissolved or adjudicated a bankrupt, or a receiver is appointed, or any proceedings seeking an order for relief or to adjudicate it insolvent (unless the EPC



Contractor demonstrates to the reasonable satisfaction of KPSB that such proceedings are frivolous and vexatious and have been dismissed within six months of such proceedings being commenced);

(ii) the EPC Contractor fails substantially to perform any of its obligations under the EPC Contract in any material respect;

(iii) failure to achieve guaranteed completion date of any of the Generating Blocks or the Interconnection Facilities for reasons attributable to the EPC Contractor, in the case of each, by more than three months;

(iv) the measured output of each Generating Block is more than 5% below the guaranteed generating block net output;

(v) the measured heat rate of each Generating Block is more than 5% above the guaranteed generating block net heat rate of each Generating Block; or

(vi) the sum of liquidated damages payable under the EPC Contract exceeds 30% of the EPC Contract Price (as adjusted); or

(vii) failure to achieve the guaranteed placement of the main equipment for the first Generating Block by its placement date.

Upon termination, the following, inter alia, shall apply:-

A. the EPC Contractor shall be entitled to be paid the portion of the EPC Contract Price attributable to the Works executed as at the date of termination and the value of any unused or partially used materials at the site (if applicable, less any liquidated damages paid by the EPC Contractor);

B. the EPC Contractor shall be liable for the reasonable costs incurred by KPSB for completing the Works, where such costs exceed the balance of the EPC Contract Price which would have been paid to the EPC Contractor but for such termination;

C. the EPC Contractor shall use its best efforts to assign all leases and contracts relating to the Works, the Power Plant and the Interconnection Facilities to KPSB, which KPSB shall so request within 30 days of termination.

Termination by EPC Contractor

The EPC Contractor shall be entitled to terminate the EPC Contract by giving written notice to KPSB in accordance with the terms thereof if any of the following, inter alia, occurs:-

(i) KPSB is dissolved or adjudicated a bankrupt, or a receiver is appointed, or any proceedings seeking an order for relief or to adjudicate it insolvent;

(ii) KPSB defaults in payment as and when due and payable whereby such default continues for a period of 90 days except for progress payment applications disputed in good faith by KPSB; or

(iii) KPSB fails substantially to perform any of its obligations under the EPC Contract in any material respect.

Without prejudice to the Contractor‟s right to terminate, upon the occurrence of the events mentioned in sub-paragraph (i) or (ii) above, the EPC Contractor shall have the right to immediately suspend its performance under the EPC Contract subject to the EPC Contractor giving prior written notice to KPSB to this effect. If, however, within 60 days of such notice, KPSB provides reasonable assurances to the EPC Contractor of the availability of sufficient financing to continue and complete the Works, the EPC Contractor shall promptly resume performance and the complete the Works subject to an equitable adjustment.

Upon termination, KPSB shall pay to the EPC Contractor:-

A. the portion of the EPC Contract Price, as adjusted to the Works executed as at date of termination;

B. the value of any unused or partially used materials at the site; and



C. reasonable compensation for all loss and damage sustained by the EPC Contractor arising out of such termination.

Termination on Force Majeure

If a force majeure event occurs during the term of the EPC Contract, any obligation (other than the obligation to pay any moneys due under the EPC Contract) of either party shall be excused to the extent and for the period of that party‟s inability to perform or delay is caused by such force majeure event and each party shall be responsible for its own lossess, damages, costs and/or expenses incurred or suffered as a result of the same. Such delay in performance will not constitute a default under the EPC Contract, however, the affected party shall be entitled to an equitable adjustment to the following:-

(i) the design and construction schedule, which schedule sets out the specific activities to be performed by the EPC Contractor and the specific dates on which such activities are scheduled to be commenced and completed;

(ii) guaranteed performance, which includes the dates on which the EPC Contractor guarantees to achieve substantial completion; or

(iii) other affected obligations of that affected party (except for any payment for compensation).

Either party is entitled to terminate the EPC Contract if the force majeure event materially and adversely affects the performance by a party of its obligation and such event occurs for more than 180 days. Upon termination, the EPC Contractor is entitled to all progress payments due and payable on or before the force majeure event and for Works performed up to the date of termination.

In addition, in the event that a force majeure event continues for more than 180 days but not expected to exceed a total of 360 days, the parties may mutually agree in writing to any amendments to the EPC Contract subject to the concurrence of SESB (being the power purchaser) and/or the financiers of the Power Plant.

(c) GSA

General Overview

KPSB and PETRONAS have on 28 June 2011 entered into the GSA whereby PETRONAS has agreed to sell to KPSB natural gas on a commercial basis in accordance with the terms and conditions set out therein for the sole purpose of electricity generation at the Power Plant and the electricity generated is for onward selling to SESB under the PPA.

Term

The GSA shall be for a period of 21 years commencing from the day after the completion of the Initial Delivery Period (i.e. the period of four months where PETRONAS and KPSB agree to use their best endeavours to deliver and to receive the natural gas for the purpose of testing and commissioning), unless earlier terminated in accordance with the terms thereof.

Gas Supply Availability

There will be a firm commitment to supply natural gas by PETRONAS to KPSB for the first 15 years of the term of the GSA. Thereafter, during the period up to the expiry of the GSA, PETRONAS‟ supply commitment is dependant on whether PETRONAS, solely in its reasonable opinion, has natural gas up to the ACQ available for delivery to KPSB (“Available Natural Gas”) and shall incur no additional capital expenditure for purposes of supplying the same.

PETRONAS shall notify KPSB if it has Available Natural Gas for delivery no later than the end of the 12

th contract year and the quantity to be delivered shall be mutually agreed between the

parties.

Delivery and Quantities

PETRONAS shall make available the DQ for delivery of natural gas for each contract year as follows:



Contract Year DQ in Volume unites (kSM3)

1 468kSM3 (16.5mmscfd)

2 – 15 1416kSM3 (50mmscfd)

16 – 21 1416kSM3 (50mmscfd)

KPSB is required to provide PETRONAS with its daily, monthly and annual forecasts and nominations of its requirements of natural gas to enable PETRONAS to plan for delivery.

Should KPSB require supply over the DQ, PETRONAS will use reasonable endeavours to meet such requirement provided such amount has been properly nominated by KPSB. If KPSB takes more than 10% above the DQ, it shall pay PETRONAS a balancing charge of 30% of the contract price payable under the GSA in addition to said contract price.

If there is a supply deficiency due to a force majeure event, emergency situation, any maintenance shutdown or any other reason, PETRONAS has the right to supply natural gas at a lower rate than the DQ or suspend its supply, as it thinks fit. KPSB is not entitled to claim any compensation from PETRONAS in this situation.

If there is a supply failure due to a force majeure event, emergency situation or maintenance shutdown, PETRONAS is not obligated to deliver natural gas to KPSB.

Conditions Precedent

The sale and purchase of the natural gas under the GSA for use as fuel at the Power Plant are conditional upon, inter alia,:-

(a) the execution of the PPA;

(b) the achieving of financial close in respect of the Project,

by or before 31 December 2011 or such other date as may be mutually agreed (“Long Stop Date”). The parties have previously agreed in writing for the Long Stop Date to be extended to 30 June 2012. Thereafter, the parties have agreed in writing to further extend the Long Stop Date to 30 September 2012.

Take or Pay

For each contract year, KPSB is to purchase 75% of the net ACQ (“Take or Pay quantity”).

Where KPSB has paid but not taken delivery for any quantity of natural gas (“Make-up Gas”), KPSB may opt to take delivery of the Make-up Gas within the following three contract years, subject to the following:-

(i) PETRONAS‟ delivery capacity; and

(ii) KPSB fulfilling the Take or Pay quantity for the following contract year.

Otherwise, KPSB shall be deemed to have disclaimed its right to the Make-up Gas.

If, upon expiry of the GSA, KPSB has not taken the whole of the balance of the Make-up Gas, KPSB is allowed to do so within three months from such expiry, provided that the GSA is not terminated due to KPSB‟s default. Otherwise, the balance of the Make-up Gas shall be forfeited and KPSB shall have no right to any refund for such balance.

Price and Payment

The contract price for the natural gas is determined based on a function of the market price (i.e. average price of natural gas as quoted by Platt‟s Asia Pacific / Arab Gulf Market Scan on-line services).

PETRONAS is to deliver weekly invoices to KPSB for the supply of natural gas and KPSB shall be required to pay within 14 days of receipt of such invoices. KPSB shall be liable to interest at the rate of 3.5% above the prevailing base lending rate of Malayan Banking Berhad if it fails to



make timely payment of any amount due under the GSA. Failure by KPSB to pay PETRONAS the amount due and payable under the invoice together with interest (if any) will entitle PETRONAS to suspend the delivery of natural gas to KPSB by giving seven days prior written notice.

Force Majeure

Under the GSA, the following, inter alia, constitutes a force majeure event:-

(i) depletion of gas fields from gas production area which PETRONAS delivers to its customers;

(ii) any emergency situation caused by a force majeure event; and

(iii) the termination of the PPA for reasons other than due to the fault of KPSB.

Upon the occurrence and continuance of a force majeure event, the affected party is relieved from its obligations under the GSA and shall not be liable to the other party in respect of any breach.

If the force majeure event continues for a period of one month, the parties may request to meet and review the situation in good faith. If, pursuant to such meeting, it is determined that:-

A. the force majeure event is expected to continue for less than two years, the parties may consult each other on the appropriate remedial action to mitigate its effects; or

B. the force majeure event is expected to continue for more than two years, the unaffected party is entitled to terminate the GSA by giving six months written notice.

Termination

(A) Termination by either party

Either party may terminate the GSA by giving written notice if any of the following, inter alia, occurs:-

(i) the other party commits a breach of the GSA and fails to remedy the same within 30 days;

(ii) the other party becomes insolvent or is affected by other similar credit-related events; or

(iii) a receiver, manager, liquidator or similar officer is applied for, by or over the other party over all or a substantial part of the assets of such party.

Either party may terminate the GSA by giving 14 days written notice if the other party commits a breach which is incapable of remedy.

(B) Termination by PETRONAS

PETRONAS may terminate the GSA by giving two weeks written notice if any of the following, inter alia, occurs:-

(i) KPSB fails to pay any amount due under the GSA of more than RM30.0 Million at any one point;

(ii) KPSB fails to take natural gas after a lapse of 90 days continuously from the last day of offtake by KPSB at any time due to any reason other than force majeure or any other failure by PETRONAS to make delivery of natural gas at the delivery point;

(iii) KPSB is unable to take or receive natural gas at its Power Plant continuously for two months after the first contractual delivery date due to any reason other than force majeure or any other failure by PETRONAS to make delivery of natural gas at the delivery point; or

(iv) the bank guarantee to be furnished by KPSB has expired or is terminated and/or is not renewed by KPSB.



PETRONAS may immediately terminate the GSA by giving written notice if any of the following occurs:-

(i) the IPP Licence is not issued by the commencement date of the GSA or is revoked due to the fault of KPSB; or

(ii) the PPA is terminated due to KPSB‟s default.

Upon termination of the GSA due to KPSB‟s default, PETRONAS shall cease supply of natural gas to KPSB whereupon KPSB shall settle all amounts due to PETRONAS up to the date of termination and compensate PETRONAS for all unrecovered capital costs expended by PETRONAS including but not limited to the tendering, design, pipelines, labour, equipment, compression costs, land cost/use, independent firm of engineers and pipeline disconnection costs and fees together with any interest, incidental and administrative costs.

(d) DSA

General Overview

Pursuant to the DSA entered into between KPSB and PDB on 31 October 2011, KPSB shall purchase from PDB certain quantities of certain characteristics distillate fuel oil or diesel (“Product”) for the sole use as back up fuel at the Power Plant to generate electricity in accordance with and subject to the terms and conditions of the DSA.

Term

The DSA shall be effective for a period of one year from the date on which the first delivery of the Products commences. Thereafter, the DSA shall be automatically renewed based on the same terms and conditions unless otherwise terminated by either party giving one month prior written notice.

Notwithstanding the above, either party shall have the right to terminate the DSA by giving 30 days prior written notice or the DSA may be terminated in accordance with the terms therein contained.

Pricing and Payment

The price of the Products are determined based on market conditions basis based on the current product costings of the day.

The DSA provides for payment on an M30 Credit Term, whereby payment for the Products supplied within a particular month shall be effected by KPSB on the full invoice value by the end of the next immediate following month. The M30 Credit Term may be withdrawn or suspended if KPSB fails to make the payments within the time period specified or in the event KPSB‟s account has reached or exceeded the credit limit. KPSB shall then make the payments by cash or bank draft or any other methods as approved by PDB.

The DSA also provides for a credit limit of RM30.0 Million and this amount may be varied at the request of KPSB to commensurate with the value of the Products purchased. The variation is at PDB‟s sole discretion and subject to any terms and conditions specified by PDB.

Force Majeure

In the event of a force majeure, neither party shall be responsible for any failure to carry out or to observe its duties and/or obligations under the DSA, and such duties and/or obligations which cannot be performed shall be suspended. A party claiming to be affected by an event of force majeure shall give notice and full particulars of such event to the other party by telex or facsimile within seven days of the occurrence thereof.

Notwithstanding the foregoing, if the suspension due to force majeure continues for a period of 30 days the injured Party may serve upon the Party claiming to be affected by said force majeure event 30 days‟ notice in writing of its intention to terminate, and unless performance shall have been resumed before the expiration of the said notice the DSA shall automatically terminate upon the expiration of such notice without prejudice to either party's right of action against the other for any antecedent of the terms of the DSA.



Termination

PDB shall have the right to terminate the DSA at any time by giving KPSB 30 days written notice if any of the following occurs, inter alia:-

(a) breach of terms and conditions of DSA by KPSB;

(b) KPSB does any wilful act which is, or is reasonably deemed by PDB to be detrimental to the interest of PDB;

(c) If KPSB fails to pay PDB the purchase price of the Products supplied by PDB as and when it becomes due and payable;

(d) KPSB becomes insolvent or is affected by other similar credit-related events;

(e) a receiver, manager, liquidator or similar officer is applied for, by or over KPBS or over all or a substantial part of the assets of KPSB;

(f) KPSB made a material false or misleading statement or representation which induced PDB to enter into the DSA or which is materially relevant to the relationship of the parties to the DSA;

(g) without the prior written consent of PDB, there is any change in the shareholders, directors or management of KPSB; or

(h) PDB has reason(s) to believe that KPSB is or has committed, engaged either directly or indirectly in any activity, which may materially damage or affect the good reputation of PDB, its employees or any of PDB's products.

(e) OMA

General Overview

Pursuant to the OMA executed between KPSB and the Operator on 29 March 2012, KPSB has agreed to engage the Operator and the Operator agrees to operate and maintain the Power Plant upon the terms and subject to the conditions therein contained.

Term

The OMA shall be for a term of 256 months from the operation date of the first Generating Block, unless otherwise terminated in accordance with the terms and conditions set out in the OMA (“Term”).

Payment

Subject to the provisions of the OMA, KPSB shall pay to the Operator:-

(i) a fixed mobilisation fee as set out in the OMA during the mobilisation phase in respect of the mobilisation services; and

(ii) an operating fee comprising a fixed operating payment component and a variable operating payment component (which is calculated based on electrical energy generated and metered) as set out in the OMA during the operation phase in respect of the operation and maintenance services to be rendered pursuant thereto.

The Operator is also entitled to (a) a performance incentive payment calculated in accordance with the formula set out in the OMA and based on the electrical energy generated and metered; and (b) a start up payment for each start up of each Generating Block requested pursuant to a despatch instruction following a prior despatch instruction to shut down subject to the provisions contained therein.

the mobilisation fee shall be payable according to the schedule of payment in the OMA.

The Operator acknowledges receipt of RM1,139,711.00 from KPSB as advance payment for the mobilisation services and the sum will be deducted from the sum payable under the first mobilisation fee.



KPSB shall also pay contract management charges of RM1.1 Million per annum for the Operator‟s management of contracts entered into in respect of the Facilities including the PPA, GSA, DSA and CSA.

Liquidated Damages

The Operator shall pay KPSB liquidated damages in the following circumstances and manner:

(i) if the actual outage for a contract year results in a lower availability factor for the relevant contract year as set out in the availability factor table in OMA, the Operator shall pay liquidated damanes based on the formula provided in the OMA;

(ii) if KPSB is obliged to pay liquidated damages to SESB under the PPA for failure to comply with the despatch instruction and such failure is due to the Operator‟s default, the Operator shall pay RM100,000 for each occurrence;

(iii) In the event KPSN is obliged to pay liquidated damages to SESB under the PPA for failure of a monitoring test and such failure is due to the Operator‟s default, the Operator shall pay RM100,000 for each such failure.

(iv) In the event KPSB is obliged to pay liquidated damages to SESB under the PPA for failure to operate in conformity with any operating standards as stipulated in the PPA and such failure is due to the Operator‟s default, the Operator shall pay RM100,000 for each such failure.

(v) In the event that the Operator does not achieve the guaranteed performance as set out in the OMA the Operator shall pay the sum as set out therein.

The liquidated damages payable shall not exceed exceed 10% of the total Operator‟s total revenue in the applicable contract year. The Owner has the right to set off any liquidated damages payable under the OMA against any payments due from KPSB. Any liquidated damages payable shall be due 30 days upon KPSB‟s written demand failing which KPSB shall be entitled to charge default interest at 1% above Malayan Banking Berhad‟s base lending rate.

Termination

Operator Event of Default

The Operator‟s event of default include:

(i) failing to make any payment which is substantial in nature under the OMA within 90 days from the receipt of the notice of non-payment from KPSB;

(ii) failing to comply with the requirements of the OMA (other than the payment obligation) and such failure remains uncured within 90 days after the notice of such failure from KPSB;

(iii) appointment of a trustee or receiver or the like for the Operator or of all or a substantial part of its assets; or

(iv) the Operator commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, winding-up, composition or adjustment of debts.

Owner Event of Default

KPSB shall be in default if, inter alia:

(i) KPSB fails to make any payment which is substantial in nature under the OMA within 90 days from the receipt of the notice of non-payment from the Operator;

(ii) KPSB fails to comply with any of its obligations under the OMA (other than the payment obligation) and the default is not cured with the exercise of reasonable diligence by the Owner within 90 days of the Operator‟s notice;

(iii) KPSB commences a voluntary case or files a petition seeking to take advantage of any law relating to bankruptcy, insolvency, winding-up, composition or adjustment of debts; or



(iv) appointment of a trustee or receiver or the like for KPSB or of all a substantial part of its assets.

Consequences of the Occurrence of EOD

Upon the occurrence of an Event of Default (other than a default for failing to perform its obligations under the OMA), the non-defaulting Party may terminate the OMA by giving a 14-day notice in writing to the other Party.

If either party commits a default for failing to perform its obligations under the OMA, and such default cannot be cured within the 90-day period from the receipt of the notice of non-payment from the other party, the cure period shall be extended for a further 180 days. If such default continues uncured at the end of the 180 days, the non-defaulting Party may terminate the agreement immediately by a notice in writing to the other Party.

The termination rights are in addition to all other rights of the non-defaulting party including compensation for monetary loss, injunctive relief and specific performance.

Step-In Rights

The Operator acknowledges SESB‟s step-in rights under the PPA and the Parties agree that where SESB exercises its step-in rights, the Operator‟s obligations, insofar as the obligations have been taken over by SESB, shall be suspended temporarily until the Facility is handed back to the Owner.

Upon SESB exercising its step-in rights, the Parties shall agree in writing the variation to the Operator‟s obligations. The Owner shall continue to pay the Operator the Operating Fee during the period that SESB has operational responsibility.

Handing Over

Handing Over Upon Expiry or Termination of the OMA

Upon the expiry of the Term or termination of the OMA, the Operator shall perform the handing over services as set out in the OMA.

Upon the expiry of the Term or termination of the OMA, KPSB may by itself or engage a contractor (“Successor Contractor”) to operate and maintain the Facilities. KPSB or the Successor Contractor, as applicable, may enter the site and use the spares, stock, KPSB‟s equipment and all other equipment at the site and do anything else necessary for the operation and maintenance of the Facility.

The Operator, if required by KPSB within 14 days of the expiry of the Term or termination of the OMA, shall assign to KPSB the benefit of any agreement for the supply of the spares, consumables, materials or goods or for the performance of any services for the purposes of the OMA. The Operator irrevocably appoints KPSB as its attorney with full power and authority to execute that assignment on behalf on the Operator.

KPSB shall make all such payment for the goods and services delivered or performed before the expiry of the Term or termination of the OMA. Such sums paid may be deducted from any payments to be made by KPSB to the Contractor.

Handing Over to the Successor Contractor

The Operator shall provide the Successor Contractor and its representatives full access to the Facilities, all relevant information, and all property in its possession including the site and Facilities, subject to the terms of the financing documents, if applicable.

The Operator shall transfer to the Successor Contractor its rights as Operator under all contracts entered into in the performance of its obligations under the OMA or relating to the operation and maintenance of the Facilities (other than a contract of employment or secondment in relation to its employees). Pending such transfer, the Operator shall hold its rights and interests for the account and to the order of the Successor Contractor.

(f) CSA

General Overview



KPSB has entered into the CSA with the GE Consortium on 23 December 2010 pursuant to which KPSB has appointed the GE Consortium to supply Parts (as defined in the CSA) and Services (as defined in the CSA) in respect of three gas turbines identified as Covered Units at the Power Plant upon the terms and subject to the conditions therein contained.

Term

Unless earlier terminated in accordance with the terms thereof, the CSA shall be effective on 23 December 2010 and be valid until the earlier of the completion of the third major inspection of all the Covered Units or 24 years from 23 December 2010.

Prices and Payment Terms

The prices to be paid by KPSB to the GE Consortium in respect of the Parts ordered and Services requested are as set out in the CSA and all payments shall be made by KPSB to the respective entities under the GE Consortium within 30 days of the date of the invoice issued. A delay in payment by KPSB will attract a late payment interest at a fluctuating per annum rate equal to the prevailing one year LIBOR as published in the US Wall Street Journal plus two percent on all outstanding amounts. The price to be paid by KPSB shall be adjusted upward on an annual basis beginning 1 January 2011 and on 1 January of each year thereafter. The price adjustment is a function of changes in indexation in relation to labour costs, material costs and energy costs. Warranty The GE Consortium warrants to KPSB that the Parts shall be fit for the purpose of generating electric power when operated according to the GE Consortium‟s specific operating instructions or recommendations. The warranty period for the Parts will expire the earlier of one year from date of first use or 18 months after date of delivery. If the GE Consortium installs the Part or provides technical advisory service for the installation, the warranty period in respect of such Part shall be the earlier of 24 months after first use or 36 months from date of delivery. Services are under a one-year warranty period from the time of performance of such Services. All warranties are to expire no later than one year after the expiration or termination of the CSA. Guaranteed Performance Commitment The GE Consortium has provided a guaranteed performance commitment based on the underlying operation and maintenance assumptions stated in the CSA. The guaranteed performance commitments are as follows: 1) The outage duration for planned maintenance will not exceed the hours in Table 1 set forth

below:

Table 1: Outage Duration

Planned Maintenance Event Maximum Outage Duration (Natural Gas Operation)

Hot Gas Path Inspection 432 hours (18 days)

Major Inspection 672 hours (28 days)

2) The GE Consortium has provided a guarantee on heat rate degradation based on open

cycle performance tests at base load, steady state conditions using the testing procedures and heat rate correction curves stated in the CSA. The heat rate degradation levels are set forth in Table 2 below:

Table 2: Heat Rate Degradation Commitment Levels

Factored Fired Hours Heat Rate Degradation

48,000 2.40%



96,000 3.20%

144,000 3.80%

Bonus/Liquidated Damages In the event that the GE Consortium performs a planned maintenance inspection in fewer hours than specified in the CSA, KPSB shall credit the GE Consortium a bonus credit amount upon submission of the GE Consortium‟s invoice. The bonus which the GE Consortium may receive per planned maintenance inspection is capped at USD119,880. If the GE Consortium performs a planned maintenance inspection in more hours than that specified in the CSA, the GE Consortium is liable to pay KPSB liquidated damages up to a cap of USD119,880 per planned maintenance inspection. For each positive percentage point of net heat rate improvement (“NHRI”) rounded to the nearest one-hundredth of a point, KPSB shall pay the GE Consortium a bonus equal to USD30,000 up to a maximum cap of USD90,000 per Covered Unit per major inspection event.

In the event that the GE Consortium does not meet the guaranteed commitment levels for heat rate, then the GE Consortium shall pay KPSB a sum of USD30,000 for each negative percentage point of NHRI rounded to the nearest one-hundredth of a point, up to a maximum cap of USD90,000 per Covered Unit per major inspection event. Subject to the provisions contained in the CSA, if there is a delay in shipping the Parts in accordance with the pre-determined schedule or a delay in completing any repair services within the stipulated timeline, due to causes attributable to the GE Consortium, the GE Consortium shall pay KPSB liquidated damages in US Dollar at the rate of 0.1% of the price of delayed Parts for each day of delay or delayed repair services for each 24 hour period, as the case may be, up to a maximum of 3% of the price of such Parts or such repair services, as the case may be. Excusable Events If a party is delayed or prevented, directly or indirectly, from performing its obligations due to any of the following (“Excusable Event”):

(i) causes beyond the party‟s reasonable control;

(ii) acts of God, acts of governmental authorities or third parties not engaged by that party claiming the excusable event, fires, severe weather conditions, earthquakes, strikes or other labour disturbances, floods, war, armed conflict, epidemics, civil unrest, terroristic threats, or riots;

(iii) acts or omissions of the other party including failure of such other party to promptly perform its obligations under the CSA; or

(iv) inability on account of causes beyond its reasonable control to obtain necessary materials, components or services,

And upon notification of an Excusable Event, the date of delivery or performance shall be extended for a period equivalent to the time lost by reason of delay, provided that the term of the CSA shall not be extended due to the Excusable Event, unless mutually agreed upon in writing by the parties. If the delay excused has extended for more than 120 days and parties have yet to agree on a revised basis for continuing work, then either party may terminate the affected order by giving 30 days‟ written notice, OR if the whole CSA is affected, either party may terminate the CSA in respect of undelivered Parts and uncompleted Services.



