233 F INANC IAL Statements Sect ion 05 Annual Report 2022 NOTES TO THE F INANC I AL STATEMENTS For the year ended 31 December 2022 31. LOANS AND BORROWINGS (Contd.) Musharakah Medium Term Notes (“mMTN”) (contd.) The mMTN is secured over the followings: Tranche 1 (i) a debenture to create a first ranking fixed and floating charges over all present and future assets of RPII; (ii) first assignment and charge of all the Lease Agreement and the lease on the Project land and building excluding switchyard areas and parts which are to be transferred to Sabah Electricity Sdn. Bhd. pursuant to the Lease Agreement; (iii) a charge and assignment of all the rights, benefit and interest of RPII in and to the Designated Accounts; and (iv) assignment (by way of security of) on all rights, interest and benefit of RPII for the following: • the Project Agreements (including the right to all liquidated damages payable thereunder and the right to revenues under the Power Purchase Agreement and such step-in-rights under the terms). • applicable licenses and permits (to the extent that the licenses and permits are assignable and no further consents are required to be obtained for such assignment). • applicable insurance/takaful policies. • performance bonds and guarantees issued in favour of RPII. • Any other security as may be advised by the solicitors to the JLAs (“Legal Counsel”) and agreed with the Issuer. Tranche 2 The securities will be shared on pari passu basis with the Guarantor in Tranche 1 via the security sharing arrangement in respect of the payment obligation by RPII of the nominal value of each series of the Tranche 2. The major covenants that are required to be complied by RPII are as follows: (i) to maintain a Financial Service Coverage Ratio (“FSCR”) of 1.25 times and debt/equity ratio not higher than 80:20; (ii) a minimum FSCR of 1.75 times is required for the declaration of dividend and thereafter a minimum of 1.5 times is required to be maintained; (iii) to maintain a minimum requirement reserve in FSRA and Finance Payment Account (“FPA”) to meet the profit payment due and payable semi-annually and the principal payment annually; and (iv) cash generated from power generation are restricted for operational and administrative expenses incurred in the normal course of business.
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