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Sunday, December 10, 2023

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Agha Steel to issue first green Sukuk for steel sector in Q4 2023

Karachi-headquartered steel manufacturing company Agha Steel Industries (Agha Steel) is looking to issue a green Sukuk facility worth up to PKR3.5 billion (US$11.94 million) in Q4 this year, Nidal Ahmed Shaikh, the head of advisory and strategic investments group at Pak Brunei Investment Company, told ISFI.

The issuance will be the first green Sukuk issued for the steel sector and will comply with the International Finance Corporation’s Green Bond Framework.

“Agha Steel plans on issuing a green bond to attract avid environmentalists into investing … This is an untapped unconventional market and by offering an Islamic investment instrument with attractive returns, we foresee a good response from potential investors,” Nidal explained.

The PKR3.5 billion facility, which is inclusive of a greenshoe option, is expected to have a tenor of three to five years. Agha Steel has appointed the Bank of Punjab as the lead transaction advisor and arranger alongside Pak Brunei Investment Company.

According to Nidal, the soon-to-be-issued green facility will fund the commissioning of its plant expansion project and installation of a 2.2 megawatt solar power plant into its Micro Mill Danieli ‘MiDa’ facility. The expansion project is expected to result in significant time and energy savings, contributing to uninterrupted production.

Back in late 2018, Agha Steel signed an agreement with Italy’s Danieli Group to construct Asia’s first endless steel technology MiDa plant. The plant construction was funded by a PKR5 billion (US$17.05 million) Sukuk facility structured under the diminishing Musharakah concept. The facility was Pakistan’s first over-the-counter listed Sukuk.

On the 17th August this year, the steel manufacturing company issued a new PKR3.4 billion (US$11.6 million) Sukuk facility to swap its outstanding 2018 facility.

Due to the economic realities of the country as well as the restrictions imposed by the central bank, the company faced cash flow restraints, inhibiting its ability to meet the coupon payments of its previous facility. To provide further leeway to the issuer, the new Sukuk included an 18-month grace period.

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