Termination (a) Termination for Default and/or Insolvency

Either party may terminate the CSA if the other party becomes insolvent; or commits a material breach of the CSA and fails to cure the breach within 30 days of the notice from the non-defaulting party; or, if the fault cannot be cured within 30 days, fails to commence to cure the breach within 30 days or fails thereafter to diligently continue to complete to cure the breach as soon as reasonably possible. The provision may be exercised if notice is given within 90 days of the event giving rise to the default and the termination shall be effective 30 days after the notice. The defaulting party shall then pay the non-defaulting party a termination amount equal to 10% of the unfulfilled minimum purchase volume amount as of the date of termination, calculated based on the price stated in the CSA and subject to the escalation provisions contained in the CSA in addition to all other payments due for performance prior to the termination.

(b) Termination resulting from Excusable Event

If the CSA is terminated due to an Excusable Event, then KPSB shall pay the GE Consortium any payments due for performance prior to the termination and if applicable, reimburse the GE Consortium for any costs of demobilisation and cancellation of work.

In the event the CSA expires without completion of the purchase of the full of the minimum purchase volume amount, KPSB shall pay the GE Consortium an amount equal to 10% of the unfulfilled minimum purchase volume amount.

(g) Sub-Lease Agreement

General Overview

KPSB and Yayasan Sabah have entered into the Sub-Lease Agreement on 20 October 2011 whereby Yayasan Sabah has agreed to grant KPSB exclusive vacant possession of the lands more particularly described in the said agreement (“Said Lands”) at an agreed yearly fixed non-escalating rent payable by KPSB upon the terms and subject to the conditions therein contained. Pending issuance of the separate issue documents of title in respect of the Said Lands, no sub-lease can be registered in favour of KPSB.

Term

The sub-lease granted is for a term of 30 years commencing from 3 April 2009.

KPSB’s Covenants

KPSB covenants, inter alia, as follows:-

(i) to bear and/or reimburse Yayasan Sabah the land premium charges, annual quit rent, title preparation fee, surveyor‟s cost of the surveyor appointed by Yayasan Sabah and land application fee within 14 days from Yayasan Sabah‟s request in writing;

(ii) to bear and pay rates, taxes, assessments, duties, impositions, outgoings and burdens whatsoever lawfully assessed, charged or imposed by the Municipality, the State Government, the Federal Government or any other authority by KPSB upon the Said Lands; and

(iii) to use the Said Lands solely for the purpose of the Project and for no other purposes unless the consent in writing of Yayasan Sabah is first had and obtained and KPSB shall continuously and in a bona fide active and reasonable manner use the Said Lands for such purpose during the sub-lease period.

Yayasan Sabah’s Covenants

Yayasan Sabah covenants with KPSB, inter alia, as follows:-



(i) to bear any costs and expenses including but not limited to the cost of land application, premium, surveys costs that may be payable on the Said Lands as a result of the issuance of document of title to Yayasan Sabah and any matter ancillary to it;

(ii) to procure and obtain any approvals required from the relevant authority to sub-lease the Said Lands to KPSB;

(iii) as soon as the issue document of title in respect of the Said Lands has been issued, Yayasan Sabah shall procure the registration of the sub-lease based on the terms and conditions contained in the Sub-Lease Agreement at the Central Land Registry with the intent that the sub-lease shall take effect and operate as legal sub-lease of the Said Lands to KPSB.

Termination

Yayasan Sabah may terminate the sub-lease forthwith by giving notice in writing to the KPSB within six months from the occurrence of the following events:-

(i) any rent hereby reserved or any part thereof shall remain unpaid for one month after the same shall become due. Yayasan Sabah will grant a six months extension from the date of the notice in writing for the payment of all outstanding Rent (“grace period”) and should KPSB fails to pay within the grace period, a further 14 days shall be given to KPSB to pay Yayasan Sabah (whether formally demanded or not). If KPSB still fails to comply, Yayasan Sabah may determine the sub-lease in accordance with the terms of thereof;

(ii) if any covenants, conditions and agreements on KPSB's part therein contained shall not be performed or observed and KPSB fails to remedy the same within a reasonable time after receipt of the notice from Yayasan Sabah requiring it to remedy the same;

(iii) KPSB shall cease to use the Said Lands for the purpose covenanted in the Sub-Lease Agreement (except where such discontinuance and cessation are brought about by force majeure or event beyond the control of KPSB);

(iv) If KPSB goes into liquidation or becomes insolvent or is wound up either compulsorily or voluntarily except for the purpose of reconstruction or amalgamation;

(v) If KPSB enters into any arrangement or composition for the benefit of KPSB's creditors without the consent of Yayasan Sabah;

(vi) If KPSB suffers any distress or execution to be levied on KPSB's business, goods or property of any other description or character; or

(vii) If KPSB's business is taken over by any of KPSB's creditors.

Upon terminating the sub-lease, Yayasan Sabah may forfeit the deposit paid by KPSB to Yayasan Sabah and at any time thereafter re-enter upon the Said Lands or any part thereof and thereupon the sub-lease shall absolutely determine but without prejudice to the right of Yayasan Sabah in respect of any arrears of rent or any breach of covenant.

The KPSB may terminate the Sub-Lease Agreement by giving notice in writing to Yayasan Sabah within one month from the occurrence of the following event:-

(i) If any covenants, conditions and agreements on Yayasan Sabah's part therein contained shall not be performed or observed and shall fail to remedy such within a reasonable time after the receipt of the notice from KPSB requiring it to remedy the same;

(ii) If Yayasan Sabah shall assign the rights or create another sub-lease agreement of the Said Lands without consent from and/or without notifying KPSB;

(iii) If Yayasan Sabah goes into liquidation or becomes insolvent or is wound up either compulsorily or voluntarily except for the purpose of reconstruction or amalgamation; or

(iv) If Yayasan Sabah fails to show reasonable effort to acquire the Said Lands, and fails to register the Sub-Lease Agreement upon issuance of the title deed; or



(v) That through no fault of KPSB, KPSB is prevented by the relevant authorities from occupying the Said Lands or from the purpose covenanted therein the Sub-Lease Agreement.

Notwithstanding the above, KPSB may also at any time during the term of the Sub-Lease Agreement terminate the Sub-Lease Agreement by giving 12 calendar months' notice in writing to Yayasan Sabah whereupon Yayasan Sabah shall refund and pay all the deposit paid by KPSB to Yayasan Sabah one month after the expiry of the notice of termination.

(h) Pipeline Agreement

General Overview

Pursuant to the Pipeline Agreement executed between KPSB and the Pipeline Contractor on 21 February 2012, KPSB has agreed to engage the Pipeline Contractor to carry out the design, procurement, construction, pre-commissioning, commissioning of the Power Plant‟s gas pipeline project and all other works as described in the Pipeline Agreement including the engineering of the construction of the gas pipeline project, procurement and provision of the relevant materials for the construction and the application of the relevant government and authorities permits (“Works”).

Term

The Pipeline Agreement shall be effective from 21 February 2012 and the Pipeline Contractor shall complete the Works on or before 15 July 2013.

(i) Sponsors’ Undertaking

Pursuant to the Sponsors‟ Undertaking, the Sponsors have agreed to undertake to the security agent in respect of the Sukuk Programme (“Security Agent”) as follows, inter alia:-

(.1) to ensure, in proportion to their shareholdings in KPSB, that KPSB has adequate funds to satisfy all the conditions precedents set out in the PPA and achieve the COD of all Generating Blocks;

(.2) in the event KPSB is unable, due to delay of the Scheduled Commercial Operation Date of any Generating Block, to meet its payment obligations to the Sukukholders pursuant to the Sukuk Programme, to also ensure, in proportion to their shareholdings in KPSB, that KPSB has sufficient funds to service on a full and timely basis its payment obligations in respect of all the Sukuk Kimanis issued or to be issued under the Sukuk Programme up to a total aggregate amount of RM50.0 Million;

(.3) not to take any action nor cause KPSB to take any action which may result in KPSB being unable to perform its obligations towards the Sukukholders in respect of the Sukuk Kimanis;

(.4) in the event that the Power Plant cannot be completed by KPSB for any reason whatsoever, to take all actions necessary to complete the Power Plant;

(.5) to provide through equity injection and/or inter-company financing facility to KPSB in proportion to their shareholdings in KPSB to fund any cost overruns incurred relating to the Project up to a total aggregate amount of RM50.0 Million;

(.6) to subordinate all loans or advances made or to be made by them to KPSB.

The abovementioned undertakings by the Shareholders shall cease and have no further effect upon the fulfillment of the following conditions at the satisfaction of the Security Agent:-

(a) satisfactory opinion from the Independent Engineer that the actual COD of all three Generating Blocks are achieved and the required performance parameters are met on the actual COD:

(b) all approved costs in relation to the Project have been paid;



(c) the issue document of title for the Said Lands has been issued and a first fixed charge over the Memorandum of Sub-Lease (as defined in Section 4 herein) is in full effect;

(d) all the relevant conditions subsequent in respect of the Sukuk Programme have been satisfied; and

(e) the FSRA (as defined in Section 4 herein) and the Maintenance Reserve Account have been fully funded;

and PROVIDED THAT no Dissolution Event has occurred and is continuing at the time when the last of items (a) to (e) above is fulfilled.

The Sponsors‟ liabilities under the Sponsors‟ Undertaking are capped at RM100.0 Million.

3.5.3 Project Parties

(a) Power Purchaser – SESB

SESB is a vertically integrated utility providing reliable electricity generation, transmission and distribution services in the state of Sabah and the Federal Territory of Labuan. It is the only power utility company in Sabah supplying electricity distributed over a wide area of 74,000 sq. km. SESB is an 80% owned subsidiary company of TNB and 20% owned by the State Government of Sabah. SESB is committed to developing the electricity infrastructure in the state of Sabah and the Federal Territory of Labuan including the implementation of the Rural Electrification Program. (Source as at 10 July 2012: http://www.sesb.com.my/index.php?option=com_content&view=article&id=75&Itemid= 93)

(b) EPC Contractor

The EPC Contractor is a consortium comprising of CTCI Corporation, CTCI Overseas Corporation Limited, CTCI Malaysia, Synerlitz (Malaysia) Sdn Bhd and SCHB Engineering Services Sdn Bhd. CTCI Corporation, the core member in the consortium, was founded in 1979 with its headquarters in Taipei and is the largest engineering, procurement, and construction (“EPC”) firm in Taiwan. Through years of hands-on experience and outstanding services, also underpinned by outstanding workforce, stable financial status and sound managerial systems, CTCI Corporation has earned international prestige and goodwill. Adhering to its corporate principle "Professionalism, Sincerity, Teamwork and Innovation”, CTCI Corporation sustains its strong momentum, persistently tapping into growing markets to compete for the dominant role of its kind. Numerous landmark achievements were built through synergetic efforts over the decades. CTCI Corporation has a strong global presence with approximately 7,000 employees stationed in more than 30 affiliates worldwide. In 2011, the paid-in capital of CTCI Corporation reached NT$7 billion. As a leading EPC contractor in Taiwan, CTCI Corporation is uniquely distinguished for its competence in delivering comprehensive services to meet customers' requirements. The service portfolio of CTCI Corporation includes engineering, design, procurement, fabrication, construction, supervision, project management, and test & commissioning. Through decades of experiences in undertaking significant projects at home and abroad, CTCI Corporation has expanded its business lines from refinery, chemical and petrochemical into power, infrastructure, environmental protection, steel & nonferrous, storage & terminal, and waste-to-energy fields. As CTCI Corporation utilized the top-notch technologies transferred from abroad and consolidated its roots firmly in Taiwan for years, CTCI Corporation has become a designated partner for many internationally well-known companies to collaborate with in various projects, which achieved commendable results.

http://www.sesb.com.my/index.php?option=com_content&view=article&id=75&Itemid



(c) Gas Supplier – PETRONAS

PETRONAS was incorporated on 17 August 1974 as the national oil company of Malaysia, vested with the entire ownership and control of the petroleum resources in the country. It has since grown from merely being the manager and regulator of Malaysia‟s upstream sector into a fully integrated oil and gas corporation, ranked among the FORTUNE Global 500 largest corporations in the world.

(Source as at 10 July 2012: http://www.petronas.com.my/about-us/Pages/default.aspx)

(d) Back-up Fuel Supplier – PDB

Incorporated in 1982 and listed on the Main Board of Bursa Malaysia in 1994, PDB is the principal domestic marketing arm of PETRONAS and Malaysia‟s leading retailer and marketer of downstream oil and gas products.

PDB offers a wide range of internationally recognised high quality petroleum products including motor gasoline, aviation fuel, kerosene, diesel, fuel oil, bunker fuel, LPG cylinders and asphalt.

PDB has also vastly extended its comprehensive nationwide logistics and distribution system over the years, which now includes bulk depots, aviation depots, bunkering facilities as well as LPG bottling plants, in an effort to make its products and services accessible throughout Malaysia.

(Source as at 10 July 2012: http://www.mymesra.com.my/?ch=mm_2011&pg=content&ac=22&tpl=2011_article)

(e) Operator

The Operator was incorporated in 2010 and has been engaged by KPSB to provide operation and maintenance services to the Power Plant pursuant to the OMA.

The Operator is jointly owned by PGB and Yayasan Sabah, through its investment arm, NRG.

(f) Specific Operator – GE Consortium

The GE Consortium consists of GE Energy Parts International, LLC and GE Power Systems (Malaysia) Sdn Bhd. Both are subsidiaries of the GE Electric Company (“GE”). The GE Consortium is a supplier of key and major parts and provides services related to GE gas turbines generators in the power generation industry. Some of its customers includes TNB, PETRONAS and other independent power producers in Malaysia.

(g) Land Owner – Yayasan Sabah

The Sabah Foundation, today operationally referred to as the Yayasan Sabah, was established through Enactment No. 8 in the Sabah State Legislative Assembly in 1966 for three main purposes of providing education and educational facilities for all Malaysian youths in Sabah; creating opportunities for a more equitable distribution of economic wealth among the people in Sabah; and providing aid to charitable institutions and victims of natural disasters. (Source as at 10 July 2012: http://www.ysnet.org.my/) Yayasan Sabah has entered into a sub-lease agreement to grant a sub-lease to KPSB over the Said Lands for the purposes of the Project.

http://www.ysnet.org.my/



(h) Pipeline Contractor

The Pipeline Contractor, being an unincorporated joint venture between TMM Engineering Services Sdn Bhd (“TMM Engineering”) and Bayulink Sdn Bhd (“Bayulink”) are 100% Malaysian Bumiputera companies.

TMM Engineering has provided a wide range of engineering services and construction work in oil and gas, petrochemical sectors, and has an enviable track record, underpinned with a reputation for innovation and quality.

TMM Engineering has been a contributing force offering a suite of services for PETRONAS in many activities. It has been awarded with many licenses under various categories of work and supply by PETRONAS.

TMM Engineering has successfully undertaken more than 120 hot tap and welding services since year 1998 throughout Peninsular Malaysia. The medium of line services are hydrocarbon line i.e. Gas line, flare line, feed condensate line, hot oil, paraxylene and also HP/LP steam water line, nitrogen line etc.

With TMM Engineering‟s experiences in gas pipeline maintenance and repair, TMM Engineering is proud to be the leading company in this area and one of the specialised contractor for PETRONAS to explore and utilize any approved advance technology in the market for the purpose of pipeline repair without shutdown the line.

(Source as at 10 July 2012: http://www.tmmsb.com.my/v.2)

Bayulink was set-up with the main intention to capture the growing prospects of the oil & gas industry both offshore and onshore, as well as mainstream mainstream development at local and international front.

Bayulink offers an integrated and diverse range of services for the clients of the oil & gas industry with main business activities in the offshore construction, marine services and offshore catering services, servicing clients primarily in South East Asian region and expanding into Far East and Middle East region.

To date, Bayulink has grown into a reputable integrated oil and gas service provider and had won numerous accolades and award from the clients of the industry for the safety performance as well as par-excellent services provided by Bayulink. To become an integrated key player and preferred oil & gas service provider in construction, marine and offshore catering services.

(Source as at 10 July 2012: http://www.bayulink.com/Bayu/index.php)

3.6 Project Insurance

KPSB has the benefit of various insurances for the Power Plant, the particulars of which are as follows:- (a) Construction All Risks and Comprehensive General Liability Policy

This said policy covers the following: (i) Erection All Risk

The insurer shall indemnify the insured for any loss or damage to all contract works, whether permanent or temporary, materials, machinery, equipment incorporated or destined for incorporation therein, temporary buildings and their contents, and all other property or equipment of whatsoever nature including free-issue materials (other than construction plant and equipment) the property of the insured or for which they are responsible, whilst at the Contract Site, or elsewhere in the Territorial Limit, including whilst in storage and whilst in transit within Malaysia. Includes cover for existing property located on or immediately adjacent to the Contract Site and belonging to or held in care custody or control by the Insured.



The sum insureds are:-

(.1) Physical Damage; Special Extension; Defects Liability Period: RM1.046 Billion (.2) Existing / Surrounding Property: RM25.0 Million The pipeline works are also insured under the current Construction All Risks and Comprehensive General Liability Policy.

(ii) Delay in Start Up The insurer shall indemnify the insured for any loss of revenue and increased costs of working due to delay to the commencement of operations caused by physical damage insured under Erection All-Risk above.

The indemnity period in respect of the aforementioned delay is 18 months commencing

on the schedule date of commencement of commercial operations of each Generating Block. The sum insured is RM360.0 Million.

(iii) Comprehensive General Liability The insurer agrees to indemnity the insured for legal and/or contractual liability arising from death or bodily injury to persons and/or loss of, or damage to, property in connection with or execution of the Project. The sum insured is RM30.0 Million any one occurrence and series of occurrences and Unlimited in all. Endorsements have been issued to this policy to reduce the deductible from RM4.0 Million to RM1.0 Million for the Pipeline Contractor‟s portion of construction works pursuant to the Pipeline Agreement.

The policy is valid from 1 April 2011 up to the dates of certificate of practical completion for the Project, until final handover estimated to be 2 April 2012 plus 24 months Maintenance from date of Practical Completion plus up to 12 months Extended Maintenance.

(b) Contractors‟ All Plant and Equipment Policy

This insurance policy is designated for construction plant and equipment, to cover against loss or damage caused by fire, accidental damage, theft etc.

The EPC Contractor will pass down its obligations under the EPC Contract to procure this policy to the appointed sub-contractors. In compliance with the EPC Contract, the EPC Contractor have issued a Letter of Undertaking to confirm that the EPC Contractor and the appointed sub-contractor will adhere to the conditions stated in Clause 14.1.1.4 of the EPC Contract.

(c) Workmen‟s Compensation and/or Employer‟s Liability Policy

This said policy indemnifies the insured for any compensation payable by the insured for any personal injury by accident or disease sustained by an employee of the insured arising and in the course of such employee‟s employment by the Insured. The policy excludes air crew, ship crew and underwater activities. The sum insured is RM2.0 Million for sums payable under the common law.



(d) Comprehensive General Liability Policy (Contractor‟s Arranged)

The insurer agrees to indemnify the insured for all sums which the insured shall be obligated to pay by reason of:- (i) liability imposed upon the insured by law; or

(ii) express contractual liability,

for damages arising out of each occurrence happening anywhere in the world (excluding USA and Canada) on account of personal injury and/or personal damage and/or advertising injury arising on or of the insured‟ operation. The period of insurance in respect of the said policy is 1 April 2011 to 1 April 2014. The said policy excludes liability under warranty for fitness; quality of the insured‟s product or work performed; liability arising from delay or failure to meet deadlines; damage to property or liability due to the sole negligence of KPSB. The limits of liability of the insured under the policy arranged by the EPC Contractor and the Pipeline Contractor are RM4.0 Million and RM1.0 Million in any one occurrence and unlimited in aggregate, respectively.

(e) Marine Open Cover Policy (Petronas Group policy)

The interest agreed to be covered by the insurer is such interest in goods, merchandise and cargo of every description incidental to the business of the insured, or otherwise, including duties and taxes applicable and increased value howsoever arising, the property of the insured or for which the insured have or assume a responsibility to insure, whether contractually or otherwise, or for which the insured receive instructions to insure prior to shipment or prior to known or reported loss or accident. The said policy is effective from 1 April 2011 and shall remain valid unless cancelled by either the insured or the insurer by giving 60 days written notice of such cancellation. The policy is arranged in three tiers with different underwriting capacity afforded by each underwriter. The sum insured is RM700.0 Million split as follows:- (i) Insurers of 1st tier – Shipment with sum insured up to RM40.0 Million (ii) Insurers of 2nd tier – Shipment with sum insured above RM40.0 Million to RM200.0

Million (iii) Insurers of 3rd tier – Shipment with sum insured above RM200.0 Million to RM700.0

Million Maximum total sum insured per shipment is RM700.0 Milion. (f) Marine Delay Start Up Policy (Petronas Group policy)

The insurer agrees to indemnify the insured for their financial loss (loss of revenue and increased cost of working) in the event of interruption or interference to completion of the project caused by insured damage under Marine Open Cover Section.

(g) Comprehensive Automobile Liability / Motor Vehicle Liability policy



The insurer agrees to indemnify the insured or the authorized driver are legally liable to pay (including claimants‟ costs or expenses) for:- (i) death or bodily injury to any third party except those specifically excluded

(ii) damage to third party property as a result of an accident arising out of the use of the

motor vehicle,

This is a yearly renewable policy. The limits of liability of the insured under the policy are:-

(.1) Unlimited for Third Party Bodily Injury / Death; and

(.2) RM3.0 Million for Third Party Property Damage. Any claim in excess to the above mentioned RM3.0 Million limit can be admissible under the Contractor‟s Comprehensive General Liability policy.




Section 4

Principal Terms and Conditions of the Sukuk Kimanis

BACKGROUND INFORMATION

(a) Issuer

(i) Name Kimanis Power Sdn Bhd

(ii) Address Level 19, Menara Tun Mustapha, Yayasan Sabah Headquarters Complex, Teluk Likas, 88400 Kota Kinabalu, Sabah

(iii) Business Registration No.

842208-H

(iv) Date and Place of Incorporation

22 December 2008

Kuala Lumpur

(v) Date of Listing Not Applicable

(vi) Status

Resident controlled company

(vii) Principal Activities Power generation and activities in relation thereto

(viii) Board of Directors

As at 30 April 2012, the board of directors of the Issuer comprises the following directors:-

1. Samsudin bin Miskon

2. Datuk Dr. Johan Arriffin Bin Abd. Samad

3. Datuk Dr. Mohd Yaakub Bin Johari

4. Mohd Sukri bin Ibrahim

5. Ezhar Yazid bin Mat Jaafar

(ix) Structure of shareholdings and names of shareholders or, in the case of a public company, names of all substantial shareholders

As at 30 April 2012, the registered shareholders of the Issuer are Petronas Gas Berhad (“PGB”) with 60% equity stake in the Issuer and NRG Consortium (Sabah) Sdn Bhd (“NRG”) with 40% equity stake in the Issuer.

(x) Authorised and paid-up capital

The authorized and paid-up capital as at 30 April 2012 are as follows:



Authorised capital: RM500,000,000.00 divided into 500,000 ordinary shares of RM1,000.00 each

Paid-up capital: RM320,000,000.00 comprising 320,000 ordinary shares of RM1,000.00 each

PRINCIPAL TERMS AND CONDITIONS

(a) Names of parties involved in the proposed transaction (where applicable)

(i) Joint Principal Advisers CIMB Investment Bank Berhad (“CIMB”) and HSBC Amanah Malaysia Berhad (“HSBC Amanah”)

(ii) Joint Lead Arrangers CIMB and HSBC Amanah

(iii) Co-arranger Not Applicable

(iv) Solicitors Messrs. Albar & Partners, as legal counsel to the Joint Lead Arrangers (“Legal Counsel”)

(v) Financial Adviser CIMB

(vi) Technical Adviser Not Applicable

(vii) Trustee Malaysian Trustees Berhad

(viii) Guarantors Not Applicable

(ix) Valuer Not Applicable

(x) Facility Agent CIMB

(xi) Primary Subscriber(s) (under a bought-deal arrangement) and Amount Subscribed

To be determined prior to issuance

(xii) Underwriter and Amount Underwritten

Not Applicable

(xiii) Shariah Adviser CIMB Islamic Bank Berhad and HSBC Amanah Malaysia Berhad (collectively as “Joint Shariah Advisers”)

(xiv) Central Depository Bank Negara Malaysia (“BNM”)

(xv) Paying Agent BNM

(xvi)Reporting Accountant Messrs. KPMG Desa Megat & Co. (“KPMG”)

(xvii) Calculation Agent CIMB



(xviii) Others (please specify)

Offtaker Sabah Electricity Sdn Bhd (“SESB”), who is a counterparty to the PPA. Pursuant to the terms of the PPA, the Offtaker has agreed to purchase from the Issuer electricity generated by the power plant under the Project upon the terms and subject to the conditions contained therein.

Joint Lead Managers / Joint Bookrunners

CIMB and HSBC Amanah

Shared Security Agent, Sukuk Security Agent and Project and Account Monitoring Agent

CIMB

Account Banks CIMB Islamic Bank Berhad (“MYR Account Bank”) and CIMB Bank Berhad (“Foreign Currency Account Bank”)

Hedging Banks CIMB Islamic Bank Berhad and HSBC Bank Malaysia Berhad

Independent Engineer (“IE”) / Environmental Consultant

Sinclair Knight Merz

The role of the IE and Environmental Consultant is to conduct due diligence and advise on all technical and environmental aspects of the Project and to monitor and provide reports in relation to the Project on a periodic basis.

Insurance Consultant Marsh (Hong Kong) Limited

The role of the Insurance Consultant is to conduct due diligence and advise on all aspects of takaful/insurance in relation to the Project including but not limited to the covered/ insurable amounts and sufficiency of risk coverage.

(b) Facility Description (including the description of Islamic principle)

Pursuant to a Trust Deed entered into by the Issuer and the Trustee, the Trustee agrees and declares that it shall act for and on behalf of all the Sukukholders in respect of the Sukuk Kimanis (herein defined) issued or to be issued pursuant to the Sukuk Programme and in connection therewith to enter into the following agreements in respect of the Sukuk Programme on behalf of the Sukukholders of all series of the Sukuk Kimanis on an undivided basis:- i. Istisna‟ Agreement ii. Ijarah Agreement; iii. Service Agency Agreement; and iii. Purchase Undertaking

The Trustee shall then declare a trust over the Trust Assets (herein defined) for the benefit of all Sukukholders on an undivided basis. The Trust Assets comprise the rights,



interest and benefit in, to and under the Istisna‟ Agreement, the completed Asset, the Ijarah Agreement and the Purchase Undertaking.

The Trustee (acting on behalf of the Sukukholders), shall enter into an Istisna‟ Agreement with the Issuer (in its capacity as Contractor), to effect the following:

i. The Contractor will build, construct and deliver the 285 MW gas-fired power plant comprising three generating blocks in Kimanis, Sabah (“Asset”) for the Sukukholders for an Istisna‟ Price which is equivalent to the aggregate proceeds to be raised from the issuance of all series of the Sukuk Kimanis. The Contractor may appoint a sub-contractor to construct and deliver the Asset. The Istisna‟ Price shall be determined prior to issuance of Series 1 and paid in instalments as specified in the Istisna‟ Agreement. The Istisna' Price shall be in compliance with the asset pricing requirement stipulated under the Sukuk Guidelines issued by Securities Commission as may be replaced, substituted, amended or revised from time to time (“Assets Pricing Guidelines”).

ii. Upon completion of construction and delivery of the Asset, the Contractor shall accordingly notify the Trustee of the completion and delivery of the Asset. Thereafter, the Istisna‟ Agreement will complete in accordance with the terms thereof.

iii. Upon declaration of a Dissolution Event when the Asset has not been completed and delivered to the Trustee (on behalf of the Sukukholders) under the Istisna‟ Agreement, the Istisna‟ Agreement shall be terminated immediately whereupon the Contractor shall:- (.1) refund the Istisna‟ Price, and (.2) be liable to pay the Sukukholders the Compensation Amount as compensation for failure to complete the construction and delivery of the Asset to the Trustee, which amount shall be equivalent to the aggregate Periodic Distribution Amount (as defined herein) paid and any Periodic Distribution Amount accrued but remain unpaid up to the date of declaration of Dissolution Event. The Compensation Amount shall be set off against the Advance Rental (as defined herein) that has been paid to the Sukukholders up to the date of declaration of Dissolution Event.

The Trustee (acting on behalf of the Sukukholders), will enter into an Ijarah agreement with the Issuer, whereby:-

i. the Trustee (as “Lessor”) agrees to lease and the Issuer (as “Lessee”) agrees to take on the lease of the Asset (under the concept of Ijarah Mawsufah Fi Zimmah i.e. Forward Lease), in an proportionate and undivided basis. In consideration of the Trustee agreeing to grant to the Lessee a forward lease in respect of the Asset to



be completed and delivered, the Lessee shall pay advance rental at a pre-determined rental amount (“Advance Rental”) at such times and in the manner as provided in the Ijarah Agreement. The Advance Rental shall be equivalent to the Periodic Distribution Amounts which is to be channeled to the Sukukholders as Periodic Distributions in proportion to their Sukukholdings prior to completion of the construction of the Asset;

ii. Upon completion and delivery of the Asset up to maturity of the lease (corresponding to the maturity date of the last outstanding tranche of the Sukuk Kimanis) (“Lease Period”), the Lessee will pay pre-determined rental amounts to the Lessor (“Lease Rentals”). The Lease Rentals for each tranche shall be equivalent to the Periodic Distribution Amounts which is to be channeled to the Sukukholders as Periodic Distributions in proportion to their sukukholdings. Upon the (i) payment in full of the Lease Rentals for each tranche of the Sukuk Kimanis; and (ii) maturity date of each tranche of the Sukuk Kimanis, it is hereby agreed that the Issuer, in its capacity as Lessee, shall not be liable to pay any future Lease Rentals in respect of the maturing tranche of the Sukuk Kimanis.

iii. In the event the Asset is not completed and delivered to the Trustee by the Contractor pursuant to the provisions of the Istisna‟ Agreement, the total Advance Rental paid shall be refunded by the Lessor to the Lessee and the Ijarah Agreement will thereafter be terminated.

iv. Upon the occurrence of a Total Loss Event (as defined herein), the Ijarah Agreement will be terminated. The Sukuk Kimanis will be redeemed using the proceeds of takaful/insurance.

The Issuer then issues the Sukuk Kimanis, where the Sukuk Kimanis shall represent the Sukukholders‟ interest, rights and entitlements under the Trust Assets, including proportionate undivided ownership of the Asset (herein defined) upon completion and delivery of the same. The Sukuk Kimanis proceeds shall be utilised to pay the Issuer (in its capacity as Contractor) the Istisna‟ Price under the Istisna‟ Agreement. The Istisna‟ Price will be paid in accordance with the issuance of Series 1 and Series 2 of the Sukuk Kimanis as contemplated under the Sukuk Programme.

a. Pursuant to a Service Agency Agreement:-

i. the Trustee acting as Agent of the Sukukholders shall appoint the Issuer as “Servicing Agent” throughout the Lease Period;



ii. the Servicing Agent shall perform all repairs, replacements, acts and maintenance works and pay ownership expenses in respect of the Asset (“Ownership Expenses”) during the Lease Period. The Ownership Expenses will be set-off against the Exercise Price payable by the Issuer pursuant to the Purchase Undertaking upon the expiry of the Ijarah Agreement; and

iii. the Servicing Agent shall be responsible to procure takaful/insurance that provides sufficient proceeds for the redemption of the Sukuk Kimanis under a Total Loss Event. If the takaful/insurance proceeds are insufficient to cover the redemption amount due under the Sukuk Kimanis and Ownership Expenses (if any) under a Total Loss Event (as defined herein), the Servicing Agent shall be liable to make good the difference. Any excess from the takaful/insurance proceeds over the amount required to redeem the relevant Sukuk Kimanis and the Ownership Expenses, if any, shall be paid to the Servicing Agent as an incentive fee.

a. The Issuer (as “Purchaser”) will grant a purchase undertaking (“Purchase Undertaking”) to the Trustee, whereby the Purchaser irrevocably undertakes to purchase the proportionate undivided ownership in the Asset from the Trustee acting for the Sukukholders of the relevant tranche of the Sukuk Kimanis, upon occurrence of certain events (“Dissolution Events”) (save for a Dissolution Event due to a Total Loss Event) or upon the maturity of each tranche of the Sukuk Kimanis whichever is earlier, at the relevant Exercise Price (as defined herein), subject to the Asset being completed and delivered to the Trustee (on behalf of the Sukukholders) under the Istisna‟ Agreement.

On the maturity date of eachtranche of the Sukuk Kimanis or upon declaration of a Dissolution Event (save for a Dissolution Event due to a Total Loss Event), the Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase the proportionate undivided ownership in the completed Asset from the Trustee, at the relevant Exercise Price, by entering into a sale agreement.

Upon invocation of the Purchase Undertaking on the maturity of the relevant tranche of the Sukuk Kimanis by entering into a sale agreement, the proportionate undivided ownership in the completed Asset to which such tranche relates will be



transferred to the Issuer whereupon the Issuer will be co-owner of the Asset together with the Sukukholders of the remaining outstanding tranches of Series 1 and 2.

“Total Loss Event” is the total loss or destruction of, or damage to the whole (and not part only) of the completed and delivered Asset under the Ijarah Agreement or any event or occurrence that renders the whole (and not part only) of the Asset permanently unfit for any economic use and the repair or remedial work in respect thereof is wholly uneconomical.

The Contractor shall procure takaful/insurance covering defaults that may occur due to natural disasters (e.g. acts of God). If the Contractor fails to procure such takaful/insurance coverage, the Contractor will indemnify the Sukukholders for all such losses.

Please refer to Appendix A for diagrammatic illustration of the underlying structure.

(c) Issue / Programme Size The aggregate outstanding nominal value of the Sukuk Kimanis issued under the Sukuk programme of up to RM1.16 billion in nominal value (“Sukuk Programme”) shall not exceed RM1.16 billion at any point in time (“Sukuk Kimanis”)

(d) Tenure of Issue / Sukuk Programme (or Facility)

The tenure of the Sukuk Programme shall be up to sixteen (16) years from the date of the first issuance under the Sukuk Programme The tenure of each Sukuk Kimanis shall be more than one (1) year but up to sixteen (16) years, provided that the Sukuk Kimanis mature on or prior to the expiry of the Sukuk Programme.

It is expected that the Sukuk Programme will consist of two (2) series, as follows:

(i) Series 1: comprising such serial tranches, with tenures of up to sixteen (16) years, with an aggregate nominal amount of RM860.0 million; and

(ii) Series 2: comprising such serial tranches, with tenures of up to ten and a half (10.5) years, with an aggregate nominal amount of RM300.0 million.

Series 1 will be issued by the Issuer within two (2) years from the date of SC‟s approval or prior to the Scheduled COD of the first Generating Block, whichever is earlier.

Series 2 will be issued by the Issuer no later than two (2) years from the first issue date of the Sukuk Kimanis under Series 1 or prior to the Scheduled COD of the first Generating Block, whichever is earlier.

For the avoidance of doubt, there will only be issuances of two series under the Sukuk Programme, which are Series 1 and Series 2. Upon such issuances, the Sukuk Programme will no longer be available for any future utilisation.



(e) Availability Period of Sukuk Programme (or Facility)

The period commencing from the date the conditions precedent of the Sukuk Programme are fulfilled or waived (as the case may be) and expiring 16 years thereafter, provided that the Sukuk Kimanis mature on or prior to the expiry of the Sukuk Programme.

(f) Profit / Coupon / Rental rate

The Periodic Distribution Rate for Series 1 and Series 2 shall be determined and agreed between the Issuer and the Joint Lead Managers prior to the issuance of Series 1.

(g) Profit / Coupon / Rental Payment Frequency

Payable semi-annually in arrears with the first payment of Periodic Distribution commencing six (6) months from the date of issue of the respective Sukuk Kimanis with the last payment of Periodic Distribution for each Sukuk Kimanis to be made on the respective maturity dates of each Sukuk Kimanis.

“Periodic Distribution Date” means the last day of a particular Periodic Distribution Payment Period.

On any relevant Periodic Distribution Date, “Periodic Distribution Amount” is calculated at the Periodic Distribution Rate on the nominal value of the relevant Sukuk Kimanis based on the Periodic Distribution Payment Basis.

(h) Profit / Coupon / Rental Payment Basis

Actual / 365 days

(i) Security / Collateral

(if any)

Including, but not limited to:

(i) an assignment in favour of the Shared Security Agent of all the Issuer‟s rights, title, interests and benefits in and over the Land Sub-lease Agreement entered into between the Land Owner and the Issuer. Upon the issuance of document of title, a first fixed charge (“Memorandum of Charge”) over the sub-lease in respect of the land on which the Project is situated;

(ii) a first ranking debenture in favour of the Shared Security Agent comprising fixed and floating charges over all present and future assets (including any distillates inventory) of the Issuer;

(iii) assignment by way of security in favour of the Shared Security Agent of all the rights, title, benefits and interest in and to the following:

(a) all Project Documents;

(b) all permits and licences (to the extent that the permits and licences are assignable);

(c) performance bonds/ guarantees; and

(d) takaful /insurances.

(iv) charge and assignment by way of security in favour of



the Shared Security Agent over all the Designated Accounts (as herein defined) and the Trustee‟s Reimbursement Account (as herein defined);

(v) charge and assignment by way of security in favour of the Sukuk Security Agent over the FSRA (as herein defined);

(vi) Letter of Undertaking from the Sponsors (as defined herein) in favour of the Shared Security Agent; and

(vi) such other security arrangement to be mutually agreed between the Issuer and the JLAs.

In addition, the Issuer may enter into certain Hedging Arrangements (as defined herein) in relation to the Project Documents with respect to foreign exchange risks and procure the MOL Facilities (as defined herein) for purposes of, inter alia, issuances of bank guarantees or performance bonds in relation to the Project Documents. The security arrangement held by the Shared Security Agent referred to in this paragraph (save and except for the security referred to in paragraph (v) above which shall only secure the Sukuk Kimanis) is permitted to secure the interest of the Hedging Banks in relation to the Hedging Arrangements and the financier granting the MOL Facilities in relation to the MOL Facilities, to be shared on a pari passu basis in point of priority and security.

(j) Details on Utilisation of Proceeds by Issuer / Obligor

The proceeds of the Sukuk Kimanis shall be utilised for Shariah-compliant purposes as follows:

(a) to part finance all costs associated with the project land, development, design, construction, and initial operations of the Project (as described below) and any other Project related costs, including consultant fees, takaful contributions and contingencies;

(b) to pay Periodic Distributions, fees, expenses, commissions and all other amounts payable under the Sukuk Kimanis prior to the COD of all Generating Blocks (as defined herein), to fund the FSRA Initial Deposit and first FSRA Minimum Required Balance (as defined herein), and to fund the initial deposit into the MRA (as defined herein);

(c) to meet the working capital requirements of the Issuer in relation to the Project; and

(d) to refinance any bridging or interim financing incurred for funding the Project (including without limitation, any amount due under the bridging financing facility of up to RM160 million by CIMB Islamic Bank Berhad; and

(e) any costs and expenses incurred by the Issuer in implementing and maintaining the Sukuk Programme.

(k) Sinking fund and Designated Accounts (if

The Issuer shall open, maintain and operate the following Designated Accounts. Upon the occurrence of a Dissolution



any) Event, the Shared Security Agent will be the sole signatory of all the Designated Accounts.

MYR Disbursement Account (“MYR DA”)

(i) The MYR DA shall be a Shariah compliant bank account denominated in Ringgit Malaysia and to be opened with the MYR Account Bank.

(ii) The Project and Account Monitoring Agent shall be the sole signatory and sole operator.

(iii) The following shall be deposited into the MYR DA prior to the COD of all the Generating Blocks:

(a) equity and any other forms of shareholders‟ contributions from the Issuer‟s shareholders;

(b) the balance proceeds from the Sukuk Kimanis on the issue date of Series 1 after meeting the following:

(1.) RM30,000.00 into the Trustee‟s Reimbursement Account;

(2.) Payment of any refinancing amount in Ringgit Malaysia of any bridging or interim financing incurred for funding the Project;

(c) the proceeds from Series 2 Sukuk Kimanis on the issue date of Series 2;

(d) any profit in Ringgit Malaysia earned on Permitted Investments prior to the COD of all the Generating Blocks;

(e) all revenues and other payments in Ringgit Malaysia received by the Issuer prior to the COD of all the Generating Blocks;

(f) proceeds of takaful/insurance claims in Ringgit Malaysia prior to the COD of all the Generating Blocks;

(g) any claims in Ringgit Malaysia received by the Issuer in respect of third party performance bonds, liquidated damages or any other compensation received prior to the COD of all the Generating Blocks;

(i) All payments from the MYR DA shall be applied in accordance with the “Priority of Cash Flow” as set out below and based on certification from the IE or such other acceptable professional certification or documentary evidence in form and substance acceptable to the Project and Account Monitoring Agent:

(a) for payment of all obligations due under the



Transaction Documents Hedging Arrangements and the MOL Facilities including any conversions to USD and EUR under the Hedging Arrangements which is to be placed under the relevant USD and EUR DA prior to utilisation;

(b) for payments of RM-denominated capital expenditures prior to the COD of all the Generating Blocks which shall be credited into the MYR OA (as defined herein);

(c) for payment of direct operations and maintenance costs, taxes and duties prior to the COD of all the Generating Blocks which shall be credited into the MYR OA;

(d) for payment of contingency amounts including liquidated damages in relation to the Project which shall be credited into the MYR OA; and

(e) for compliance with the FSRA and MRA (as defined herein) requirements prior to the COD of all the Generating Blocks.

Balances in the MYR DA will be transferred to the RA after COD of all the Generating Blocks and the MYR DA will thereafter be closed.

USD Disbursement Account (“USD DA”)

(i) The USD DA shall be a bank account denominated in USD to be opened with the Foreign Currency Account Bank.


(iii) The following shall be deposited into the USD DA prior to the COD of all the Generating Blocks:

(a) USD proceeds arising from the conversion of RM DA proceeds pursuant to the Hedging Arrangements prior to the COD of all Generating Blocks;

(b) any profit in USD earned on Permitted Investments prior to the COD of all the Generating Blocks; and

(c) all other payments in USD received by the Issuer prior to the COD of all the Generating Blocks.

(iv) All payments from the USD DA shall be applied for the payment of capital expenditures in USD based on certification from the IE or such other acceptable professional certification or documentary evidence in form and substance acceptable to the Project and Account Monitoring Agent prior to the COD of all the Generating Blocks to be credited into the USD OA (as defined herein).



Balances in the USD DA will be converted into Ringgit Malaysia and transferred to the RA after COD of all the Generating Blocks and the USD DA will thereafter be closed.

EUR Disbursement Account (“EUR DA”)

(i) The EUR DA shall be a bank account denominated in Euro to be opened with the Foreign Currency Account Bank.


(iii) The following shall be deposited into the EUR DA prior to the COD of all the Generating Blocks:

(a) EUR proceeds arising from the conversion of RM DA proceeds pursuant to the Hedging Arrangements prior to the COD of all Generating Blocks;

(b) any profit in EUR earned on Permitted Investments prior to the COD of all the Generating Blocks; and

(c) all other payments in EUR received by the Issuer prior to the COD of all the Generating Blocks.

(iv) All payments from the EUR DA shall be for payments in EUR of capital expenditures based on certification from the IE or such other acceptable professional certification or documentary evidence in form and substance acceptable to the Project and Account Monitoring Agent prior to the COD of all the Generating Blocks to be credited into the EUR OA (as defined herein).

Balances in the EUR DA will be converted into Ringgit Malaysia and transferred to the RA after COD of all the Generating Blocks and the EUR DA will thereafter be closed.

Revenue Account (“RA”)

(i) The Revenue Account shall be a Shariah compliant bank account denominated in Ringgit Malaysia and to be opened with the MYR Account Bank.


(iii) The RA shall be operational from the COD of all the Generating Blocks for the purpose of depositing the following:

(a) all receivables under the Project and the PPA other than revenue received by the Issuer prior to the COD of all the Generating Blocks;

(b) all other revenues inclusive of any profit earned on Permitted Investments and equity contributions from the shareholders received by the Issuer commencing from the COD of all the Generating



Blocks;

(c) proceeds of takaful/insurance claims in respect of takaful/insurances taken and maintained throughout the tenure of the Sukuk Programme;

(d) any claims received in respect of third party performance bonds/guarantees, liquidated damages or any other compensation received during the tenure of the Sukuk Programme;

(e) any funds released from the FSRA and MRA (as defined herein) which exceeds the FSRA Minimum Required Balance and MRA Minimum Required Balance respectively;

(f) any remaining balances from the MYR DA, the EUR DA and/or the USD DA after the COD of all the Generating Blocks; and

(g) any remaining balances from the Trustee‟s Reimbursement Account upon full redemption of the Sukuk Kimanis provided always that no Dissolution Event has occurred or is occurring.

(iv) Balances in the RA shall be applied in accordance with the “Priority of Cashflow” below (except that in the case of proceeds of takaful/insurance claims not relating to loss in revenue, business interruption and/or delay in start-up, and claims received in respect of net output and/or net heat rate liquidated damages, item (e) of the “Priority of Cashflow will not apply):

(a) transfers to the MYR OA for payment of operating and maintenance, liquidated damages, taxes, duties and capital expenditures all of which shall be in Ringgit Malaysia in respect of the Project‟s expenses and any payment (after the COD of all the Generating Blocks) of such expenses and/or expenditure which would have, but for the occurrence of the COD of all the Generating Blocks, otherwise been funded by monies standing to the credit of the MYR DA, the USD DA and the EUR DA, subject to the Project and Account Monitoring Agent‟s receipt of the Issuer‟s approved budget for the relevant period and satisfactory documentary evidence for such payments and such monies so withdrawn shall be credited into the MYR Operating Account;

(b) conversions into USD under the Hedging Arrangements and to be credited into the USD OA for operating and maintenance expenses and capital expenditures all of which shall be in USD;

(c) for payment of Periodic Distribution, fees and other payments payable (excluding payment of principal obligations) under the Transaction Documents, Hedging Arrangements and the MOL



Facilities;

(d) for payment of all principal obligations under the Sukuk Programme, Hedging Arrangements and the MOL Facilities;

(e) for compliance with the FSRA and MRA requirements (in particular to fund the FSRA Minimum Required Balance and the MRA Minimum Required Balance) after the COD of all the Generating Blocks; and

(f) for payment of dividends and/or permitted distributions or payments to the Issuer‟s shareholders subject to all requisite terms and conditions under the Sukuk Programme and Transaction Documents having been met.

MYR Operating Account (“MYR OA”)

(i) The MYR OA shall be a Shariah compliant account bank denominated in Ringgit Malaysia and to be opened with the MYR Account Bank.

(ii) The Issuer shall be the sole signatory and sole operator.

(iii) The Issuer shall open the MYR OA for purposes of depositing and remitting the following:

(a) all monies withdrawn from the MYR DA solely for the purpose of crediting the same into the MYR OA for payment of all capital expenditures in Ringgit Malaysia prior to the COD of all the Generating Blocks;

(b) all monies withdrawn from the MYR DA solely for the purpose of crediting the same into the MYR OA for payment of operating and maintenance expenses, taxes, duties and recurring capital expenditures all of which shall be in Ringgit Malaysia in respect of the Project prior to the COD of all the Generating Blocks; and

(c) amounts transferred from the RA for payment of operating and maintenance expenses, taxes, duties and recurring capital expenditures all of which shall be in Ringgit Malaysia in respect of the Project after the COD of all the Generating Blocks.

USD Operating Account (“USD OA”)

(i) The USD OA shall be a bank account denominated in USD and to be opened with the Foreign Currency Account Bank.

(ii) The Issuer shall be the sole signatory and sole operator.



(iii) The Issuer shall open the USD OA for purposes of depositing and remitting the following:

(a) all USD monies withdrawn from the USD DA for payment of all USD capital expenditures prior to the COD of all the Generating Blocks; and

(b) all monies withdrawn from the RA and converted into USD under the Hedging Arrangements for payment of operating and maintenance expenses, and recurring capital expenditures all of which shall be in USD in respect of the Project after the COD of all the Generating Blocks.

EUR Operating Account (“EUR OA”)

The EUR OA shall be a bank account denominated in EUR and to be opened with the Foreign Currency Account Bank.

The Issuer shall be the sole signatory and sole operator.

The Issuer shall open the EUR OA for purposes of depositing and remitting all EUR monies withdrawn from the EUR DA for payment of all capital expenditures in EUR prior to the COD of all the Generating Blocks.

Maintenance Reserve Account (“MRA”)

The MRA shall be a Shariah compliant account bank denominated in Ringgit Malaysia and to be opened with the MYR Account Bank.

The Issuer shall be the sole signatory and sole operator.

The Issuer shall, in order to fulfil its obligations under the PPA, establish a Shariah compliant reserve account with a minimum balance of RM8 million (“MRA Minimum Required Balance”). The MRA shall be fully funded prior to the Scheduled COD of the first Generating Block and will remain in place as long as any Sukuk Kimanis obligations remain outstanding.

The Issuer is allowed to draw from the MRA to pay for maintenance expenses of the Project, including any repair or replacement of parts.

(l) Rating The rating of the Sukuk Kimanis has been assigned a preliminary rating of AA-



by Malaysian Rating Corporation Bhd (“MARC”).

(m) Mode of Issue

The Sukuk Kimanis may be issued via direct placement on a best effort basis or on bought deal basis or book running on a best effort basis, all without prospectus.

(n) Selling Restriction, including tradability

Selling Restriction at Issuance

The Sukuk Kimanis may only be offered, sold, transferred or otherwise disposed directly or indirectly to persons falling within the relevant category of the persons specified in Section 4(6) of the Companies Act, 1965, as amended from time to time, and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within:

(i) Schedule 6 or Section 229(1)(b);

(ii) Schedule 7 or Section 230(1)(b),

read together with Schedule 9 or Section 257(3) of the Capital Markets and Services Act, 2007 (“CMSA”), as amended from time to time.

Selling Restriction Thereafter

The Sukuk Kimanis may only be offered, sold, transferred or otherwise disposed directly or indirectly to persons falling within the relevant category of the persons specified in Section 4(6) of the Companies Act, 1965, as amended from time to time, and persons to whom an offer or invitation to subscribe the Sukuk Kimanis may be made and to whom the Sukuk Kimanis are issued would fall within Schedule 6 or Section 229(1)(b), read together with Schedule 9 or Section 257(3) of the CMSA, as amended from time to time.

(o) Listing Status and Types of Listing

The Sukuk Kimanis may be listed on Bursa Malaysia Securities Berhad (Exempt Regime) or any other stock exchange.

(p) Other Regulatory Approvals Required in relation to the Issue, Offer or Invitation and whether or not Obtained (please specify)

None

(q) Conditions Precedent Conditions precedent to first issuance

All the conditions precedent have to be in the form and substance acceptable to the Joint Lead Managers.

A. Main Documentation

1) The Transaction Documents and such other documents as may be advised by the Legal Counsel and mutually agreed with the Issuer have been signed and, where



applicable, stamped, or endorsed as being exempted from stamp duty and presented for registration with the relevant registries (where applicable);

2) All relevant notices and acknowledgements and where applicable, consents from the relevant counterparties to the Project Documents (where applicable) shall have been made or received, as the case may be.

B. Issuer

Receipt from the Issuer of:

1) Certified true copies of the Certificate of Incorporation, and the Memorandum and Articles of Association of each of the Issuer and the Sponsors.

2) Certified true copies of the latest Forms 24 and 49 (or such other corresponding forms, where applicable) of each the Issuer and the Sponsors.

3) The duly executed Letter of Undertaking from the Sponsors

4) A certified true extract of the board resolutions of the Issuer authorising, among others, the execution of the relevant Transaction Documents and other documents as advised by the Legal Counsel and mutually agreed with the Issuer.

5) A certified true extract of the board resolution of each of the Sponsor authorising, among others, the execution of the Letter of Undertaking.

6) A list of the Issuer‟s authorised signatories and their respective specimen signatures.

7) Original copies of all the executed and stamped Project Documents and any other supplemental documentation in relation thereto together with the board of directors‟ resolution(s) of the Issuer authorizing the execution and performance of each of the Project Documents to which it is a party.

8) Certified true copies of all relevant and material licences, permits and approvals (other than the generation licence from the Energy Commission) which are required to be obtained by the Issuer as at Financial Close and if none, a written confirmation from the Issuer to that effect.

9) Documentary evidence duly certified by auditors that prior to issuance of the Series 1 Sukuk Kimanis, the Issuer‟s shareholders‟ equity contribution in the form of ordinary paid-up shares is at least RM320.0 million.

C. General

1) A report of the relevant company search of the Issuer;

2) A report of the relevant winding up search of the Issuer;

3) The approval from the SC;



4) The Sukuk Kimanis have received the requisite rating as stated in this term sheet;

5) Evidence that all the Designated Accounts, the Trustee‟s Reimbursement Account and the FSRA have been opened and are in accordance with the provisions of this term sheet;

6) Receipt of a written report from the IE in form and substance satisfactory to the Joint Lead Arrangers confirming amongst others, the technical viability and the plant‟s ability to meet the requirements of the PPA;

7) Receipt of a written report from the Insurance Consultant satisfactory to the Joint Lead Arrangers confirming amongst others, that the construction phase takaful/insurance cover obtained by the Issuer in relation to the Project is adequate and in compliance with the Issuer‟s obligations to insure under the Project Documents;

8) Confirmation from the Insurance Consultant that the Shared Security Agent has been named as loss-payee in respect of such takaful/insurances to be assigned to the Shared Security Agent;

9) Evidence that all transaction fees, costs and expenses have been paid in full or an irrevocable authorization letter to the Facility Agent from the Issuer to deduct such fees, costs and expenses from the proceeds of the Sukuk Kimanis.

10) The Joint Lead Arrangers shall have received a satisfactory legal opinion from the Legal Counsel addressed to the Joint Lead Arrangers advising the legality, validity and enforceability of the Transaction Documents and a confirmation from the Joint Lead Arrangers‟ legal counsel that all the conditions precedents have been fulfilled;

11) The Joint Lead Arrangers have received a satisfactory legal opinion from Messrs Albar and Partners addressed to them, advising with respect to the legality, validity and enforceability of the Project Documents against the Issuer;

12) The Joint Lead Arrangers have received a satisfactory legal opinion from the Issuer‟s internal counsel addressed to them, advising with respect to the legality, validity and enforceability of the Project Documents against the relevant counterparties and confirming to the Joint Lead Arrangers that all conditions precedent in relation to the Project Documents (if applicable) have been fulfilled;

13) Perfection of all relevant Security (except for those mentioned under “Conditions Subsequent to Issuance of Series 1” below);

14) Receipt of a certified true copy of the environmental



impact assessment (“EIA”) approval from the Department of Environment (“DOE”) in respect of the Project and evidence that all conditions in the EIA approval required to be fulfilled prior to Financial Close have been met;

15) Evidence that the Issuer has entered into hedging arrangements in accordance with the Hedging Policy;

16) Delivery of a construction budget, construction schedule and operating budget in a form acceptable to the Project and Account Monitoring Agent;

17) Receipt of the latest audited financial statements of the Sponsors;

18) Evidence of the confirmation from the Joint Shariah Advisers that the structure and mechanism together with the Transaction Documents of the Sukuk Kimanis are in compliance with Shariah principles;

19) Receipt of the Reporting Accountant‟s letters on projections and forecast and comfort letter in respect of the information memorandum; and

20) Such other conditions precedent as advised by the Legal Counsel and mutually agreed with the Issuer.

Conditions Subsequent to Issuance of Series 1

The following conditions subsequent and additional conditions to be mutually agreed with the Issuer shall be complied with to the satisfaction of the Trustee within the stipulated timeframe below or such other extended period as may be agreed with the Trustee:

(a) the following shall be complied with by no later than three (3) years from the date of the Financial Close:

(i) The Memorandum of Charge and the Sub-lease (“Memorandum of Sub-Lease”) over the Project Land have been signed and, where applicable, stamped, or endorsed as being exempted from stamp duty, where applicable, and presented for registration with the relevant land registry;

(ii) The execution of any agreement(s) or document(s) that is material to the Project as may be reasonably determined by the Joint Lead Arrangers and agreed by the Issuer;

(iii) The issue document of title to the Project Land in the name of the Land Owner shall have been delivered to the Shared Security Agent for the purpose of facilitating the presentation and registration of the Memorandum of Sub-Lease and the Memorandum of Charge at the relevant land registry;

(iv) Written evidence of the permission of the Director of Lands and Survey to Yayasan Sabah for the sub-



lease of the Project Land to the Issuer shall have been delivered to the Shared Security Agent and receipt of documentary evidence evidencing or confirming that all conditions imposed by the Director of Lands and Survey have been fulfilled;

(b) Receipt of a confirmation from the Insurance Consultant that the agreed operational phase insurance cover has been duly executed six (6) months prior to the Scheduled COD of the first Generating Block;

(c) Perfection of the assignment of all the Issuer‟s rights, title, interests and benefits in and to the operational phase insurances prior to Scheduled COD of the first Generating Block;

(d) Receipt of a confirmation from the IE that all the conditions required during construction period in the EIA report have been met within 5 business days of the actual COD of the first Generating Block;

(e) Receipt of a certified true copy of the generation license from the Energy Commission with documentary evidence that the conditions therein have been complied prior to the actual Initial Operation Date (as defined in the PPA) of the first Generating Block; and

(f) Such other conditions subsequent as advised by the Legal Counsel and mutually agreed with the Issuer.

Conditions Precedent to Issuance of Series 2

All conditions precedent have to be in form and substance acceptable to the Primary Subscriber/s of Series 2:

1) All representation and warranties are true and correct; and

2) No Dissolution Event has occurred and is continuing or shall occur following the issuance of Series 2.

(r) Representations and Warranties

To include the following:

(i) the Issuer is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, has full power to carry on its business and to own its property and assets;

(ii) the memorandum and articles of association of the Issuer incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise the Issuer to:

(a) own its assets,

(b) carry on its business; and



(c) execute, deliver and perform the transactions contemplated in the Transaction Documents and the Project Documents in accordance with their terms;

(iii) all relevant consents, approvals or authorisation of any administrative, governmental or other authority or body in Malaysia required or necessary to authorise the Issuer to:

(a) own its assets,

(b) carry on its business; and

(c) execute, deliver and perform the transactions contemplated in the Transaction Documents and the Project Documents in accordance with their respective terms;

have been duly obtained and remain in full force and effect;

(iv) neither the execution and delivery of any of the Transaction Documents and the Project Documents nor the performance of any of the transactions contemplated by the Transaction Documents and the Project Documents did or does as at the date this representation and warranty is made or repeated:

(a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Issuer or any of its assets are bound or which is applicable to the Issuer or any of its assets; or

(b) cause the powers of the Issuer‟s directors, whether imposed by or contained in its constitution or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded;

(c) cause the creation or imposition of any security interest or restriction of any nature on any of its assets (other than those securities as contemplated in this termsheet);

(v) no step has been taken by the Issuer or, to the best of the Issuer's knowledge, any of its shareholders nor has any legal proceeding including winding up been commenced, instituted or threatened (to which the Issuer has received written notice thereof) for the dissolution or for the appointment of a receiver, receiver and manager, liquidator, judicial manager or such similar officer of the Issuer or any of its assets which, in the case of any proceeding undertaken by a party other than the Issuer, has not been suspended or set aside by the Issuer within fourteen (14) days of such action coming to the knowledge of the Issuer;



(vi) no event has occurred which constitutes, or which with the giving of notice and/or the lapse of time and/or a relevant determination would constitute a contravention of, or default under any agreement or instrument by which the Issuer or any of its assets is bound or affected, being a contravention or default which would have a Material Adverse Effect;

(vii) no litigation, arbitration or administrative proceeding or claim is current, presently in progress or pending against the Issuer or any of its assets, which if adversely determined would have a Material Adverse Effect;

(viii) all necessary returns have been delivered by or on behalf of Issuer to the relevant taxation authorities and the Issuer is not in default of any tax payment save and except for taxes that are being contested in good faith and by appropriate means and it is not required under the applicable law to pay the taxes pending determination of the matter;

(viii) the latest audited financial statements (including cashflow statements, income statements and the balance sheet) of the Issuer have been prepared on a basis consistently applied and in accordance with approved accounting standards in Malaysia and give a true and fair view of its financial position for that year and the state of affairs at that date, as the case may be;

(viii) the information memorandum in relation to the Sukuk Programme does not contain any statement or information that is false or misleading and there is no material omission in respect thereof, and all expressions of expectations, intentions, belief and opinion contained therein were honestly made on reasonable grounds after due and careful query by the Issuer;

(ix) the Issuer is in compliance and will comply with all applicable laws, guidelines, permits and regulations (including all relevant environmental laws, permits and guidelines);

(xii) all authorisations, approvals, consents, licenses, exemptions, registrations, recordings, filings or notarisations and payment of all duties or taxes and all other actions whatsoever which are necessary or desirable to ensure the legality, validity or enforceability of the liabilities and obligations of the Issuer or the rights of the Sukukholders or the Trustee or the Shared Security Agent under the Transaction Documents or the Sukuk Programme have been duly obtained and remain in full force and effect;

(xiii) no Dissolution Event or event or circumstance which, with the passing of time, the giving of notice, the making of a determination or any combination thereof constituting a Dissolution Event has occurred;

(xiv) each of the Transaction Documents to which it is a



party constitutes legal, valid, binding and enforceable obligations of the Issuer;

(xv) to the best of the Issuer's knowledge, no person has disputed, repudiated or disclaimed liability under any of the Project Documents or evidenced an intention to do so where, in each case, such action has a Material Adverse Effect;

(xvi) there has been no material adverse change in the financial condition of the Issuer since the date of its incorporation (where no audited financial statements have been prepared) or since its last audited financial statements;

(xvii) (a) each copy of the Project Documents delivered to the Shared Security Agent is true and complete; (b) there is no other agreement in connection with the Project, or arrangements which amend, supplement or change the effect of any Project Document; and (c) there is no material dispute in connection with any Project Document;

(xviii) all takaful/insurances required under the Project Documents have been effected and are valid and binding and all takaful contributions/premiums due have been paid and, so far as the Issuer is aware, nothing has been done or omitted to be done which has made or could make any such policy void or voidable; and

(xix) any other representations and warranties as advised by the Legal Counsel and mutually agreed with the Issuer.

(s) Events of Default

The „Dissolution Events‟ shall include the following:

(i) the Issuer fails to pay any amount due from it under the Sukuk Kimanis or any of the Transaction Documents on the due date unless it demonstrates to the satisfaction of the Trustee that such failure to pay is due to a technical error in the banking system relating to the transmission of funds (which is not caused by the Issuer) and such payment is made within seven (7) business days of its due date;

(ii) any indebtedness for borrowed moneys (including Islamic financing) of the Issuer other than (i) above becomes due or payable or capable of being declared due or payable prior to its stated maturity or any guarantee or similar obligations of the Issuer is not discharged at maturity or when called and such declaration of indebtedness being due or payable or such call on the guarantee or similar obligations is not (.1) discharged; or (.2) disputed in good faith by the Issuer in a court of competent jurisdiction; within thirty (30) days from the date of such declaration or call or the Issuer goes into default under, or commits a breach of, any agreement or instrument relating to any such indebtedness, guarantee or other obligations, or any security created to secure such indebtedness becomes enforceable;



(iii) any representation or warranty made by the Issuer under any provision of the Transaction Documents to which it is a party or any information, notice, opinion or certificate or other document delivered pursuant to the terms of the Transaction Documents proves to have been incorrect or misleading as of the date at which such representation or warranty is made or the date of delivery of such information, notice, opinion or certificate or other document or, if repeated, with reference to the facts and circumstances then existing provided that, in the case of any information, notice, opinion or certificate or other document delivered by a party (other than the Issuer) to a Project Document such incorrect or misleading information, notice, opinion or certificate or other document, in the reasonable opinion of the Trustee, would have a Material Adverse Effect;

(iv) the Issuer fails to observe or perform its obligations under any of the Transaction Documents or under any undertaking or arrangement entered into in connection therewith (other than an obligation of the type referred to in paragraph (i) above and paragraph (xxii) below), and in the case of a failure which in the reasonable opinion of the Trustee is capable of being remedied, the Issuer does not remedy the failure within a period of fourteen (14) days after the Issuer became aware or having been notified by the Trustee of the failure;

(v) an encumbrancer takes possession of, or a trustee, receiver and manager or similar officer is appointed in respect of the whole or part of the business or assets of the Issuer, or distress, legal process, sequestration or any form of execution is levied or enforced or sued out against the Issuer, which has a Material Adverse Effect, or any security interest which may for the time being affect any of its assets becomes enforceable, and is not discharged, suspended or set aside by the Issuer within fourteen (14) days from the date of such taking of possession or appointment or of service of notice of execution or enforcement;

(vi) the Issuer fails to satisfy any judgment passed against it by any court of competent jurisdiction and no appeal against such judgment or no application for a stay of execution has been made to any appropriate appellate court within the time prescribed by law or such appeal or application for a stay of execution has been dismissed;

(vii) any step is taken for the winding up, dissolution or liquidation of the Issuer or a resolution is passed for the winding up of the Issuer or a petition for winding up is presented against the Issuer and the Issuer has not taken any action in good faith to set aside such



petition within fourteen (14) days from the date of service of such winding up petition or a winding up order has been made against the Issuer;

(viii) the Issuer convenes a meeting of its creditors or proposes or makes any arrangement including any scheme of arrangement or composition or begins negotiations with its creditors, or takes any proceedings or other steps, with a view to a rescheduling or deferral of all or any part of its indebtedness or a moratorium is agreed or declared by a court of competent jurisdiction in respect of or affecting all or any part of its indebtedness or any assignment for the benefit of its creditors (other than for the purposes of and followed by a reconstruction previously approved in writing by the Trustee, unless during or following such reconstruction the Issuer, as the case may be, becomes or is declared to be insolvent) or where a scheme of arrangement under section 176 of the Companies Act 1965 has been instituted against the Issuer;

(ix) the Issuer:-

(a) is deemed unable to pay any of its debts within the meaning of Sections 218(2)(a) of the Companies Act, 1965 (save and except for any demand or notice which is scandalous, frivolous, vexatious or an abuse of process or related to a claim to which is being contested in good faith by the Issuer PROVIDED THAT no Dissolution Event shall occur under this paragraph if (.1) the Issuer has, within 30 business days or such other extended period as may be agreed by the Trustee after the serving of such demand or notice, taken steps to dispute such demand or notice, and (.2) the Issuer has, within 60 business days or such other extended period as may be agreed by the Trustee after the serving of such demand or notice, settled such demand or notice or alternatively cause such demand or notice to be withdrawn; or

(b) becomes unable to pay any of its debts as they fall due or suspend or threaten to suspend making payments with respect to all or any class of its debts;

(x) any creditor of the Issuer exercises a contractual right to take over the financial management of the Issuer and such event in the reasonable opinion of the Trustee may have a Material Adverse Effect;

(xi) the Issuer changes or threatens to change the nature or scope of a substantial part of its business, or suspends or threatens to suspend or cease or threatens to cease the operation of a substantial part of its business which it now conducts directly or



indirectly and such change or suspension or cessation in the reasonable opinion of the Trustee may have a Material Adverse Effect;

(xii) at any time any of the provisions of the Transaction Documents or Project Documents is or becomes illegal, void, voidable or unenforceable;

(xiii) any of the assets, undertakings, rights or revenue of the Issuer are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any governmental body which in the reasonable opinion of the Trustee may have a Material Adverse Effect;

(xiv) any of the Project Documents is terminated or there has been a breach of any obligation or term by the Issuer and/or project counterparties under any of the Project Documents, which would in the reasonable opinion of the Trustee have Material Adverse Effect and in a case of a breach which, is in the reasonable opinion of the Trustee capable of remedy, such breach has not been remedied to the satisfaction of the Trustee within fourteen (14) days after the Issuer became aware or having been notified in writing of such breach or within such longer period as may be allowed under the relevant Project Document but in any case not longer than sixty (60) days after the Issuer become aware or having been notified in writing of such breach;

(xv) where there is a revocation, withholding, invalidation or modification of any license, authorisation, approval or consent which in the opinion of the Trustee would have a Material Adverse Effect or the generation licence is terminated, revoked or ceases to be in full force and effect without a substitute licence being issued therefore or is modified and the effect of such modification would be to prevent the implementation or carrying out of the Project or would in the reasonable opinion of the Trustee otherwise have a Material Adverse Effect;

(xvi) the Issuer repudiates any of the Transaction Documents or the Issuer does or causes to be done any act or thing evidencing an intention to repudiate any of the Transaction Documents;

(xvii) any event or events has or have occurred or a situation exists which gives reasonable grounds for the Trustee to believe that such event would have a Material Adverse Effect and/or would materially and adversely affect the Issuer‟s ability to perform its obligations and undertakings under the Transaction Documents and/or Project Documents, and in the case of the occurrence of such event or situation which in the reasonable opinion of the Trustee is capable of being remedied, the Issuer does not



remedy it to the satisfaction of the Trustee within a period of fourteen (14) days (or such other longer remedy period as may be allowed under the Project Documents for the relevant event or situation) after the Issuer became aware or having been notified in writing by such Trustee of the event or situation;

(xviii) work in respect of the whole or any material part of the Project is suspended and such suspension continues for a period of thirty (30) days or such longer period as may be allowed under the relevant Project Document but in any case not longer than ninety (90) days;

(xix) The Issuer fails to achieve completion of the Project within six (6) months from Scheduled COD of any Generating Block and in the manner outlined in the PPA;

(xx) any of the security interests created under any of the Transaction Documents cannot be perfected or is in jeopardy for any reason whatsoever;

(xxi) the occurence of a Total Loss Event; or

(xxii) the Memorandum of Sub-Lease over the Project Land is not executed and registered at the relevant land office within three (3) years from the date of Financial Close or such other extended period as may be agreed by the Trustee; or

(xxiii) such other events as may be advised by the Legal Counsel and mutually agreed with the Issuer;

the Trustee may, or if so instructed in writing by the Sukukholders pursuant to Special Resolution shall declare (by giving notice to the Issuer) that a Dissolution Event has occurred and that the Sukuk Kimanis will become immediately due and payable (notwithstanding their stated maturity dates) whereupon:-

(1) in the case where the Asset has not been completed and delivered to the Trustee pursuant to the Istisna‟ Agreement, the Istisna‟ Agreement shall be terminated immediately and the Issuer (in its capacity as the Contractor) shall immediately:- (.1) refund to the Trustee the Istisna‟ Price that has

been paid to by the Contractor; and (.2) pay to the Trustee the Compensation Amount

as compensation for failure to complete the construction and delivery of the Assets to the Trustee.

The refund and payment by the Issuer (in its capacity as Contractor) of the Istisna‟ Price and the Compensation Amount respectively shall be satisfaction pro tanto of the Issuer‟s obligation to



redeem the Sukuk Kimanis;

(2) in the case where the Asset has been completed and delivered to the Trustee pursuant to the Istisna‟ Agreement and in the absence of the occurrence of a Dissolution Event referred to in paragraph (xxi) above (relating to a Total Loss Event)), Trustee (acting for and on behalf of the Sukukholders) shall exercise the Purchase Undertaking and, when so exercised, the Exercise Price will become immediately due and payable under the sale agreement entered into pursuant to the exercise of the Purchase Undertaking. Upon full payment of the Exercise Price, the Sukuk Kimanis held by the Sukukholders shall be cancelled;

(3) in the case where the Asset has been completed and delivered to the Trustee pursuant to the Istisna‟ Agreement and in the case of the occurrence of a Dissolution Event referred to in paragraph (xxi) above (relating to a Total Loss Event), the Issuer (in its capacity as Servicing Agent) shall utilize proceeds from the takaful/insurance to redeem the Sukuk Kimanis and if the proceeds from the takaful/insurance are insufficient to redeem the Sukuk Kimanis in full and to pay the redemption amount due under the Sukuk Kimanis and the Ownership Expenses (if any), the Issuer (in its capacity as Servicing Agent) shall make good the difference. If the proceeds from the takaful/insurance exceed the amount required to redeem the Sukuk Kimanis and the Ownership Expenses (if any), such excess shall be paid to the Servicing Agent as an incentive fee.

(t) Covenants

(1) Positive Covenants To include the following:

(i) the Issuer shall maintain or cause to be maintained in full force and effect all relevant authorisations, consents, rights, licenses, approvals and permits (governmental or otherwise) and comply with environmental laws and will promptly obtain and/or renew any further authorisations, consents, rights, licenses, approvals and permits (governmental and otherwise) which is or may become necessary:

(a) to enable it to own its assets and to carry on its business; and

(b) for the entry or performance of its obligations under the Transaction Documents to which it is a party or to ensure the legality, validity,



enforceability, admissibility in evidence of the obligations of the Issuer under the Transaction Documents and the Issuer shall comply with the same where failure to do so would have a Material Adverse Effect .

(ii) the Issuer shall at all times upon request by the Trustee and/or Facility Agent execute or cause to be executed all such further documents and do all such further acts, as are reasonably necessary to give further effect to the terms and conditions of the Transaction Documents and the Project Documents, save, in relation to the Project Documents, the Issuer shall be required to execute such documents or do such acts if the failure to do so would have a Material Adverse Effect;

(iii) the Issuer shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices of the power industry;

(iv) the Issuer shall procure that the Project is constructed, operated and maintained in accordance with the Project Documents, good industry practice and all applicable laws;

(v) the Issuer shall appoint and maintain reputable and recognized external auditors;

(vi) the Issuer shall promptly perform and carry out all its obligations under the Transaction Documents to which it is a party (including obligation to redeem the Sukuk Kimanis on the relevant maturity date(s) or any other date on which the Sukuk Kimanis are due and payable) and ensure that it shall immediately notify the Trustee in writing in the event that the Issuer is unable to fulfil or comply with any of the provisions of the Transaction Documents;

(vii) the Issuer shall comply with the requirements in relation to takaful/insurances required under the Transaction Documents and Project Documents;

(viii) during the construction period prior to the COD of the third Generating Block, the Issuer‟s engineer shall submit a progress report every quarter to each of the IE for verification and the Trustee, and which report shall contain (1) a summary of progress towards achieving the COD of all Generating Blocks, (2) latest estimated date of COD of all Generating Blocks, (3) confirmation of construction and other costs paid up to the date of the then quarterly progress report and estimated remaining capital expenditure/construction-related costs and pre-operational expenditure to be incurred towards the implementation of the COD of all Generating Blocks, (4) details of actual or likely cost



overruns, and (5) details of the conditions of the EIA approval being complied. Such report must be signed-off by the IE and outlines the matters specified in items (1) until (5) above;

(ix) the Issuer shall keep proper books and accounts at all times and prepare and maintain its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Issuer for the period to which the financial statements are made up and shall disclose or provide against all material liabilities (actual or contingent) of the Issuer and shall provide the Trustee and any person appointed by it (for e.g. auditors) access to such books and accounts to the extent permitted by law;

(x) the Issuer shall provide the Trustee, the Shared Security Agent and their representatives reasonable access to the Project site and to inspect all relevant Project Documents at all reasonable times provided prior notice has been given to the Issuer and subject to such parties executing confidentiality undertakings as prescribed by the Issuer and Provided further that such access and disclosure does not result in any contravention by the Issuer of any laws, regulations or directives and would not result in the Issuer breaching any stock exchange requirements, duty of confidentiality or confidentiality obligations;

(xi) the Issuer shall open and maintain the required Designated Accounts and the FSRA for the purposes stated herein and make payments from such accounts only as permitted under the Transaction Documents;

(xii) the Issuer shall maintain a paying agent in Malaysia at all times and will procure the paying agent to forthwith notify the Trustee (through the Facility Agent) if the Paying Agent does not receive payment from the Issuer on the due dates as required under the Trust Deed and the conditions of the Sukuk Kimanis;

(xiii) the Issuer shall promptly exercise its rights under the Project Documents so as to procure that the contractors, subcontractors and consultants appointed in connection with any works are properly skilled, qualified and experienced to undertake the awarded contracts and maintenance projects and to ensure that such parties perform their respective obligations under the Project Documents;

(xiv) it shall promptly notify the Trustee of any litigation or other proceedings of any nature whatsoever being initiated against it before any court or tribunal or administrative agency which would have a Material Adverse Effect;



(xv) it shall promptly comply with all applicable laws relating to the Sukuk Kimanis (including the provisions of the Capital Market & Services Act, 2007 as amended from time to time (“CMSA”) and all circulars, conditions or guidelines issued by the Securities Commission from time to time) as may be applicable to it;

(xvi) the Issuer will do all acts and take all steps necessary or expedient to safeguard and preserve its assets (whether in relation to the Project or otherwise) and each part thereof and the title and ownership thereto and the security interests created pursuant to the Transaction Documents;

(xvii) the Issuer shall:

(a) ensure that the environmental management plan stated, and the environmental mitigation and monitoring measures recommended, in the EIA report are followed in the design, construction, implementation, operation and maintenance of the Project;

(b) ensure that all the conditions in the EIA report required to be fulfilled during operations phase have been met;

(c) comply with all relevant environmental laws, permits, guidelines and regulations; and

(d) take all necessary mitigation measures specified in the EIA to minimize the environmental impact of the Project;

(xviii) the Issuer shall promptly inform the Trustee and Facility Agent of any change in the Project Cost, which exceeds RM10 million from the original Project Cost or any variation orders which may result in a delay of the Scheduled COD;

(xix) the Issuer shall procure the execution of the Memorandum of Sublease and registration of the same at the relevant land office pursuant to the Sabah Land Ordinance no later than 3 years from the date of the Financial Close or such other extended period as may be agreed with the Trustee;

(xx) such other positive covenants as may be advised by the Legal Counsel and mutually agreed with the Issuer.

(2) Negative Covenants The Issuer undertakes that unless the prior written consent of the Trustee, acting under the instructions of the Sukukholders by way of a special resolution, is obtained:

(i) the Issuer will not incur or permit to exist any indebtedness for borrowed moneys including Islamic financing or enter into any derivative transactions or



give any guarantee in respect of any indebtedness of any person other than (i) pursuant to the Sukuk Programme; or (ii) the Permitted Indebtedness;

(ii) the Issuer shall not create or permit to exist any security interest over its assets other than those contemplated under this term sheet, but excluding liens arising in the ordinary course of business by operation of law and not by way of contract;

(iii) the Issuer shall not dispose of the whole or any substantial part of its assets, save:

a) for the disposal and replacement of the same due to obsolescence and/or deterioration; or

b) where the asset disposal is solely for the purpose of facilitating Shariah-compliant financing to the extent such financing is permitted under the terms hereof.

(iv) the Issuer shall not enter into any agreement or transaction, whether directly or indirectly, with interested persons (including a director of the Issuer, a major shareholder of the Issuer or the chief executive of the Issuer or persons connected with a director or a major shareholder or the chief executive of the Issuer), unless:

(a) such agreement or transaction: (1) is entered into in the ordinary course of its business and on an arms‟ length basis, (2) would not have a Material Adverse Effect, (3) is on terms that are no less favourable to the Issuer than those which could have been obtained in a comparable transaction from persons who are not interested persons; and

(b) in respect of a transaction involving an aggregate amount greater than 5% of the percentage ratio (as defined in the Listing Requirements), the Issuer obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms;

and provided that the Issuer shall certify to the Trustee:

1. that such transaction complies with the requirement in item (a);

2. that the Issuer has received the certification referred to in item (b) (where applicable); and

3. that such transaction has been approved by the majority of the Issuer‟s board of directors or shareholders in a general meeting, as the case



may require;

(v) the Issuer shall not add, delete, amend or substitute its Memorandum or Articles of Association in a manner which may be materially prejudicial to the interests of the Sukukholders;

(vi) the Issuer shall not agree to any material variations to work under the EPC Contract that could result in delay in the Project beyond 12 months from the Scheduled COD of each Generating Block and/or result in an increase in the Project Cost by more than RM50 million;

(vi) the Issuer shall not reduce or in any way whatsoever alter except increase, its authorised or paid-up share capital whether by varying the amount, structure or value thereof or the rights attached thereto or by converting any of its share capital into stock, or by consolidating, dividing or sub-dividing all or any of its shares;

(vii) the Issuer shall not have any subsidiaries;

(viii) the Issuer shall not obtain or permit to exist any financing/loans or advances from its shareholders unless these financing/loans and advances are subordinated to the Sukuk Programmeto the extent contemplated in (ix) below;

(ix) the Issuer shall not declare or pay any dividends or make any distribution whether income or capital in nature to its shareholders or make any payments (whether in relation to principal, interest or otherwise) to its shareholders in connection with any loans or advances from its shareholders if:

(a) the FSCR is below 1.5x or will fall below 1.5x after such payment or distribution; or

(b) COD of all Generating Blocks have not been achieved; or

(c) the requirements of the FSRA and MRA have not been met or will not be met following such payment or distribution; or

(d) it is during a period when no FSCR is being calculated; or

(e) a Dissolution Event has occurred or is continuing or if following such payment or distribution, a Dissolution Event would occur.

(x) the Issuer shall not use the proceeds of the Sukuk Programme except for the purposes set out in the Transaction Documents and the Information Memorandum;

(xi) the Issuer shall not lend any money to any party other than to the Issuer's directors, officers or employees as



part of their terms of employment;

(xii) the Issuer shall not (a) engage or carry on any other business other than the business in connection with Project; (b) cancel, surrender, abandon or otherwise change in a material manner the nature or scope of its existing business; or (c) suspend or threaten to suspend a substantial part of its business in any manner which would have a Material Adverse Effect;

(xiii) the Issuer shall not agree to, amend, vary, terminate (except due to lapse of time), replace or supplement or waive any breach or proposed breach any of its Project Documents, which would have a Material Adverse Effect;

(xiv) the Issuer shall not agree to, waive any breach or proposed breach in any of the Project Documents by its counterparty(s) which would have a Material Adverse Effect;

(xv) the Issuer shall not do or omit to do any act, or execute or omit to execute any document which may render any of the Project Documents to be illegal, void, voidable or unenforceable;

(xvi) the Issuer will not consolidate or amalgamate or merge with or into, or transfer all or substantially all its assets to or acquire all or substantially all the assets (including shares and/or stocks of any class, partnership or joint venture interest) of another entity; (for the avoidance of doubt, the Issuer will be deemed to have acquired substantially all of the ordinary shares of another entity if that entity becomes a subsidiary of the Issuer as a result of the acquisition);

(xvii) the Issuer shall not open or maintain any other bank accounts apart from the Designated Accounts and the FSRA for Sukukholders‟ Actions throughout the tenure of the Sukuk Programme and for so long as the Sukuk Kimanis remains outstanding;

(xviii) the Issuer shall not take any steps to wind up or enter into any voluntary winding up or dissolve itself;

(xix) the Issuer shall not grant any licence, rentals, tenancies and/or further sub-leases in respect of the Project Land or any part thereof arising from the sub-lease granted to the Issuer over the Project Land to any persons save and except for the further sub-lease of such portion of the Project Land by the Issuer to SESB in respect of the switchyards in accordance with the terms of the PPA and such parties as nominated by Petronas in accordance with the terms of the GSA;

(xx) the Issuer shall not permit any change to its Shareholders which will result in Petronas Gas Berhad and Yayasan Sabah (via NRG Consortium (Malaysia) Sdn Bhd) holding less than 60% and 40% respectively



of its issued and paid up capital; and

(xxi) such other negative undertakings as may be advised by the Legal Counsel and mutually agreed with the Issuer.

(3) Information Covenants To include the following:

(i) the Issuer shall provide to the Trustee and Facility Agent, at least on an annual basis, a certificate signed by an authorised director confirming that:

(a) it has observed, performed and complied with all its covenants, representations, warranties and other relevant obligations under the Transaction Documents and the Project Documents save, in relation to the Project Documents such confirmation shall relate to its obligations where the non-observance, non-performance or non-compliance therewith would have a Material Adverse Effect;

(b) no Dissolution Event has occurred since the date the Sukuk Kimanis were first issued or the date of the previous certificate (as the case may be), and if a Dissolution Event has occurred or did exist since the date stipulated above, the Issuer shall provide the details of such Dissolution Event;

(c) the Issuer is compliant with all relevant environmental laws, permits, guidelines and regulations;

(ii) the Issuer shall deliver to the Trustee and the Facility Agent the following:

(a) as soon as they become available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its consolidated financial statements for that year which shall contain the income statements and balance sheets of the Issuer and which are audited and certified without qualification by a firm of independent certified public accountants acceptable to the Trustee;

(b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of its financial year) copies of its unaudited half yearly consolidated financial statements for that period which shall contain the income statements and balance sheets of the Issuer which are duly certified by any one of its directors;

(c) promptly, such additional financial or other information relating to the Issuer‟s affairs, business, the Project and its operations as the Trustee and/or Facility Agent may from time to time reasonably request; and



(d) promptly, all other accounts, reports, notices, statements, circulars or other documents received by the Issuer from any of its shareholders or its creditors which contents may materially and adversely affect the interests of the Sukukholders, and a copy of all accounts, reports, notices, statements, circulars or other documents dispatched by the Issuer to its shareholders (or any class of them) in their capacity as shareholders or its creditors generally at the same time as these documents are dispatched to these shareholders or creditors and the Issuer agrees that the Trustee may at its discretion circulate such documents to the Sukukholders as well as to the Rating Agency;

(iii) upon achieving the COD of the third Generating Block, the Issuer shall deliver to the Project and Account Monitoring Agent budgets (the form and substance to be mutually agreed with the Project and Account Monitoring Agent) at a date to be determined with the Project and Account Monitoring Agent.

(iv) the Issuer shall notify the Trustee of any change in its board of directors within fourteen (14) days of such change;

(v) the Issuer shall promptly notify the Trustee in writing upon the occurrence of any of the following:-

(a) any change in its condition (financial or otherwise) or any circumstances that has occurred that would materially prejudice the security interest given under the Transaction Documents and of any litigation or other proceedings of any nature whatsoever being threatened or initiated against the Issuer before any court or tribunal or administrative agency which may have a Material Adverse Effect;

(b) any Dissolution Event or any event which, upon the giving of notice and/or lapse of time and/or the issue of a certificate and/or the fulfillment of the relevant requirement as contemplated under the relevant Transaction Document would constitute a Dissolution Event (“Potential Dissolution Event”) forthwith upon becoming aware thereof, and it shall take all reasonable steps and/or such other steps as may reasonably be requested by the Trustee to remedy and/or mitigate the effect of the Dissolution Event or the Potential Dissolution Event;

(vi) the Issuer shall immediately notify the Trustee in writing if the Issuer becomes aware of any event that has caused or could cause one or more of the following:-



a) any amount payable under the Sukuk Kimanis to become immediately payable or enforceable in accordance with the terms thereof;

b) any other right or remedy under the terms, provisions or covenants under the trust deed or under the Sukuk Kimanis and/or the trust deed becomes immediately enforceable;

c) any circumstance that has occurred that would materially prejudice the Issuer or the security interest created by the Shared Security Documents;

d) any substantial change in the nature of the business of the Issuer;

e) any change in the withholding tax position of the Issuer;

f) any change in the utilisation of the issue proceeds of the Sukuk Kimanis, details of such usage as described in the Information Memorandum and the Transaction Documents; and/or

g) any other matter that may materially prejudice the interests of the Sukukholders.

(4) Financial Covenants

To include the following and any other covenants to be mutually agreed with the Issuer:

The Issuer shall, commencing from the financial year following the financial year when the COD of the 3rd Generating Block is achieved, maintain a Minimum FSCR (as defined herein) of at least 1.25x. The calculation of the FSCR calculations shall be duly confirmed by the Issuer‟s external auditors and be based on the latest audited accounts of the Issuer on an annual basis.

The Issuer shall arrange for the external auditor‟s confirmation to be forwarded to the Project and Account Monitoring Agent for its onward transmission to the Trustee and Rating Agency.

(u) Provisions on Buy-Back and Early Redemption of Sukuk

Not applicable.

(v) Other Principal Terms and Conditions for the Issue

(i) Issue Price The Sukuk Kimanis are to be issued at par or at a discount and the issue price will be calculated in accordance with the Operational Procedures for Securities Services issued by Malaysian Electronic Clearing Corporation Sdn Bhd (“MyClear”), as amended or substituted from time to time



(“MyClear Procedures”).

(ii) Minimum Level of Subscription (%)

The minimum level of subscription for each issue shall be 100% of the said issue size.

(iii) Form and Denomination

The Sukuk Kimanis shall be issued in accordance with (1) the “Participation and Operation Rules for Payment and Securities Services issued by MyClear (“MyClear Rules”) and (2) the MyClear Procedures, or their replacement thereof (collectively the “MyClear Rules and Procedures‟) as applicable from time to time. Each tranche of the Sukuk Kimanis shall be represented by a Global Certificate to be deposited with BNM, and is exchangeable for definitive bearer form only in certain limited circumstances. The denomination of the Sukuk Kimanis shall be RM1,000 or in multiples of RM1,000 thereof or such other denominations as may be allowed by MyClear/BNM at the time of issuance.

(iv) Letter of Undertaking from Sponsors

A letter of undertaking from the Sponsors to:

(i) complete the Project;

(ii) provide through equity injection and/or inter-company financing facility to the Issuer in proportion to each of their respective shareholding in the Issuer to fund any cost overruns incurred relating to the Project up to a total aggregate of RM 50.0 million; and

(iii) provide through equity injection and/or inter-company financing facility to the Issuer, in proportion to its shareholdings in the Issuer to fund any payment obligations in relation to the Sukuk up to a total aggregate amount of RM50.0 million.

(v) Status All payment obligations under the Sukuk Kimanis shall constitute direct, unconditional and secured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, subject to those preferred by the laws of Malaysia.

(vi) Redemption Unless previously redeemed or purchased and cancelled, the Sukuk Kimanis will be redeemed by the Issuer at 100% of their nominal value on their respective maturity dates.

The Issuer may at any time purchase the Sukuk Kimanis at any price in the open market or by private treaty, but these repurchased Sukuk Kimanis shall be cancelled and cannot be resold or reissued.

(vii) Availability Upon completion of documentation and, unless waived by the Joint Lead Arrangers, compliance of all conditions precedent and other applicable conditions to be mutually agreed with



the Issuer and such compliance shall be to the satisfaction of the Joint Lead Arrangers.

(viii) Purchase and selling price / rental (where applicable)

Istisna’ Price

The Istisna„ Price pursuant to the Istisna‟ Agreement (which shall be equal to the aggregate proceeds from the issuance of each series of the Sukuk Kimanis) shall be determined prior to the issuance of Series 1.

The Istisna‟ Price shall be in line with the asset pricing requirement stipulated under the Sukuk Guidelines issued by the SC as may be amended from time to time.

Selling Price

Not applicable

Advance Rentals and Lease Rentals

The Advance Rentals and Lease Rentals (based on the relevant Periodic Distribution Rate) shall be determined prior to issuance of each Sukuk Kimanis.

(ix) Finance Service Cover Ratio (“FSCR”)

The FSCR is the ratio of Available Cash Flow to the aggregate of:

(i) all principal obligations payable by the Issuer under the Sukuk Programme for the next 12 months; plus

(ii) all principal obligations paid by the Issuer under any other indebtedness for borrowed monies (including Islamic financing) of the Issuer during the previous 12 months and all interests/coupons/profit payments paid under such other indebtedness for borrowed monies of the Issuer during the previous 12 months; plus

(iii) all Periodic Distributions, to be paid under the Sukuk Programme for the next 12 months; plus

(iv) all payments under the Hedging Arrangements during the previous 12 months.

For the avoidance of doubt, any double counting shall be disregarded.

“Available Cash Flow” means in any annual period, the sum of:

(i) all income received by the Issuer under the PPA and other Project Documents and any other receipts of a capital or revenue nature under any contract or agreement;

(ii) all cash distribution, returns and realized gains received by the Issuer;

(iii) all credit balances in the Designated Accounts and the FSRA including accrued profit payments retained by or on behalf of the Issuer and the amount utilized from the Designated Accounts for Permitted Investments at



the beginning of the relevant 12 month period;

(iv) net sums released from the MRA and FSRA;

(v) any liquidated damages (“LDs”)/penalties received by the Issuer under any Project Document; and

(vi) proceeds of takaful/insurance claims received by the Issuer.

Less:

(i) the total amount spent on management, administration, financing (including but not limited to the respective fees of the Trustee, the Facility Agent, the Shared Security Agent, the Rating Agency, commitment fees and fees payable under the MOL Facilities etc), operation, maintenance and heavy repairs and any other capital expenditures;

(ii) any other payments (including penalties and LDs) made by the Issuer under the Project Documents;

(iii) taxes, duties or such other contributions paid by the Issuer;

which shall be computed based on the Issuer‟s latest audited accounts and confirmed by its external auditors acceptable to the Trustee.

(x) Permitted Investments The Issuer shall be permitted from time to time to utilise funds held in the Designated Accounts, the Trustee‟s Reimbursement Account and the FSRA to make Permitted Investments, provided that:

(i) such funds utilised for Permitted Investments shall be remitted to the relevant Designated Accounts, the Trustee‟s Reimbursement Account or the FSRA, as the case may be, no later than three business days prior to the dates when such monies will be needed to meet any payment obligations of the Issuer when due and payable;

(ii) such Permitted Investments are to be held and not traded. However, in the event that such Permitted Investments subsequently fails to meet any of the criteria for Permitted Investments, that Permitted Investment may be disposed of; and

(iii) in the case where such Permitted Investments are to be denominated in currencies other than Ringgit Malaysia, such Permitted Investments are only restricted to Islamic certificate of deposits with licensed financial institutions with a rating of not lower than BBB+ by Standard & Poor and Moody;

(iv) Permitted Investments shall comprise investment products approved by the SC SAC, BNM's Shariah Council and/or other recognised Shariah authorities. Permitted Investments are as follows:

(i) Mudharabah, Wadiah and other deposits under Shariah



principles with licensed financial institutions in Malaysia with a short term credit rating and long term credit rating of not lower than “P1/MARC-1” (or their equivalent) and “AA3/AA” (or their equivalent) respectively; or

(ii) Islamic Acceptance Bill, Islamic Bankers‟ Acceptances, Islamic certificates of deposits, Islamic money market instruments or any other capital market instruments or Islamic investment products issued under Shariah principles and by licensed financial institutions with a short term rating and long term credit rating of not lower than “P1/MARC-1” (or their equivalent) and “AA3/AA” (or their equivalent) respectively; or

(iii) Islamic securities issued by quasi-government or government related entities with a short term credit rating and long term credit rating of not lower than “P1/MARC-1” (or their equivalent) and “AA3/AA” (or their equivalent) respectively or Islamic securities which are guaranteed by the Government of Malaysia; or

(iv) Islamic Treasury Bills, Islamic money market instruments, and other Islamic debt instruments issued under Shariah principles by BNM or the Government of Malaysia; or

(v) any other Islamic capital market instruments or investment products, with short term credit rating and long term credit rating of not lower than “P1/MARC-1” (or their equivalent) and “AA3/AA” (or their equivalent) respectively; or

(vi) any other Islamic capital market instruments or Islamic investment products which are capital protected by licensed takaful companies in Malaysia, or corporations in Malaysia with a short term credit rating and long term credit rating of not lower than “P1/MARC-1” (or their equivalent) and “AA3/AA” (or their equivalent) respectively; or

(vii) any other Shariah-compliant funds approved by the SAC which invests in any of the products above.

(xi) Purchase Undertaking The Issuer (as Purchaser) shall enter into a Purchase Undertaking with the Trustee pursuant to which the Issuer shall undertake to purchase the proportionate undivided ownership in the completed Asset from the Trustee acting for the Sukukholders of the relevant tranche:

(a) upon the declaration of Dissolution Events (save for a Dissolution Event due to a Total Loss Event); or

(b) upon the maturity date of each tranche of the Sukuk Kimanis;

whichever is earlier, at the relevant Exercise Price (as defined herein), subject to the Asset being completed and delivered by the Contractor to the Trustee. The proceeds therefrom shall be utilised by the Issuer for the redemption of such relevant Sukuk Kimanis held by the Sukukholders which shall then be cancelled.



(xii) Exercise Price In relation to the Purchase Undertaking, the Exercise Price for the purchase of the proportionate undivided ownership in the completed Asset from the Trustee acting for the Sukukholders of the relevant tranche is as follows:

(a) upon declaration of a Dissolution Event (save for a Dissolution Event due to a Total Loss Event), the Exercise Price shall be equal to the nominal value of all outstanding Sukuk Kimanis plus Ownership Expenses in respect of the Asset plus all accrued but unpaid Lease Rentals up to the date of the declaration of the Dissolution Event; or

(b) upon maturity of the tranche of the Sukuk Kimanis, the Exercise Price shall be equal to the nominal value of such tranche of the Sukuk Kimanis plus the Ownership Expenses in respect of the Asset.

The Exercise Price payable shall be set off against the reimbursement of any Ownership Expenses payable to the Servicing Agent.

(xiii) Compensation for late and/or default payment(s) (Ta’widh)

In the event of any overdue payments of any amounts due under the Sukuk Kimanis, the Issuer (as Contractor/Lessee/Purchaser/Servicing Agent) shall pay to the Sukukholders the compensation on such overdue amounts at the rate and manner as prescribed by the SC‟s Shariah Advisory Council from time to time in accordance with Shariah.

(xiv) No Payment of Interest For the avoidance of doubt and notwithstanding any other provision to the contrary herein, it is hereby agreed and declared that nothing in this principal terms and conditions and the Transaction Documents shall oblige or entitle any party nor shall any party pay or receive or recover interest on any amount due or payable to another party pursuant to the principal terms and conditions or the Transaction Documents and the parties hereby expressly waive and reject any entitlement to recover such interest.

Any accumulations or accretions of proceeds which are interest in nature in respect of the Project Documents which are due to the Sukukholders shall be applied by the Shared Security Agent in accordance with Shariah. For avoidance of doubt this clause is not applicable to insurance proceeds and LDs payable under the Project Documents.

(xv) Taxation All payments by the Issuer shall be made without withholding or deductions for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied by or on behalf of Malaysia or any other applicable jurisdictions, or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law, in which event the Issuer shall be required to make such additional



amount so that the payee would receive the full amount which the payee would have received if no such withholding or deductions are made.

(xvi) Governing Laws Laws of Malaysia

(xvii) Jurisdiction The Issuer shall unconditionally and irrevocably submit to the exclusive jurisdictions of the courts of Malaysia.

(xviii) Other Conditions The Sukuk Kimanis shall at all times be governed by the guidelines issued and to be issued from time to time by the SC, BNM, MyClear and/or any other authority in Malaysia having jurisdiction over matters pertaining to the Sukuk Kimanis.

(xix) Hedging Policy Issuer shall, at the Financial Close, enter into Hedging Arrangements with the Hedging Banks to hedge 100% of the foreign currency exposure in relation to the EPC contract and the CSA.

(xx) Assignment of any hedging facility

No assignment or transfer by the Issuer.

Each Hedging Bank will have the right (at no cost to the Issuer) to transfer or assign to one or more persons all or a portion of its rights and obligations under the hedging agreements provided the Issuer is notified accordingly without the need for the consent of the Issuer. Each Hedging Bank shall also have the right (at no cost to the Issuer) to transfer or assign or sub-participate all or part of its rights or obligations under the hedging agreements to any of its affiliates.

(xxi) Trustee‟s Reimbursement Account

(i) The Trustee will open a Shariah-compliant Trustee‟s Reimbursement Account;

(ii) The Trustee shall be the sole signatory to the Trustee‟s Reimbursement Account and shall operate the said account in accordance with the provisions of the Trust Deed;

(iii) The Issuer will credit or caused to be credited into Trustee‟s Reimbursement Account from the proceeds of from the issuance of Series 1 in an amount equivalent to Ringgit Malaysia Thirty Thousand (RM30,000.00) only (“TRA Initial Amount”);

(iv) The Issuer will maintain the TRA Initial Amount in the Trustee‟s Reimbursement Account at all times throughout the tenure of the Sukuk Kimanis and the Sukuk Programme and for so long as the Sukuk Kimanis remains outstanding;

(v) Such monies standing to the credit of the Trustee‟s Reimbursement Account shall be utilised by the Trustee strictly in carrying out its duties following the



occurrence of a Dissolution Event;

Funds held in the Trustee‟s Reimbursement Account can be utilised to make Permitted Investments and all incomes earned therefrom shall be accrued to the Issuer. Funds held in the Trustee‟s Reimbursement Account shall be returned to the Issuer upon full redemption of the Sukuk Kimanis provided always that no Dissolution Event has occurred and is occurring.

(xxii) Finance Service Reserve Account (“FSRA”)

The Issuer shall open and maintain the FSRA. Upon the occurrence of a Dissolution Event, the Sukuk Security Agent will be the sole signatory of the FSRA.

(i) The FSRA shall be a Shariah compliant bank account denominated in Ringgit Malaysia to be opened with the MYR Account Bank.

(ii) The Project and Account Monitoring Agent shall be the sole signatory of the FSRA.

(iii) The Issuer shall, upon the issue date of the Sukuk Kimanis under Series 1, deposit an amount equal to RM18.0 million into the FSRA (“FSRA Initial Deposit”).

(iv) The FSRA Initial Deposit may be utilised to meet the Issuer‟s scheduled payment obligations under the Sukuk Programme prior to the COD of all the Generating Blocks in the event that funds in the MYR DA are insufficient to fulfill the Issuer's scheduled payment obligations in accordance with the "Priority of Cash Flow" thereunder. Any FSRA Initial Deposit amount utilised prior to the COD of all the Generating Blocks is to be topped up by the Sponsors forthwith pursuant to their obligations under the Letter of Undertaking.

(v) The Issuer shall, upon achieving COD of all the Generating Blocks, deposit an amount equivalent to the FSRA Minimum Required Balance (as defined herein). The FSRA Minimum Required Balance will apply and is to be maintained throughout the tenure of the Sukuk Programme.

(vi) The FSRA Minimum Required Balance (“FSRA Minimum Required Balance”) is equal to the next six (6) months projected finance service (consisting of principal and Periodic Distribution Payments) due under the Sukuk Kimanis issued under the Sukuk Programme.

(vii) The FSRA may be drawn by the Project and Account Monitoring Agent to the extent that the funds, in accordance with the “Priority of Cash Flow”, are insufficient to fulfil the Issuer‟s scheduled payment and/or payment obligations under the Sukuk Programme.

(viii) For the avoidance of doubt, if the balance in the FSRA



exceeds the FSRA Minimum Required Balance, such difference between the total in FSRA and the FSRA Minimum Required Balance shall be transferred to the RA to be utilised in accordance with the “Priority of Cash Flow” clause therein.

(xxiii) Definitions

a) COD

with respect to each Generating Block, the commercial operation date, being the date on which all the conditions precedent as set forth in Clause 3.3 of the PPA shall have been satisfied or waived in writing by SESB.

b) Scheduled Commercial Operation Date (“Scheduled COD”)

First Generating Block: 1 December 2013

Second Generating Block: 1 February 2014

Third Generating Block: 1 April 2014

c) Energy Commission

The Energy Commission established under the Energy Commission Act 2001 and any successor thereof.

d) EPU

The Economic Planning Unit of the Prime Minister‟s Department

e) EUR the lawful currency of the Eurozone

f) Financial Close

The date on which the Trust Deed is executed.

g) Generating Block

the electricity generating facility comprising one (1) gas turbine and one (1) steam turbine including one (1) heat recovery steam generator with an aggregate nominal capacity of 65MW when operating in open cycle mode (if instructed in writing by SESB) and



95MW when operating in combined cycle mode, as more specifically described in Appendix A of the PPA and includes any part or combination thereof and any modification thereto which has been approved in writing by SESB.

h) Hedging Arrangements

hedging arrangements, via derivative instruments which may result in net exposure on a marked-to-market basis, entered into by the Issuer to hedge the foreign exchange exposure arising from payments under the Project Documents

i) Land Owner Yayasan Sabah

j) Material Adverse Effect

any event or circumstances the occurrence of which has resulted in, or will likely result in a material adverse effect on:

(i) the business or condition or results of the operations of the Issuer; or

(ii) the ability of the Issuer to perform any of its obligations under any of the Transaction Documents.

k) MOL Facilities the multi-option line facilities in the amount of up to RM150.0 million obtained by the Issuer comprising the bank guarantee-i facility, the documentary credit-i facility and the shipping guarantee-i facility for the, inter alia, issuance of bank guarantees and/or



performance bonds as may be required pursuant to the Project Documents.

l) Periodic Distribution Amount

in relation to any tranche, the amount of periodic distribution which is calculated at the applicable periodic distribution rate on the nominal value of such tranche on the basis of the actual number of days over three hundred and sixty five (365) days in the relevant periodic distribution period.

m) Permitted Indebtedness

the Permitted Indebtedness which consists of:

(i) indebtedness in respect of any hire purchase or leasing of any equipment or goods or vehicles incurred or assumed by the Issuer for the purpose of the Project;

(ii) the Hedging Arrangements;

(iii) the MOL Facilities;

PROVIDED THAT the MOL Facilities shall not exceed the aggregate maximum amount of RM150.0 million at any one time; and

(iv) any shareholders‟ loans or advances which are subordinated to the Sukuk Kimanis under the Sukuk Programme.



n) Project

collectively, the financing, design, engineering, procurement, construction, installation, testing, commissioning, ownership, operation and maintenance of a 285MW gas fired power plant in Kimanis, Sabah, the fuel facilities, the site, and associated facilities irrespective of whether construction thereof has been completed or the relevant COD of each Generating Block has been achieved, as more specifically described in Appendix A of the PPA, and any modification made thereto.

o) Project Cost Up to RM1.470 billion

p) Project Documents

Pre-Financial Close

(i) the Power Purchase Agreement ("PPA");

(ii) the Contractual Service Agreement ("CSA");

(iii) the Gas Supply Agreement ("GSA");

(iv) the Distillate Supply Agreement (“DSA”);

(v) the Engineering, Procurement and Construction contract ("EPC") and associated bonds and guarantees from or on behalf of the EPC contractor;

(vi) the Operation & Maintenance Agreement ("O&M Agreement")(including any agreement in relation to technical alliance, if any);

(vii) the Agreement to



Sub-lease;

(viii) the Pipeline Agreement (“PA”)

(ix) any agreements entered by the Issuer in connection with the Project (where applicable);

(x) the takaful/insurances/reinsurances relating to the Project.

Post-Financial Close

In addition to the Project Documents referred to for Pre Financial Close above, within 3 years from the date of the Financial Close or such other extended period as may be agreed by the Trustee, the execution of the Memorandum of Sub-Lease over the Project Land and any agreement or document that is material to the Project as may be reasonably determined by the Joint Lead Arrangers and mutually agreed by the Issuer.

q) Project Land

the parcel of land upon which the Project is to be constructed and located, as more specifically described in Appendix A of the PPA.

r) Ringgit Malaysia and RM and MYR

the lawful currency of Malaysia;

s) SESB

Sabah Electricity Sdn Bhd.

t) Shareholders collectively :

Petronas Gas Berhad



(60%); and

NRG Consortium (Malaysia) Sdn Bhd (40%).

u) Sponsors

collectively:

Petronas Gas Berhad; and

Yayasan Sabah

v) Transaction Documents

The financing agreements in relation to the Sukuk Programme, the security documents, and other relevant documentation as may be advised by the Legal Counsel and mutually agreed by the Issuer. For avoidance of doubt, the documentation for the Hedging Arrangement and the MOL Facilities shall not be part of the Transaction Documents.

w) USD the lawful currency of the United States of America;



ANNEXURE 1

TRANSACTION DIAGRAM

At Inception and during construction

Fund flow

Process

6

Istisna’

Price

(Sukuk

Proceeds)

Sukuk

Issue


Construct

and deliver

of Asset

24

Kimanis

(Contractor/Purchaser/Issuer)

Kimanis

(Lessee)

Pu

rch

ase U

nd

ert

akin

g

Istisna’

Agreement

Ijarah Agreement

Advance Lease

3

Trustee (as Lessor) appoints Kimanis as

its agent for major maintenance

Service Agency Agreement5

Trust Deed1

Advance Rental

Refund of Istisna’ Price and

payment of Compensation

Amount

Post-completion and at Maturity

Lease Lease

Rental

Kimanis

(Contractor/Lessee)

Notify

completion and

delivery of Asset

7

Kimanis

(Purchaser)Exercise Price

9


Fund flow

Process

Istisna’

Agreement

Ijarah

Agreement8

Explanatory Notes: 1 Pursuant to a Trust Deed entered into by the Issuer and the Trustee, the Trustee agrees and declares

that it shall act for and on behalf of all the Sukukholders in respect of the Sukuk Kimanis issued or to be issued pursuant to the Sukuk Programme and in connection therewith to enter into the following agreements in respect of the Sukuk Programme on behalf of the Sukukholders of all series of the Sukuk Kimanis on an undivided basis:-

(i) Istisna‟ Agreement;

(ii) Ijarah Agreement;



(iii) Service Agency Agreement; and

(iv) Purchase Undertaking.

The Trustee shall then declare a trust over the Trust Assets (as defined below) for the benefit of all Sukukholders on an undivided basis. The Trust Assets comprise the rights, interest and benefit in, to and under the Istisna‟ Agreement, the proportionate undivided completed Asset (as defined below), the Ijarah Agreement and the Purchase Undertaking.

2 The Trustee (acting on behalf of the Sukukholders) shall enter into an Istisna‟ Agreement with the Issuer

(in its capacity as Contractor), whereby the Contractor will build, construct and deliver the Power Plant (“Asset”) for the Sukukholders for an Istisna‟ Price which is equivalent to the aggregate proceeds to be raised from issuance of all series of the Sukuk Kimanis. The Contractor may appoint a sub-contractor to construct and deliver the Asset. The Istisna‟ Price shall be determined prior to issuance of Series 1 and paid in instalments as specified in the Istisna‟ Agreement. The Istisna‟ Price shall be in compliance with the asset pricing requirement stipulated under the Islamic Securities Guidelines (Sukuk Guidelines) issued by the SC as may be replaced, substituted, amended or revised from time to time (“Assets Pricing Guidelines”);

3 The Trustee (acting on behalf of the Sukukholders) will enter into an Ijarah Agreement with the Issuer, whereby the Trustee (as “Lessor”) agrees to lease and the Issuer (as “Lessee”) agrees to take on the lease of the Asset (under the concept of Ijarah Mawsufah Fi Zimmah i.e. Forward Lease) in an proportionate undivided basis. In consideration of the Trustee agreeing to grant to the Lessee a forward lease in respect of the Asset to be completed and delivered in an proportionate undivided basis, the Lessee shall pay advance rental at a pre-determined rental amount (“Advance Rental”) at such times and in the manner as provided in the Ijarah Agreement. The Advance Rental shall be equivalent to the Periodic Distribution Amounts which is to be channeled to the Sukukholders as Periodic Distributions in proportion to their Sukukholdings prior to completion of the construction of the Asset;

4 The Issuer then issues the Sukuk Kimanis, where the Sukuk Kimanis shall represent the Sukukholders‟

interest, rights and entitlements under the Trust Assets, including proportionate undivided ownership of the Asset upon completion and delivery of the same. The Sukuk Kimanis proceeds shall be utilised to pay the Issuer (in its capacity as Contractor) the Istisna‟ Price under the Istisna‟ Agreement. The Istisna‟ Price will be paid in accordance with the issuance of Series 1 and Series 2 of the Sukuk Kimanis as contemplated under the Sukuk Programme.

5 Pursuant to a Service Agency Agreement:-

1. the Trustee (acting as agent of the Sukukholders) shall appoint the Issuer as “Servicing Agent”

throughout the Lease Period; 2. the Servicing Agent shall perform all repairs, replacements, acts and maintenance works and pay

ownership expenses in respect of the Asset (“Ownership Expenses”) during the Lease Period. The Ownership Expenses will be set-off against the Exercise Price payable by the Issuer pursuant to the Purchase Undertaking upon the expiry of the Ijarah Agreement;

The Servicing Agent shall be responsible to procure takaful/insurance that provides sufficient proceeds for the redemption of the Sukuk Kimanis under a Total Loss Event. If the takaful/insurance proceeds are insufficient to cover the redemption amount due under the Sukuk Kimanis and Ownership Expenses (if any) under a Total Loss Event (as defined herein), the Servicing Agent shall be liable to make good the difference. Any excess from the takaful/insurance proceeds over the amount required to redeem the relevant Sukuk Kimanis and the Ownership Expenses, if any, shall be paid to the Servicing Agent as an incentive fee.

6 The Issuer (as “Purchaser”) will then grant a purchase undertaking (“Purchase Undertaking”) to the

Trustee, whereby the Purchaser irrevocably undertakes to purchase the proportionate undivided ownership of the Asset from the Trustee acting for the Sukukholders, of the relevant tranche of the Sukuk Kimanis upon occurrence of certain events (“Dissolution Events”) (save for a Dissolution Event due to a



Total Loss Event) or upon the maturity of each tranche the Sukuk Kimanis, whichever is earlier, at the relevant Exercise Price, subject to the Asset being completed and delivered to the Trustee (on behalf of the Sukukholders) under the Istisna‟ Agreement.

7 Upon completion of construction and delivery of the Asset, the Contractor shall accordingly notify the

Trustee of the completion and delivery of the Asset. Thereafter, the Istisna‟ Agreement will complete in accordance with the terms thereof.

8 Upon completion and delivery of the Asset up to maturity of the lease (corresponding to the maturity date

of the last outstanding tranche of the Sukuk Kimanis) (“Lease Period”), the Lessee will pay pre-determined rental amounts (“Lease Rentals”). The Lease Rentals for each tranche shall be equivalent to the Periodic Distribution Amounts which is to be channeled to the Sukukholders as Periodic Distributions in proportion to their sukukholdings.

9 On the maturity date of each tranche of the Sukuk Kimanis or upon declaration of a Dissolution Event

(save for a Dissolution Event due to a Total Loss Event), the Trustee acting for the Sukukholders shall invoke the Purchase Undertaking upon which the Purchaser will purchase the proportionate undivided ownership in the completed Asset from the Trustee, at the relevant Exercise Price, by entering into a sale agreement.

Upon invocation of the Purchase Undertaking on the maturity of the relevant Sukuk Kimanis tranche by entering into a sale agreement, the proportionate undivided ownership in the completed Asset to which such tranche relates will be transferred to the Issuer whereupon the Issuer will be co-owner of the Asset together with the Sukukholders of the remaining outstanding tranches of Series 1 and 2.



Section 5

Investment Considerations

This section provides a summary of certain risk factors which prospective investors should be aware of but it is not intended to be complete or exhaustive. Prior to making any decision to invest in the Sukuk Kimanis, prospective investors are advised to seek professional advice and undertake their own investigations on the Issuer, and other parties or matters connected with the Sukuk Kimanis and/or the Sukuk Programme as they may consider necessary to obtain further information on, inter alia, the industry that the Issuer is in. The information contained in this Information Memorandum includes forward looking statements which imply risks and uncertainties. The Issuer’s actual results could differ materially from those anticipated in these forward looking statements and/or otherwise projected as a result of certain factors, including but not limited to those set forth in this section.

5.1 Considerations Relating to the Sukuk Kimanis

5.1.1 Rating of the Sukuk Programme

The Rating Agency has assigned an indicative rating of AA- to the Sukuk Programme. A rating is not a recommendation to purchase, hold or sell the Sukuk Kimanis, as such ratings do not comment on the market price of the Sukuk Kimanis or its suitability for a particular investor. There is no assurance that a rating will remain in effect for any given period of time or that a rating will not be downgraded, suspended or withdrawn entirely by the Rating Agency in the future, if, in its judgment, circumstances in the future so warrant. Further, such a rating is not a guarantee of repayment or that there will be no default by the Issuer under the Sukuk Kimanis. In the event that the rating initially assigned to the Sukuk Kimanis is subsequently downgraded, suspended or withdrawn for any reason, no person or entity will be obliged to provide any additional credit enhancement with respect to the Sukuk Kimanis. Any downgrading, suspension or withdrawal of a rating may have an adverse effect on the liquidity and market price of the Sukuk Kimanis. Any downgrading, suspension or withdrawal of a rating will not constitute a dissolution event with respect to the Sukuk Kimanis or an event by itself that warrants the Sukuk Kimanis to be immediately due and payable.

5.1.2 No prior market for the Sukuk Kimanis

The Sukuk Kimanis comprise a new issue of securities for which there is currently no secondary market. There can be no assurance that such secondary market will develop or, if it does develop, that it will provide the Sukukholders with the liquidity of investments or will continue for the tenor of the Sukuk Kimanis. If a market develops, there can be no assurance as to the ability of the Sukukholders to sell their Sukuk Kimanis and the market value of the Sukuk Kimanis may fluctuate. Any sale of the Sukuk Kimanis by the Sukukholders in any secondary market which may develop may be at a discount from the original issue price of the Sukuk Kimanis, depending on many factors, such as the market for similar securities. Trading prices of the Sukuk Kimanis may also be influenced by numerous factors, including the operating results and/or financial condition of the Issuer, political, economic, financial and any other factors that can affect the capital markets, the industry or the Issuer. Adverse economic developments could have a material adverse effect on the market value of the Sukuk Kimanis.

5.1.3 Issuer’s ability to meet its obligations under the Sukuk Kimanis

The ability of the Issuer to meet its obligations to the Sukukholders in terms of payment of amounts due in respect of the Sukuk Kimanis will depend on the Issuer‟s income and revenue



and in particular the strength of the Issuer‟s operation to generate sufficient and positive cashflows. Payments of all amounts due and payable in respect of the Sukuk Kimanis will be the Issuer‟s obligation alone. In particular, the Sukuk Kimanis will not be obligations or responsibilities of, or guaranteed by, any of the Issuer‟s related corporations, the Joint Lead Arrangers/Joint Lead Managers, the Trustee or any subsidiary or affiliate thereof, and any other person involved or interested in the transaction. None of such persons will accept any liability whatsoever to the Sukukholders in respect of any failure of the Issuer to pay any amount due in respect of the Sukuk Kimanis.

5.1.4 Suitability of investments

Each potential investor in the Sukuk Kimanis must determine the suitability of its investment in light of its own circumstances. In particular, each potential investor should: (a) have sufficient knowledge and experience to make a meaningful evaluation of the Sukuk

Kimanis, the merits and risks of investing in the Sukuk Kimanis and the information contained in this Information Memorandum;

(b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context

of its particular financial situation, an investment in the Sukuk Kimanis and the impact the Sukuk Kimanis will have on its overall investment portfolio;

(c) have sufficient financial resources and liquidity to bear all of the risks of investing in the

Sukuk Kimanis; (d) understand thoroughly the terms of the Sukuk Kimanis and be familiar with the behaviour

of any relevant indices and financial markets; and (e) be able to evaluate (either alone or with the help of a financial adviser) possible

scenarios for economic and other factors that may affect its investment and its ability to bear the applicable risks.

5.1.5 Shariah compliance

Notwithstanding the approvals of the Joint Shariah Advisers, case law in Malaysia indicates that the courts in Malaysia may still examine the issue of whether there has been compliance with Shariah and if held to be non-Shariah compliant, the recoverability of the profit element under the Sukuk Kimanis may be affected. No assurance is given that the approvals of the Joint Shariah Advisers will not be subject to challenge on grounds that the Sukuk Kimanis is not Shariah compliant. The transaction structure relating to the Sukuk Kimanis has been approved by the Joint Shariah Advisers. Prospective holders of the Sukuk Kimanis should not rely on such approval in deciding whether to make an investment in the Sukuk Kimanis, nor as the basis for deciding whether each of the structure, the issue and the trading of the Sukuk Kimanis is in compliance with Shariah principles. In particular, any reference in this Information Memorandum to secondary trading of the Sukuk Kimanis is not to be taken as advice or confirmation that such trading is Shariah compliant. Prospective holders of the Sukuk Kimanis should obtain their own independent Shariah advice as to compliance with Shariah principles. No representation, warranty or undertaking, express or implied, is given by the Issuer as to the status of the Sukuk Kimanis' compliance with Shariah principles and the Issuer, the Sponsors, the Joint Shariah Adviser shall not be liable for any consequences of such reliance and/or assumption of any such compliance.

5.2 Risks Relating to the Issuer

The Issuer has no significant operating history. The ability of the Issuer to pay amounts due on the Sukuk Kimanis will primarily be dependent upon due performance by other parties to the relevant transaction documents relating to the Sukuk Kimanis and their obligations thereunder.



5.3 Project Risks

5.3.1 Completion Risks

(a) Construction Risk

The successful completion of the construction of the Power Plant may be adversely affected by factors commonly associated with construction works such as shortages of labour, materials, equipment, labour disputes, natural disasters and adverse weather conditions. Further, any delay in obtaining the requisite approvals and licences from the relevant regulatory authorities could result in delay in achieving the scheduled CODs for the Power Plant.

Under the PPA, if the COD of a Generating Block does not occur by the scheduled COD stipulated therein due to the default of KPSB, its contractors or agents, KPSB is liable for liquidated damages of RM240,000 per day for each day of delay beyond the scheduled COD applicable to the said Generating Block, up to the earlier of (i) the COD of the relevant Generating Block, (ii) the date of termination of the PPA in accordance with its terms; or (iii) 180 days after the scheduled COD of the relevant Generating Block. Subject to the provisions therein, the aggregate liquidated damages payable by KPSB for the delay referred above is capped at RM43.2 Million in respect of each Generating Block.

The risks of delay in completion is further mitigated by virtue of the Sponsors‟ Undertaking, whereby the Sponsors have confirmed or will confirm that, inter alia:-

(i) they will ensure, either by equity, loan facilities, grants or otherwise, that KPSB has sufficient funds to achieve COD of all Generating Blocks;

(ii) in the event KPSB is unable due to delay of the Scheduled Commercial Operation Date of any Generating Block to meet its payment obligations to the Sukukholders pursuant to the Sukuk Programme, they will ensure, either by equity, loan facilities, grants or otherwise, that KPSB has sufficient funds to service on a full and timely basis its payment obligations in respect of all the Sukuk Kimanis issued or to be issued under the Sukuk Programme up to a total aggregate amount of RM50.0 Million; and

(iii) they will take all actions necessary to complete the Power Plant in the event that it cannot be completed by KPSB for any reason whatsoever,

Provided that the liabilities of the Sponsors‟ Undertakings shall be (i) in proportion to the Sponsors‟ respective shareholding in KPBS; and (ii) capped to a total maximum amount of RM100.0 Million.

(b) Performance and Technology Risk

KPSB is required to meet certain performance standards such as net heat rate, net electrical output, emissions and noise level in accordance with the requirements set out in the PPA. Under the PPA, KPSB would not be entitled to energy payments from SESB if there is any excess net electrical output generated over and above that stipulated in the despatch instruction issued by SESB. Failure to achieve the nominal capacity of 95MW will result in liquidated damages being payable by KPSB to SESB in the amount set out in Section 3.5.2(a) above. In addition, excessive net heat rate would result in the Power Plant using more fuel than anticipated, thereby increasing the fuel expense while a lower net output would result in lower revenue under the PPA. Any emissions and noise level which exceed those criteria imposed by the EPD in accordance with the EIA Approval could result in fines imposed on KPSB. The EPC Contractor has given a guarantee that the Power Plant would be constructed and completed to achieve successfully the guaranteed performance as set out in the EPC Contract, which guaranteed performance includes achieving a specified heat rate and net output (as described in Section 3.5.2(b) above), which would enable the Issuer to comply with the aforesaid performance standards as required under the PPA. If the



EPC Contractor fails to meet the required performance standards as guaranteed, the EPC Contractor is obliged to pay liquidated damages to KPSB subject to a limit of 30% of the contract price for the EPC Contract.

Further, the EPC Contractor has also provided KPSB with a performance bond equivalent to 10% of the contract price for the EPC Contract and a parent company guarantee both in favour of KPSB for the due performance of the EPC Contractor‟s obligations under the EPC Contract. The performance bond is valid until 30 days after issuance of the taking over certificate of the third Generating Block. The EPC Contractor is also required to procure a warranty performance bond in favour of KPSB as security for the due performance of the EPC Contractor‟s remaining obligations during the warranty period. The said warranty performance bond shall remain valid until 30 days after the issuance of the final completion certificate. The Independent Engineer has noted that:

(i) The technology chosen for the Project is based on established and well proven

technology;

(ii) The Power Plant design as outlined in the EPC Contract will be able to meet the PPA requirements; and

(iii) The Power Plant performance should be able to be achieved reliably.

(c) Contractor Risk

The completion and performance risks of the Power Plant are mainly dependant on the performance of the EPC Contractor in completing the same by the agreed completion dates in order for KPSB to meet the scheduled CODs under the PPA.

Under the EPC Contract, the EPC Contractor has agreed to complete the construction of the Power Plant to achieve the following guaranteed completion dates:

(i) the first Generating Block – 1 December 2013; (ii) the second Generating Block – 1 February 2014; and (iii) the third Generating Block – 1 April 2014.

If the EPC Contractor fails to achieve the above completion dates, the EPC Contractor is liable to pay KPSB liquidated damages in the sum of RM240,000 per day for each day of delay in achieving substantial completion by the aforesaid completion dates. However, the total amount of liquidated damages payable is capped at 10% of the contract price of the EPC Contract.

The liquidated damages that may be due to KPSB under the EPC Contract match the liquidated damages that may be payable under the PPA by KPSB in the event of the abovementioned delays. Hence, subject to the caps on liquidated damages set out in the EPC Contract and the PPA, respectively, there is a pass through of liability in relation to a delay in achieving the guaranteed completion dates. The maximum amount of liquidated damages payable by KPSB for the delay referred to above is capped at RM43.2 Million in respect of each Generating Block. Further, the EPC Contractor has also provided KPSB with a performance bond equivalent to 10% of the contract price for the EPC Contract and a parent company guarantee both in favour of KPSB for the due performance of the EPC Contractor‟s obligations under the EPC Contract. The performance bond is valid until 30 days after issuance of the taking over certificate of the third Generating Block. The EPC Contractor is also required to procure a warranty performance bond in favour of KPSB as security for the due performance of the EPC Contractor‟s remaining obligations during the



warranty period. The said warranty performance bond shall remain valid until 30 days after the issuance of the final completion certificate.

The risks of delay in completion is further mitigated by virtue of the Sponsors‟ Undertaking, whereby the Sponsors have confirmed or will confirm that, inter alia:-

(i) they will ensure, either by equity, loan facilities, grants or otherwise, that KPSB has sufficient funds to achieve COD of all Generating Blocks;

(ii) in the event KPSB is unable due to delay of the Scheduled Commercial Operation Date of any Generating Block to meet its payment obligations to the Sukukholders pursuant to the Sukuk Programme, they will ensure, either by equity, loan facilities, grants or otherwise, that KPSB has sufficient funds to service on a full and timely basis its payment obligations in respect of all the Sukuk Kimanis issued or to be issued under the Sukuk Programme up to a total aggregate amount of RM50.0 Million; and

(iii) they will take all actions necessary to complete the Power Plant in the event that it cannot be completed by KPSB for any reason whatsoever,

Provided that the liabilities of the Sponsors‟ Undertakings shall be (i) in proportion to the Sponsors‟ respective shareholding in KPBS; and (ii) capped to a total maximum amount of RM100.0 Million.

(d) Cost Overruns and Cost Variations

There is a risk that the actual costs of the Project may exceed the budgeted costs allocated in respect of the Project. To mitigate this risk, KPSB has entered into a fixed lump sum price EPC Contract for the Project. Within the specifications of the EPC Contract, the EPC Contractor is expected to bear all cost overruns. However, the EPC Contract provides for equitable adjustments to the contract price for the EPC Contract only in certain limited and well-defined circumstances, which are as follows:- (i) if KPSB issues a variation order instructing the EPC Contractor to alter, amend

or vary any part of the Works (as defined in the EPC Contract) and which will defer substantial completion of any part of the Power Plant;

(ii) without prejudice to the EPC Contractor‟s right to terminate the EPC Contract in accordance with its terms, if there is an occurrence of any of the following events of default by KPSB which results in the EPC Contractor suspending the carrying out of the Works but KPSB provides reasonable assurances to the EPC Contractor of the availability of sufficient financing to continue and complete the Works:

(.1) KPSB is dissolved or adjudicated a bankrupt, or a receiver is appointed,

or any proceedings seeking an order for relief or to adjudicate it insolvent; or

(.2) KPSB defaults in payment as and when due and payable under the EPC

Contract whereby such default continues for a period of 90 days;

(iii) if KPSB requests for the EPC Contractor to perform additional tests with respect to the Works which KPSB considers non-conforming and following such tests, the said Works turn out to conform with the requirements under the EPC Contract and such tests have resulted in costs at the expense of the EPC Contractor;

(iv) a dispute submitted to arbitration in respect of the conformity of the Works is

resolved in favour of the EPC Contractor and any suspension of Works by the EPC Contractor has resulted in an increase in the EPC Contractor‟s costs;



(v) any tests to the Works are delayed, interrupted or cannot be completed

successfully due to KPSB‟s failure to materially fulfil its obligations under the EPC Contract and the EPC Contractor has incurred additional costs by reason of such delay or interruption of tests.

Cost overruns would be funded out of budgeted project contingency and the completion support of up to RM50.0 Million from the Sponsors pursuant to the Sponsor‟s Undertaking, which is consistent with the level of contingency recommended by the Independent Engineer. KPSB has also established a change order management procedure to manage all variation orders. All variation orders to be issued shall be processed through the said procedure. Where the variation could reasonably be expected to have a material adverse effect to SESB‟s rights under the PPA or on the Grid System, such variation would be subject to the prior written approval of SESB.

(e) Termination of EPC Contractor

If KPSB chooses to terminate the EPC Contract due to the EPC Contractor‟s default, it will only be entitled to receive compensation for reasonable costs incurred by it for completing the works, where such costs exceed the balance of the Contract Price (as defined in Section 3.5.2(b)) which would have been paid to the EPC Contractor but for such termination. KPSB will not be entitled to receive any compensation for its lost revenues resulting from the termination. Prospective investors should evaluate and consider the track record and experience of the EPC Contractor in successful delivery of gas power plants and the risk of an event arising which leads to termination of the EPC Contract by the Issuer. Nevertheless, such risks are mitigated by the Sponsors' Undertaking whereby, in the event KPSB is unable due to delay of the Scheduled Commercial Operation Date of any Generating Block to meet its payment obligations to the Sukukholders pursuant to the Sukuk Programme, the Sponsors have agreed or will agree to ensure, either by equity, loan facilities, grants or otherwise, KPSB has sufficient funds to service on a full and timely basis its payment obligations in respect of all the Sukuk Kimanis issued or to be issued under the Sukuk Programme up to a total aggregate amount of RM50.0 Million.

5.3.2 Operation Risks

(a) Business Risk

KPSB is mainly involved in the ownership of a power plant and the generation and sale of electricity. As such, KPSB is subject to risks inherent in the power industry. These include changes in general economic conditions such as, but not limited to, Government regulations, inflation, taxation, interest rates, exchange rates of foreign currencies and changes in business conditions such as, but not limited to, deterioration in prevailing market conditions, increase in costs of labour and materials, risk of breakdown or failure of equipment and risks associated with business interruptions. Although KPSB seeks to limit these risks through, inter alia, careful negotiations of contractual terms, close supervision of its operations, regular maintenance of the equipment, prudent financial policy, purchase of insurances to protect against breakdown or failure of equipment and risks associated with delay in commencement of operations and effective human resource management, no assurance can be given on the adequacy of protection against these risks and that any change to these factors will not have a material adverse effect on the business of KPSB.

(b) Electricity Generation Licence

Under the Electricity Supply Act, 1990 (“ESA”), a person who intends to operate a power plant is required hold an electricity generation licence. The requirement to procure the



IPP Licence forms a condition precedent to commencement of generation of electricity in respect of the first Generating Block under the PPA and constitutes a condition subsequent to issuance of Series 1 Sukuk under the Sukuk Programme, which condition subsequent is to be fulfilled prior to actual COD of the first Generating Block. A delay in obtaining the IPP Licence would reduce the revenues and cashflow of KPSB. KPSB intends to apply for the IPP Licence within four months prior to the Initial Operation Date of the first Generating Block. Unless and until such IPP Licence is obtained, KPSB would not be able to commence generation of electricity. The Energy Commission, in issuing such licence, may also impose such conditions as may appear to be requisite or expedient in accordance with the provisions of the ESA. There is no certainty as to the nature of such conditions that may be imposed. Pursuant to the ESA, in the event of a breach of any of such conditions imposed, the IPP Licence may be suspended or revoked by the Energy Commission. Under the PPA, SESB is entitled to terminate the PPA in accordance with its terms in the event the IPP Licence is suspended or revoked or terminated due to KPSB‟s default and KPSB has not caused the same to be reinstated or renewed within the stipulated remedy period.

(c) Termination of PPA

KPSB derives and expects to continue to derive almost all of its revenues from available capacity payments and energy payments due to it under the PPA. The PPA is effective for a period of 256 months from the COD of the first Generating Block unless otherwise earlier terminated in accordance with the terms thereof. At the end of the term of the PPA, the ownership of the Project may be transferred to SESB at the option of SESB. In the event of a termination of the PPA by SESB as a result of an event of default attributable to KPSB, SESB has the option (but not the obligation) to purchase the Project from KPSB at a purchase price calculated based on a pre-determined formula as set out in the PPA as described in Section 3.5.2(a) above. In the event of a termination of the PPA by KPSB due to an event of default attributable to SESB, KPSB has the option (but not the obligation) to sell the Project to SESB at a purchase price calculated based on a pre-determined formula as set out in the PPA as described in Section 3.5.2(a) above.

(d) Force Majeure

Force majeure provisions are found in the PPA, the EPC Contract, the GSA, the DSA, the OMA and the CSA (“the Agreements”). A force majeure event is an event, condition, or circumstance, which is beyond the reasonable control of the parties and occurs without fault or negligence on the part of the party claiming it. Such an event would result in delay or disruption in the performance of obligation under the affected Agreements despite all reasonable efforts of the party claiming it to prevent it or mitigate its effects. There is a risk that KPSB may be adversely affected by a force majeure event either directly or indirectly if the other project counterparties to the affected Agreements are relieved of their contractual obligations thereunder. Under the PPA, if a force majeure event affects SESB and occurs pre-COD of the first Generating Block, SESB shall pay KPSB its cost of servicing debt and any other unavoidable costs that KPSB may incur reasonably (to the extent that KPSB is not entitled to claim under its relevant insurance policies).



If a force majeure event occurs post-COD of the first Generating Block, such force majeure event does not relieve SESB of its obligation to make available capacity payments to KPSB to the extent that the relevant Generating Block is available to deliver electrical energy to SESB. If a force majeure event affects SESB and the same occurs post-COD of the first Generating Block, SESB will also pay KPSB the difference (if a positive value) between (i) KPSB‟s cost of servicing debt and any other unavoidable costs that KPSB may incur reasonably; and (ii) the total available capacity payments due to KPSB for the period such force majeure event persists and any insurance proceeds which reimburse it for such costs as set out in paragraph (i) above. Under the PPA, the non-availability of natural gas does not constitute as a force majeure event unless such non-availability is itself caused by any event which constitutes as a force majeure event under the GSA.

(e) Gas Supply Risk

Delay in SOGT

Natural gas is intended to be supplied via the pipeline connecting the SOGT to the Power Plant. Petronas Carigali Sdn Bhd is responsible for the construction of the SOGT. If this is delayed, KSPB will not be able to achieve COD and KPSB‟s revenue stream will be affected. The SOGT is currently under construction, which, as at 31 May 2012, has achieved 76% completion, and is expected to be completed in December 2012, approximately six months before the gas is required for testing and commissioning. PETRONAS has indicated its commitment to be able to supply gas at the latest on the date falling 180 days from 1 January 2013 pursuant to the GSA. Price and Supply Risks The Power Plant is powered primarily by natural gas supplied by PETRONAS pursuant to the GSA. Under the GSA, PETRONAS is under an obligation to supply natural gas to KPSB on a firm basis for the first 15 years of the term of the GSA, and thereafter, the supply by PETRONAS of natural gas to KPSB will be subject to gas availability. However, the following factors are to be considered as mitigating factors to the gas supply risks:

1. The Independent Engineer has noted that the Power Plant would only consume

less than 5% of the daily output of SOGT; and 2. KPSB will continue to receive full available capacity payment in the event of gas

curtailment due to force majeure events (which includes gas depletion). KPSB will not receive available capacity payment if the gas curtailment is not a force majeure event under the GSA.

If KPSB requires gas supply over the DQ for whatsoever reasons (including operating at inefficient heat rates), PETRONAS will use reasonable endeavours to meet such requirement provided such amount has been properly nominated by KPSB. If KPSB takes more than 10% above the DQ, KPSB shall pay PETRONAS a balancing charge of 30% of the Contract Price in addition to the contract price payable under the GSA and thus KPSB‟s cashflow may be adversely impacted. Fuel cost that will be passed through to SESB will be the lower of (i) the prevailing price for the natural gas as determined by the relevant governmental authority; and (ii) the weighted average fuel price derived by dividing the amount paid by KPSB to PETRONAS for gas consumed by the aggregate GJ of such natural gas consumed. Although PETRONAS is entitled to invoice KPSB for the supply of natural gas based on



a function of the market price as stated in the GSA, PETRONAS has nevertheless agreed to fix the applicable price for the supply of natural gas in line with the direction of the relevant governmental authority. Notwithstanding the above, PETRONAS reserves the right to revert to the price as contracted under the GSA by written notice to KPSB. As an alternative fuel supply, the Power Plant can be operated on distillate fuel to be supplied to KPSB by PDB under the DSA. The use of distillate fuel by KPSB is only upon instruction by SESB. As required by the PPA, KPSB maintains a distillate fuel supply on site sufficient for operating at full load for up to seven days in the event of a gas supply disruption. If PETRONAS notifies SESB in writing that there is a curtailment or shortage of natural gas available to the power generation industry and such curtailment or shortage is due to a force majeure event under the GSA, the additional cost of despatch of the Power Plant on distillate fuel oil (being the differential fuel cost of despatch between natural gas and distillate fuel oil) for the period when there is such a curtailment or shortage of natural gas shall, subject to the allowable heat rates in the PPA, be borne by SESB. Despatch Risks Under the PPA, the Issuer does not take despatch risk as available capacity payment component of the tariff is paid regardless of actual despatch level of the Power Plant, provided that the Power Plant does not exceed unplanned outage limits and meets the PPA availability targets. However, under the GSA, for each contract year, KPSB is obligated to purchase 75% of the net ACQ on a take-or-pay basis. Therefore, if the Power Plant is despatched at a level which utilizes less gas than 75% of the net ACQ, KPSB's cashflow will be affected as the energy payments received by KPSB under the PPA is insufficient to cover the gas expenses incurred under the Take or Pay quantity. Nevertheless, the following are considered as mitigating factors to such risks:

1. the Power Plant is expected to be despatched as a base load power plant in

Sabah; 2. KPSB may opt to take delivery of the Make-up Gas within the following three

contract years, subject to the following:-

PETRONAS‟s delivery capacity; and

KPSB fulfilling the Take or Pay quantity for the following contract year.

Termination of GSA

KPSB expects to meet its electricity generation obligations under the PPA by using natural gas as the main source of fuel and the Power Plant is not expected to run on distillate fuel oil on a long term basis. KPSB will not receive any compensation if the GSA is terminated. Prospective investors should evaluate and consider the risk of an event arising which leads to termination of the GSA.

(f) Operations and Maintenance Risk

The operations of KPSB‟s Power Plant involve certain risks, including but not limited to, the breakdown or failure of electricity generation equipment, transmission lines, distribution lines, pipelines or other equipment or processes or the performance of equipment at levels below those originally projected (whether due to unexpected wear and tear, misuse, unexpected degradation or design or manufacturing defects), failure to keep on hand adequate supplies of spare parts, operation error, labour disputes, thefts and catastrophic events such as fires, floods, earthquakes and other similar events. Any of the foregoing could significantly reduce revenues and crystallise payments of liquidated damages to SESB under the PPA (where the generation capacity is below the



specific available targets agreed with SESB) or increase the cost of operating the Power Plant, including maintenance and repair costs, hence reducing the net income and cashflow of KPSB. These risks are, however, mitigated to the extent that the PPA provides for forced outage rate to cater for unforeseen breakdowns. Further, KPSB has obtained insurance coverage for machinery breakdown in respect of the Power Plant and maintained a maintenance reserve account in the sum of not less than RM8.0 Million to be built up over a period of two years commencing on the COD of the first Generating Block and to be used exclusively to fund the maintenance expenses of the Power Plant. The ability to meet the specified outputs and heat rates under the PPA also depends on the operations and maintenance of the Power Plant. KPSB has entered into the OMA with the Operator which shall be valid for the term of the PPA. The Operator is a joint-venture company between PGB and NRG. Its key personnel during mobilization and initial operation phase of the plant will be seconded from the CUF division of PGB, with each of them possessing more than six years of experience in operating and maintaining nine units of co-generation plants in Kerteh, Terengganu and Gebeng, Pahang. CUF has been in operation since 1999. Each co-generation unit consists of a GE Frame 6B Gas Turbine coupled with a Heat Recovery Steam Generator, and a 56.5 MVA GEC Alstom generator. Each gas turbine unit has undergone a complete maintenance cycle and all of the seconded staff had the experience of managing Gas Turbine Short Term Service Agreement and Long Term Service Agreement with reputable service contractors such as a consortium of GE & Remaco, Serba Dinamik Sdn Bhd and Woodgroup. In addition to co-generation units, CUF has also been operating a SIEMENS Steam Turbine Generator installed at Kerteh. The total installed capacity for both Kerteh and Gebeng sites is 340 MW. Both are connected to TNB Grid; as such they have the experience of managing the PPA with TNB and dealing with TNB Load Despatch Centre on a day to day basis. In addition to the seconded staff, the Operator will have access to technical support services from PETRONAS group of companies‟ Technical Solutions whereby all the technical experts and specialists within the group are located. They will also be able to refer to experts from other plants in PETRONAS which have been operating co-generation plants such as MLNG and Petronas Penapisan Melaka Sdn Bhd.

The Operator has also engaged Institut Teknologi PETRONAS (“INSTEP”) to provide customized Combined Cycle Gas Turbine (“CCGT”) training for the operators of the plant. With over 30 years of experience in providing technical training, INSTEP would be able to provide essential knowledge with regards to the operation and maintenance of a CCGT. KPSB is to ensure that the Facility meets certain levels of performance as required under the EPC Contract and the PPA. As such, KPSB has procured a guarantee from the Operator whereby, subject to the provisions of the OMA, the Operator guarantees to KPSB the availability factor, megawatt output and heat rate of the Facility to the level of the Performance Guarantee as more particularly set out in the OMA. In the event that the Operator fails to meet such level of the Performance Guarantee, it will be liable to pay to KPSB liquidated damages in a sum as stated in the OMA.

(g) Sub-Lease Arrangement Risk

Pursuant to the Sub-Lease Agreement entered into between KPSB and Yayasan Sabah, KPSB has been granted a right to occupy the lands more particularly described in the said agreement on which the Power Plant is being constructed (“Said Lands”) as a sub-lessee for a period of 30 years commencing from 3 April 2009. The Said Lands have



been alienated to Yayasan Sabah and are currently pending issuance of the separate issue documents of title to the same.

Yayasan Sabah may terminate the Sub-Lease Agreement by giving one month written notice to KPSB in the event that, inter alia, KPSB fails to pay any rent due and payable thereunder for a period of one month provided that KPSB has failed to pay the same within a grace period of one month and a further grace period of 14 days.

Pending issuance of the separate issue documents of title in respect of the Said Lands, no sub-lease can be registered in favour of KPSB. As such, a charge over the sub-lease in accordance with the provisions of the Sabah Land Ordinance cannot be created and registered in favour of the security agent for the benefit of the Sukukholders to secure the Sukuk Programme prior to the issuance of the Sukuk Kimanis under the Sukuk Programme. Pending the creation of such charge, as security, KPSB will assign its rights, title, interest and benefit in and under the Sub-Lease Agreement in favour of the security agent for the benefit of the Sukukholders. In this regard, the Sukukholders‟ rights over the Said Lands are merely contractual in nature. Upon issuance of the separate issue documents of title in respect of the Said Lands in the name of Yayasan Sabah, Yayasan Sabah is required to obtain the permission of the Director of Lands and Surveys of Sabah for the creation of the sub-lease in favour of KPSB. The Director of Lands and Surveys of Sabah will impose additional premium, enhanced rent, and/or any other conditions thereof when granting such permission. There is no certainty as to the quantum of additional premium and/or the nature of such other conditions that may be imposed. The requirement to create and present the charge over the sub-lease for registration constitutes a condition subsequent to issuance of Series 1 Sukuk under the Sukuk Programme, which condition subsequent is to be fulfilled no later than three years from the date of the execution of the trust deed for the Sukuk Kimanis.

5.4 Financial Considerations

5.4.1 Exposure to Foreign Currency Fluctuations

The EPC Contract is denominated in RM, EUR and USD currencies, and the CSA is denominated in USD currency and payment under the CSA shall be payable in RM and USD. As such, KPSB is exposed to exchange rate fluctuations. KPSB expects to enter into hedging arrangements to mitigate its foreign currency exchange exposure to the extent possible.

5.4.2 Off-Take Risk

KPSB‟s revenue is principally derived from available capacity payments and energy payments payable by SESB under the PPA. The risk associated with such an arrangement is that revenue stream of KPSB is dependent on the ability of SESB to make timely payments.

It is to be noted that SESB is an 80% owned subsidiary of TNB and 20% owned by the State Government of Sabah. At present, it is the only power utility company in Sabah supplying electricity to customers.

5.4.3 Adequacy of Insurance

KPSB maintains insurance policies to mitigate certain risks in accordance with the provisions of the PPA. It is one of the conditions precedent to issuance of Series 1 of the Sukuk Kimanis that KPSB procures a confirmation from an independent insurance consultant confirming that the construction phase takaful/insurance cover obtained by KPSB in relation to the Project is adequate and in compliance with KPSB‟s obligations to insure under, inter alia, the PPA. It is also one of the conditions subsequent to issuance of Series 1 of the Sukuk Kimanis that KPSB procures a confirmation from an independent insurance consultant confirming that the agreed



operational phase takaful/insurance cover has been duly effected at least six months prior to the scheduled COD of the first Generating Block. However, there can be no assurance that there will be sufficient coverage to adequately protect against interruption to business, generation of revenue, increased expenditure or any other liabilities associated with the business of KPSB.

5.4.4 Inflation

KPSB may be exposed to inflation risks on its operating costs. KPSB has provision for escalation at 4% every four years for both variable operating rate and fixed operating rate portions of the revenue from SESB.

5.4.5 Profit / Interest Rate

KPSB is not exposed to interest rate risk on the Sukuk Kimanis as the profit rates are fixed over the term of the Sukuk Kimanis. However, in the case of the MOL Facilities, KPSB may be subject to higher commission fees upon annual review of such facilities by the relevant financiers.

5.5 Other Considerations

5.5.1 Change in Law

Under the PPA, if there is a change in law that requires KPSB to make any material capital improvement or other material modification to the Power Plant costing more than RM10.0 Million in any calendar year, SESB and KPSB shall determine in good faith, an extension of the term of the PPA or an adjustment in the capacity rate financial to reflect such cost in excess of RM10.0 Million as may be reasonably incurred by KPSB in making such material capital improvement or other material modification.

5.5.2 Environmental Issues

KPSB, as with all other independent power producers, is subject to environmental legislations, policies and regulations. These include meeting air, water and noise emission standards. Although KPSB believes that they are in compliance in all material aspects of these environmental legislations, policies and regulations, some risk of environmental costs and liabilities is inherent in their operations and there can be no assurance that material costs and liabilities will not be incurred in the future in this regard. In addition, there can be no assurance that the standards imposed by the environmental legislations and regulations will not change or otherwise result in the increase in costs or losses of or reductions in revenue to KPSB. Non-compliance could also result in the suspension or revocation of the IPP Licence and/or the imposition of fines and compliance with these environmental legislations, policies and regulations may result in delays in the expansion and development of KPSB‟s generation plants and transmission systems.

At the initial stage of the Project, an Environmental Impact Assessment (“EIA”) has been conducted by KPSB to study the potential impact of the Power Plant and identify necessary measures to mitigate the risks. The EIA has been approved by the EPD and the measures have been included in the design and construction of the power plant. One of the measures is Environmental Management Plan (“EMP”), which has been submitted during the construction stage and approved by the DOE. Subsequently, the environment monitoring has been conducted throughout the construction stage and the report is being submitted to the DOE on quarterly basis. This will continue on throughout the operation and maintenance phase of the plant. All of these are performed to ensure compliance with Environmental Quality Act of Malaysia 1974 (“EQA”). In terms of design, KPSB is an independent power producer which runs mainly on natural gas, considered to be one of the cleanest, environmentally-friendly fuels available to date. In addition to that, KPSB‟s design has also included on-line continuous emission monitoring system at all the vent stacks for gas turbines and heat recovery steam generators in order to ensure compliance with the EQA.



5.5.3 Political, Economic and Regulatory Risks

Like all businesses, adverse developments in political, economic and regulatory conditions in the country could materially affect the financial and operational condition as well as the overall profitability of KPSB. Other political and economic uncertainties include the risk of war, expropriation, nationalisation, renegotiation or nullification of existing contracts, changes in rates of interest and methods of taxation.

5.5.4 Forward Looking Statements

Certain statements in this Information Memorandum are based on historical data, which may not be reflective of future results, and others are forward-looking in nature, which are subject to uncertainties and contingencies. All forward-looking statements are based on estimates and assumptions made by KPSB. Although the Board of Directors of KPSB believes that these forward-looking statements are reasonable, the statements are nevertheless subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements express or implied in such forward-looking statements. In light of these and other uncertainties, the inclusion of forward-looking statements in this Information Memorandum should not be regarded as a representation or warranty by KPSB or its advisers or the Joint Lead Arrangers/Joint Lead Managers that the plans and objectives of KPSB will be achieved. A deterioration in the financial condition of KPSB could adversely affect the market value of the Sukuk Kimanis and the ability of KPSB to make payments under transaction documents relating to the Sukuk Kimanis to which it is a party when due, if at all.

5.5.5 Industry Restructuring

The PPA provides that if the present structure of the electricity industry in Sabah is revamped with a view to setting up a power pool or other market system to replace the said present structure (“Industry Restructuring”), KPSB and SESB are to negotiate in good faith amendments to the PPA to enable KPSB the opportunity to fully participate in the restructured market. If KPSB and SESB cannot agree on the amendments to the PPA within six months from the commencement of such negotiations pursuant to the Industry Restructuring, SESB may terminate the PPA immediately in accordance with the terms thereof, whereupon SESB shall purchase and KPSB shall sell the Project in the manner and for the purchase price determined in accordance with provisions contained in the PPA. There can be no assurance that any industry restructuring will not have an adverse effect on KPSB‟s business and operations.




Section 6

Industry Overview

6.1 Outlook on the Malaysian Economy

6.1.1 Growth remained favourable in the fourth quarter

The global economic and financial conditions continued to experience stress in the fourth quarter of 2011, following heightened concerns over the resolution of the European sovereign debt crisis. Growth in the advanced economies was affected by high unemployment, weak housing markets and fiscal issues while growth in Asia was affected by weaker external demand. Despite the challenging external environment, the Malaysian economy expanded by 5.2% (3Q 11: 5.8%), with growth being underpinned by domestic demand. The favourable domestic demand conditions were supported by both private and public sector spending. On the supply side, the services sector recorded slower growth, while the manufacturing sector grew at a similar pace to the previous quarter, reflecting the weaker external environment amid sustained growth in domestic activity. Other sectors, however, recorded improvements during the quarter, while the agriculture sector continued to record strong growth. For the whole year, the Malaysian economy expanded by 5.1%.

Domestic demand expanded by 10.5% during the quarter (3Q 11: 9.0%), driven by the continued expansion in household and business spending, and public sector expenditure. Private consumption increased by 7.1% (3Q 11: 7.3%), supported by favourable income growth while public consumption expanded by 23.6% (3Q 11: 21.7%) following higher expenditure on emoluments and supplies and services. Gross fixed capital formation increased by 8.5% (3Q 11: 6.1%), supported by continued expansion in capital spending by the private sector and the non-financial public enterprises. The Federal Government development expenditure during the quarter was mostly channelled into the transportation, and trade and industry sectors.

On the supply side, activity in the services sector moderated in the fourth quarter, while the manufacturing sector expanded at a similar pace to the previous quarter. This trend reflected the weaker external environment amid strong performance in domestic-oriented activity. The agriculture sector continued to expand on account of strong production of crude palm oil, while mining output recorded a slower contraction. The construction sector registered higher growth, supported by the implementation of major infrastructure projects. The headline inflation rate, as measured by the annual change in the Consumer Price Index (CPI), declined to 3.2% in the fourth quarter (3Q 11: 3.4%). Inflation in the transport category was lower at 3.2% (3Q 11: 4.3%) as the impact of the one-off adjustment on the prices of RON95 petrol, diesel and LPG in December 2010 wore off. Inflation in the food and non-alcoholic beverages category, however, rose to 5.3% during the quarter (3Q 11: 4.8%), mainly due to higher prices in the fish and seafood subcategory.



In the external sector, the current account surplus narrowed in the fourth quarter, but remained large at RM22 billion, equivalent to 10.1% of GNI. The lower surplus reflected the lower goods surplus, higher trade deficits and larger income outflows. The goods surplus was slightly lower at RM36.9 billion as gross exports expanded at a more moderate pace (9.8%; 3Q 11: 11.4%), while import growth was sustained (7.6%; 3Q 11: 7.4%). The financial account turned around from a net outflow position to record a small net inflow of RM0.2 billion in the fourth quarter (3Q 11: -RM23.3 billion), due to the significantly smaller net outflow of portfolio funds and higher net inflow of other investments. During the quarter, foreign direct investment recorded a higher net inflow of RM6.5 billion (3Q 11: +RM5.2 billion), supported by higher retained earnings by the multinational companies (MNCs) in Malaysia and higher inflow of equity capital. Direct investments abroad by Malaysian companies increased further to -RM14.4 billion (3Q 11: -RM12.9 billion), reflecting higher outflow of equity capital and larger earnings retained abroad for reinvestment purposes. The overall balance of payments continued to remain strong, recording a surplus of RM6.3 billion in the fourth quarter (3Q 11: RM10.9 billion), as the current account surplus remained high and the financial account registered a net inflow position.

The international reserves of Bank Negara Malaysia amounted to RM423.4 billion (equivalent to USD133.6 billion) as at 31 December 2011. The reserves level as at 31 December 2011 has taken into account the quarterly adjustment of the foreign exchange revaluation loss, following the strengthening of the ringgit against some major currencies during the quarter. As at 31 January 2012, the reserves position amounted to RM424.8 billion (equivalent to USD134.1 billion), sufficient to finance 9.6 months of retained imports and is 4.1 times the short-term external debt.

6.1.2 Monetary policy remained supportive of economic activity

The Overnight Policy Rate (OPR) was left unchanged at 3.00% in the fourth quarter of 2011 given the higher downside risks to growth and lower upside risks to inflation. At the prevailing level, the OPR remains supportive of economic activity. Reflecting the unchanged OPR, the average overnight interbank rate and interbank rates of other maturities were relatively stable. In terms of retail interest rates, the average quoted fixed deposit (FD) rates of commercial banks were stable during the quarter. The average base lending rate (BLR) of commercial banks decreased slightly to 6.53% as at end-December due to the inclusion of a new foreign bank with a lower BLR in December. The weighted average lending rate (ALR) on loans outstanding moderated slightly to 5.66% as at end-December 2011 (end-September 5.70%). The cost of borrowing for businesses and households is still below pre-crisis levels and remains supportive of the economy. In the fourth quarter, total gross financing raised by the private sector through the banking system and the capital market increased to RM240.6 billion (3Q 11: RM223.9 billion). The higher financing reflected increased loan disbursements during the quarter. On a net basis, banking system loans and PDS outstanding expanded at an annual growth rate of 12.5% as at end-December (3Q 11: 13.4%). The major loan indicators posted strong performances in the fourth quarter. Net funds raised in the capital market increased to RM19.4 billion during the quarter (3Q 11: RM12.7 billion). Of this amount, RM15.9 billion was raised by the public sector. There was a significantly lower amount of redemptions by the public sector during the quarter. In the private sector, fund raising activity remained healthy. After adjusting for redemptions, net funds raised by the private sector amounted to RM3.5 billion. The monetary aggregates grew at a stronger pace during the fourth quarter. M3, or broad money, expanded at a faster annual growth rate of 14.4% as at end-December (end-September 2011: 12.5%).

The global foreign exchange markets remained volatile in the final quarter of the year as uncertainty surrounding the European sovereign debt crisis continued to dampen investor sentiments towards emerging market assets. In general, exchange rate performance was largely news-driven, as markets reacted to developments in Europe. Overall, in line with the regional trend, the ringgit appreciated by 0.4% against the US dollar in the fourth quarter. Against other major currencies, the ringgit appreciated



against the euro (5.0%), Japanese yen (1.7%) and the pound sterling (1.6%). Against regional currencies, the ringgit strengthened against the Indonesian rupiah (4.5%), Thai baht (2.3%), Singapore dollar (0.4%) and the Philippine peso (0.4%) but depreciated against the Chinese renminbi (-0.9%) and Korean won (-1.5%). During the period 1 January - 13 February 2012, the ringgit appreciated against the Japanese yen (5.1%), US dollar (5.0%), euro (2.6%) and the pound sterling (2.5%). The ringgit broadly strengthened against regional currencies, appreciating in the range of 1.3% and 4.9%.

6.1.3 Risks to financial stability remained manageable

Financial stability remained intact throughout the fourth quarter despite the persistent uncertainties and challenging external environment. Well capitalised financial institutions and orderly functioning of the financial markets continued to provide support for financial intermediation activities in the domestic economy. The banking system exhibited strong performance during the quarter. Sustained profitability continued to support the capital strength of banks. Liquidity in the banking system remained ample and sufficient to meet the demand for financing and other liquidity obligations. The core capital ratio and risk-weighted capital ratio of the banking system were at 12.9% and 14.9% respectively. Similarly, the insurance sector remained resilient with a strong capital adequacy ratio of 222.5%.

The Financial Sector Blueprint 2011 – 2020 was launched during the quarter, charting the future direction and initiatives to develop the financial sector to best serve the economy and to facilitate the economic growth and transformation over the next ten (10) years. These include initiatives to promote inclusive access to financial services; encourage further development of financial institutions, products and markets that facilitate and drive the development of new domestic sources of growth; and accelerate Malaysia‟s regional and international connectivity.

6.1.3.1 Growth may moderate amidst more challenging external environment

The global economic recovery continued in the fourth quarter, albeit at a more modest pace. Growth prospects, however, have become increasingly uncertain with the emergence of greater downside risks. In particular, policy uncertainty on the resolution of the ongoing sovereign debt crisis in Europe amid fiscal consolidation in the advanced economies could add further strains to the international financial system, thus affecting the prospects for continued global growth.

For the Malaysian economy, the favourable growth in the fourth quarter was underpinned by sustained domestic demand amid weaker external demand. Going forward, the more challenging external environment could present greater downside risks to Malaysia‟s growth prospects. Nevertheless, domestic demand is expected to continue to be the key driver of growth, supported primarily by the continued expansion of private sector activity. Public sector expenditure is also expected to lend strong support to the overall growth performance.

(Source: Economic and Financial Developments in the Malaysian Economy in the Fourth Quarter of 2011, Bank Negara Malaysia)

6.2 Overview of the Utilities Sector

The 2012 Budget is anchored on the national transformation agenda, comprising four pillars to drive change. The New Economic Model (NEM) to be achieved through the Economic Transformation Programme (ETP) constitutes a key pillar which will propel Malaysia to a developed and high-income economy that is both inclusive and sustainable. The ETP comprises two parts, namely the Strategic Reform Initiatives (SRIs) and National Key Economic Areas (NKEAs). The two other pillars are the 1Malaysia, People First, Performance Now concept and the Government Transformation Programme (GTP). The 1Malaysia, People First Performance Now concept permeates all public sector programmes and aims to unite all Malaysians to face the challenges ahead as a nation. Meanwhile, the GRP was formulated to strengthen public services as well as facilitate and enable the outcomes defined under the National Key Result Areas (NKRAs) and NKEAs. The Tenth Malaysia Plan (10MP), the fourth pillar, provides the policy support for various programmes from 2011 to 2015.



With 37% of the population living in rural areas, rural developmental remains and an important agenda in developmental planning. A sum of RM2.8 billion was allocated to implement basic infrastructure projects such as water and electricity supply as well as rural roads. An allocation was provided for water and electricity supply in rural areas of Sabah, Sarawak and Peninsular Malaysia. A total of RM181.6 was spent in Sabah and RM254.9 million in Sarawak, which benefitted 14,740 and 48,300 households respectively. In addition, RM165.4 million was disbursed for water and electricity supply to more than 27,850 households in rural areas of Peninsular Malaysia.

The utilities sub-sector is expected to expand by 3.1% in 2011 (2010: 8.2%) mainly due to higher electricity consumption in the industrial and commercial segments. During the first seven months of 2011, electricity generation and sales rose 2.6% and 2.7% (January – July 2010: 10.7%; 13.6%), respectively. The industrial segment accounted for 43.9% of total electricity consumption, followed by the commercial (33.8%) and household (20.8%) segments. Maximum demand for electricity peaked at 15,476megawatts (MW) in May 2011 (January – July 2010: 15,072 MW in May). Meanwhile, water supply to consumers increased 4.2% to 14,648 million litres per day (mld) (January – July 2010: 14,060mld). As of September 2011, five states have participated in the water asset restructuring programme aimed at ensuring sustainability and efficiency of water supply. Meanwhile, negotiations with Kelantan and Perak are expected to be concluded by end-2011.

(Source: Economic Report 2011/2012, Ministry of Finance Malaysia)

6.3 Power Generation Industry in Sabah

Electricity started in Sabah as early as 1910 supplied by 3 separate organizations. In 1957 these three organizations combined to form North Borneo Electricity Board. When North Borneo joined Malaysia in 1963 and changed its name to Sabah, this entity was renamed Sabah Electricity Board. On 1st of September 1998 Sabah Electricity Board was privatized and became Sabah Electricity Sdn. Bhd.

Sabah Electricity Sdn. Bhd. is an 80% owned subsidiary of Tenaga Nasional Berhad (TNB) and 20% by the State Government of Sabah. It is a vertically integrated utility providing reliable generation, transmission and distribution services in the state of Sabah and the Federal Territory Labuan.

SESB is committed to developing the electricity infrastructure in the state of Sabah and the Federal Territory Labuan including the implementation of the Rural Electrification Program.

SESB generates, transmits and distributes electricity. It is the only power utility company in Sabah supplying electricity distributed over a wide area of 74,000 sq.km. As of August 2011, a total of 456.406 of which 82.8% of the customers are domestic customers contributing only 31.17% of the sale.

The SESB installed capacity (excluding IPP) of the Sabah Grid which supplies electricity for major towns from Federal Territory Labuan to Tawau is 430.9 MW and the maximum demand is 830 MW (as of August 2011).

(Source as at 10 July 2012:

http://www.sesb.com.my/index.php?option=com_content&view=article&id=75&Itemid=93)





The Sabah Grid is made up of 66kV, 132kV and 275kV which links up all major towns in Sabah and Federal Territory of Labuan. As of March 2011 the total length of transmission line in Sabah is 3,263 km.






Section 7

Other Information

7.1 Borrowings

As at 30 April 2012, save and except as disclosed below, KPSB does not have any borrowings or obtained any other financing facilities:-

(a) the MOL Facilities; and

(b) the Bridging Financing Facility.

Part of the proceeds from the issuance of the Sukuk Kimanis under the Sukuk Programme is proposed to be utilized to refinance the Bridging Financing Facility.

7.2 Contingent Liabilities

As at 30 April 2012, KPSB does not have any contingent liabilities.

7.3 Litigation

As at 30 April 2012, KPSB is not involved in any litigation and arbitration, either as plaintiff or defendant, which may have a material adverse effect on the business or financial position of KPSB and KPSB is not aware of any legal proceeding, pending or threatened, or of any fact likely to give rise to any legal proceeding which may have a material adverse effect on the business or financial position of KPSB.

7.4 Related Party Transactions

Save and except as disclosed below, there are no other related party transactions as at 30 April 2012:-

7.4.1 GSA

The GSA was entered into between PETRONAS and KPSB pursuant to which PETRONAS has agreed to supply natural gas to KPSB for purposes of the Project.

The shareholders of KPSB are PGB and NRG, each having a 60% and 40% equity stake in KPSB respectively. PGB, in turn, is a subsidiary of PETRONAS whereby PETRONAS has a 60.63% stake in PGB.

7.4.2 DSA

The DSA is entered into between PDB and KPSB pursuant to which PDB has agreed to supply distillate fuel to KPSB for purposes of the Project.

PDB is a subsidiary of PETRONAS whereby PETRONAS has a 69.86% stake in PDB.

The shareholders of KPSB are PGB and NRG, each having a 60% and 40% equity stake in KPSB respectively. PGB, in turn, is a subsidiary of PETRONAS whereby PETRONAS has a 60.63% stake in PGB.

7.4.3 OMA

The OMA is entered into between KPSB and the Operator pursuant to which the Operator will operate and maintain the Facilities upon the terms and subject to the conditions therein contained.

The Operator and KPSB are related companies with common shareholders, namely PGB and NRG.

The shareholders of KPSB are PGB and NRG, each having a 60% and 40% equity stake in KPSB respectively.



The shareholders of the Operator are PGB and NRG, each having a 50% equity stake in KPSB.

7.4.4 Sub-Lease Agreement

The Sub-Lease Agreement is entered into between Yayasan Sabah and KPSB pursuant to which Yayasan Sabah has agreed to sub-lease the Said Lands to KPSB.

The shareholders of KPSB are PGB and NRG, each having a 60% and 40% equity stake in KPSB respectively.

NRG is a wholly-owned subsidiary of Innoprise Corporation Sdn Bhd, which is in turn wholly-owned by Yayasan Sabah.

7.5 Potential Conflict of Interest Situations

As at the date of this Information Memorandum, KPSB is not aware of any circumstances, which may potentially give rise to a conflict of interest situation in relation to the Sukuk Programme save and except as disclosed below:

7.5.1 CIMB

Conflict of Interest and Potential Conflict of Interest Situations

Part of the proceeds from the issuance of the Sukuk Kimanis under the Sukuk Programme is proposed to be utilized to settle the Bridging Financing Facility.

The potential conflict of interest arising therefrom is by virtue of the following:

(a) CIMB is acting in the capacity of the Joint Principal Adviser / Joint Lead Arranger, Joint Lead Manager and Facility Agent in relation to the Sukuk Programme;

(b) CIMB Islamic Bank had earlier granted a Bridging Financing Facility to KPSB;

(c) CIMB Islamic Bank and CIMB are entities within the same group of companies.

Appropriate Mitigating Measures

As a mitigating measure and to address the potential conflict of interest set out above, the following measures have been taken:

(i) the potential conflicts of interest situations has been brought to the attention of the board of directors of KPSB and hence they are aware of the same. Despite such potential conflict of interest situations, the board of directors of KPSB is prepared to proceed with the implementation of the Sukuk Programme based on the present arrangement and terms. A copy of the Letter of Awareness from KPSB setting out the acknowledgment and agreement of the board of directors of KPSB on the potential conflict of interest situations is enclosed herewith as Appendix III;

(ii) CIMB has acted as arranger and manager in numerous transactions in the Malaysian private debt securities market and is committed to upholding its professional integrity and responsibilities in relation to the Sukuk Programme; and

(iii) due diligence review pursuant to the Sukuk Programme has been undertaken by professional advisers.

7.6 Other Material Information

Neither KPSB nor its board members have been convicted or charged with any offence under the securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, for the last five years prior to the date of this information memorandum.




Appendix I

Cashflow Forecast and Projections



The principal bases and assumptions upon which the cash flow projections from 1 January 2012 to 31 March 2035 have been made by the Board of Directors of KPSB are as follows: A General Assumptions A1. There will be no significant changes in the terms and conditions of the Power Purchase Agreement (“PPA”)

entered into between Sabah Electricity Sdn Bhd (“SESB”) and KPSB in relation to the new 285 MW gas-fired power plant in Kimanis, Sabah (“Project”).

A2. There will be no significant changes in the present legislation and Government regulations, rates and

duties, tariffs, levies and taxes, which will adversely affect the operations of KPSB and the market in which it operates.

A3. KPSB will operate as planned and there are no factors which would significantly affect its operations. A4. There will be no expropriation or events leading to the termination of the PPA prior to the end of the

agreement period. A5. There will be no significant changes to the prevailing economic and political conditions and unforeseen

weather, natural disaster or civil unrest in Malaysia and elsewhere that will have direct or indirect effects to KPSB.

A6. There will be no material litigation against KPSB. A7. There will be no significant changes in costs of spares and the major operating costs. A8. The initial operation date of the Project is expected to be achieved as follows:

a) 10 August 2013 for the first Generating Block

b) 10 October 2013 for the second Generating Block

c) 10 December 2013 for the third Generating Block

A9. The expected Scheduled Commercial Operation Date (“SCOD”) for the Project are as follows:

a) December 2013 for the first Generating Block

b) February 2014 for the second Generating Block

c) April 2014 for the third Generating Block

B Project Costs Assumptions B1. The capital expenditure for the new plant comprises the following costs:

Construction costs Payment Schedule

RM’ Million Total 2011

Actual

2012 Forecast

2013 Projected

2014

Projected

EPCC* costs 1,032^ 155 351 423 103

Development costs ** 215 74 93 30 18

KIMANIS POWER SDN BHD Page 135 RM1.16 Billion Sukuk Programme

Import duties 14 - - - 14

O&M mobilisation costs

41 - - 41 -

Financing fees and expenses

148 - 45 70 33

Total 1,450 229 489 564 168

Notes:

* EPCC denotes Engineering, Procurement and Construction Contract

^ Foreign currency components of EPCC costs – USD portion amounting to USD106M, EUR portion amounting to EUR66 million, and RM411million. The foreign currency are converted using rates of USD1.00 = RM3.194 and EUR1.00 = RM4.257.

** Inclusive of site preliminary works, project insurance costs, advisory services, and other expenses.

B2. The sources of the fund for the above costs are as follows:

. RM’ Million

Senior Facilities

Sukuk Series 1 860

Sukuk Series 2

300

Equity

Share capital 320

Total 1,480

The total Project cost is to be financed from Senior Facilities and shareholders’ equity contribution in the ratio of 78.4%, and 21.6%. Shareholders’ equity contribution is expected to be in the form of ordinary shares.

C Financing Assumptions C1. The debt facilities of the Company comprise the issuance of Sukuk Series 1 amounting to RM860 million at

a targeted rating of AA- as well an issuance of Sukuk Series 2 amounting to RM300 million. C2. It is expected that the Sukuk Series 1 will consist of 13 tranches.



C3. The profit payments are expected to commence six months from the date of the issuance of both of the sukuks. The payment of principal obligations for the Sukuk Series 1 is expected to commence in June 2016 while the payment of principal obligations for the Sukuk Series 2 is expected to commence in November 2015.

C4. All payments in respect of the Islamic securities will be made on a timely manner. C5. All the financial debt covenants will be met including maintaining a Finance Service Cover Ratio (FSCR) of

minimum 1.25 times. C6. It is expected that the financing cost for a bridging loan is estimated to be RM3.15 million. D Operating Assumptions D1. The Company will achieve the following operational performance targets (per annum):

Plant Net Capacity 285MW

Plant Heat Rate (kJ/kWh HHV) 1-6 years 8,145

7-12 years 8,224

13- end 8,272

Plant Availability 90%

Plant Capacity Factor 90%

Plant Outages Planned 6%

Unplanned 4%

D2. There will be adequate gas supply which meets the required quality specifications throughout the projection

period. D3. The power plant tariff will remain unchanged in accordance with the PPA. D4. The Power Plant Operator will be able to fulfill all its obligations and the plant will perform at planned

productions levels. D5. Gas prices for Sabah will remain constant at RM6.40 per mmBtu. E Operating Revenue and Expenses Assumptions

Operating Revenue Assumptions

E1. Operating Revenue comprises the following:

a) Capacity Rate Financial (“CRF”) Revenue b) Fixed Operating Rate (“FOR”) Revenue

c) Variable Operating Rate (“VOR”) Revenue d) Fuel Revenue



Year End CRF (RM/kW/month)

FOR (RM/kW/month)

VOR

(RM/kWh)

Fuel Payment (RM/GJ)

Contract Year 1 53 5.9500 0.0232 6.10

Contract Year 2 53 5.9500 0.0232 6.10

Contract Year 3 53 5.9500 0.0232 6.10

Contract Year 4 53 5.9500 0.0232 6.10

Contract Year 5 53 6.1880 0.0241 6.10

Contract Year 6 53 6.1880 0.0241 6.10

Contract Year 7 53 6.1880 0.0241 6.10

Contract Year 8 53 6.1880 0.0241 6.10

Contract Year 9 53 6.4355 0.0251 6.10

Contract Year 10 53 6.4355 0.0251 6.10

Contract Year 11 53 6.4355 0.0251 6.10

Contract Year 12 53 6.4355 0.0251 6.10

Contract Year 13 53 6.6929 0.0261 6.10

Contract Year 14 53 6.6929 0.0261 6.10

Contract Year 15 53 6.6929 0.0261 6.10

Contract Year 16 31.5 6.6929 0.0261 6.10

Contract Year 17 31.5 6.9607 0.0271 6.10

Contract Year 18 31.5 6.9607 0.0271 6.10

Contract Year 19 31.5 6.9607 0.0271 6.10

Contract Year 20 31.5 6.9607 0.0271 6.10

Contract Year 21 31.5 7.2391 0.0282 6.10



Operating Expenses Assumptions

E2. The operating expenses are assumed to comprise fuel expenses, variable operator expenses, fixed operator expenses, CESS fund contributions and other miscellaneous operating expenses. Fuel expenses and variable operator expenses vary directly with the net electrical output produced by the Power Plant.

Operating Expenses Assumptions (continued)

E3. Fuel expenses are calculated as gas price multiplied by the amount of gas consumed for the generation of the net electrical output. Fuel expenses are assumed to be a pass-through cost to SESB, subject to meeting schedule of heat rates, as per the payment mechanism in the PPA.

E4. Variable operator expenses are costs that vary directly with the amount of energy generated, e.g. spare

parts, non-fuel costs such as water and consumables for the generation of electrical energy, etc. It is

calculated at a set rate per unit (in RM/kWh) based on the projected electricity output.

E5. Fixed operating expenses include fixed operations and maintenance costs, insurance, general and administrative expenses, regulatory fee and license fees.

E6. CESS contributions to the Malaysian Government are assumed to be equal to one per cent (1%) of the

gross revenue received excluding the fuel payment revenue. E7. The Company expects a maintenance reserve target balance of RM8 million during the commencing of the

COD of the First Generating Block. E8. Management presumes that unplanned outages will not exceed the anticipated rate of 4% of total output. F Tax, Dividend, Interest, Inflation & Exchange Rates Assumptions

Corporate Tax Assumptions

F1. The corporate tax rate is assumed to be the current Malaysian corporate income tax rate of 25% throughout the projection period and income taxes are paid at the end of each financial year.

F2. It is assumed that there will be no material disposals and write-offs of property, plant and equipment. F3. It is assumed that KPSB is granted investment tax allowance. F4. Capital Allowances (“CA”) and Industrial Building Allowances (“IBA”) will be determined as follows:

Initial (%) Annual (%)

Plant and machinery 20 14

Industrial building 10 3

It is assumed that all qualifying plant and machinery would fall within the category of “General plant and machinery” (i.e. not falling within the category of “Heavy plant and machinery”, “Motor vehicles” and “Others”). Corporate Tax Assumptions (continued)



F5. For the purposes of the computation of CA and IBA, 72% of the project costs are assumed to qualify for tax purposes, in which 70% qualifies for CA while the remaining 30% will qualify for IBA.

F6. CA and IBA are claimed on the assets of the Project with effect from 2014 onwards. It is assumed that the

construction of the plant and machinery and industrial building for the Project are completed and brought into use in April 2014.

F7. CA and IBA are assumed to be permitted to be carried forward indefinitely to offset future taxable statutory

income in accordance with current tax regulations in Malaysia. F8. In respect of tax deductions, interest expenses for Senior Facilities are treated as deductible expenses

within the cash flow projections on the basis that the facilities are for the purposes of assets acquisition and the asset will be used in the business for the production of income.

F9. The PPA will be accounted for as a finance lease between the Company (Lessor) and SESB (Lessee) in

accordance with the Malaysian Financial Reporting Standards (MFRS) issued by the Malaysian Accounting Standards Board (MASB). It is assumed that income tax payments will not be affected by the accounting treatment.

Indirect Tax Assumptions

F10. Implication of possible future implementation of Goods and Services Tax (“GST”) in Malaysia is not considered in this cash flow projections.

F11. It is assumed that goods purchased from local manufacturers under the EPCC are not subject to sales tax

in accordance with current tax regulations in Malaysia. F12. It is assumed that a 7.5% average import duty rate is adopted.

Dividend Assumptions

F13. The cash flow projections have not incorporated any dividend payments to shareholders. F14. The distribution of dividend is at the absolute discretion of the Company. In the event that dividends were to

be declared and paid, the following conditions is required to be considered before any payments are being made:

(a) the FSCR would not fall below 1.5 times after payment of dividend has been made; (b) the requirement of the Finance Service Reserve Account (“FSRA”) and Maintenance Reserve Account

(“MRA”) have been met; and (c) the maximum distributable dividend is expected to be the lower of net dividend declarable from

available profits and cash available to pay dividends. Interest Assumption

F15. Interest on cash balance is assumed to be 3% per annum. Inflation Assumption

F16 It is assumed that inflation will increase constantly throughout the period at 4% every year.

Exchange Rate

F17. The exchange rate used in the cash flow projection for the cost to be incurred under the Contract Service Agreement (“CSA”) payment is assumed at MYR/USD 3.50.



Appendix II

Audited Financial Statements of Issuer for the FYE 2011



Appendix III

Letter of Awareness

THE ISSUER

KIMANIS POWER SDN BHD (Company No. 842208-H)

(Incorporated in Malaysia under the Companies Act 1965)

JOINT LEAD ARRANGERS / JOINT LEAD MANAGERS

CIMB Investment Bank Berhad 5th Floor, Bangunan CIMB,

Jalan Semantan, Damansara Heights,

50490 Kuala Lumpur, Malaysia

HSBC Amanah Malaysia Berhad

11th Floor, North Tower, No. 2, Leboh Ampang, 50100 Kuala Lumpur,

Malaysia

TRUSTEE

Malaysian Trustees Berhad 20th Floor, Plaza OSK,

Jalan Ampang, 50450 Kuala Lumpur, Malaysia

FACILITY AGENT

CIMB Investment Bank Berhad 5th Floor, Bangunan CIMB,

Jalan Semantan, Damansara Heights,


LEGAL COUNSEL TO THE ISSUER

Messrs Khem Thadani

LEGAL COUNSEL TO THE JOINT LEAD

ARRANGERS / JOINT LEAD MANAGERS

Messrs Albar & Partners

Suite 15-1, Level 15, Wisma UOA II,

No. 21, Jalan Pinang, 50450 Kuala Lumpur

6th Floor, Faber Imperial Court, Jalan Sultan Ismail,


Level 19, Menara Tun Mustapha Teluk Likas

88400 Kota Kinabalu Sabah