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NASDA Green Energy’s syndicated finance: Supporting sustainability

A company owned by Pakistan’s Soorty Group, NASDA Green Energy, contributed to changing the energy mix in the country, which tilts significantly toward thermal sources of energy, with syndicated long-term project finance facilities extended in November 2019 to partly finance the company’s 50 MW power project. NESSREEN TAMANO has the details.

The transactions consist of a Musharakah onshore financing worth PKR4.7 billion (US$26.12 million) and an Istisnah-structured offshore financing worth US$25 million. The facilities will be used to finance the design, construction and commissioning of NASDA Green Energy’s 50 MW wind power project located at Jhimpir, in the Pakistani province of Sindh.

Being a renewable energy syndicated transaction, it bears multiple impactful advantages, including a positive impact on the environment. “The transaction has been structured to benefit the end-consumer as well, which has been achieved by negotiating and executing a very competitive set of project documents,” said Meezan Bank, which also played the role of onshore financier alongside the offshore financier the IsDB’s Islamic Corporation for the Development of the Private Sector (ICD).

Soorty Group exited the world of conventional financing in favor of Islamic financing over a decade ago, a representative from the company told IFN, adding that Shariah compliant financing was the first and only choice for the NASDA project.

“One of the challenges of this transaction is that, Soorty Group’s no-compromise policy for Shariah-based financing meant a limited choice of financiers. Stringent timelines was also a challenge — it is very rare that financial institutions would come up with a firm approval on a project finance deal with a tenor of 12 to 14.5 years. Both financiers came up with their approvals well within four weeks; the performance of the team and management remains unprecedented in cross-border multi-currency transactions.”

The wind power project has zero reliance on imported fuel, and the syndicated facility can be considered a step toward easing the challenges faced by the country, with the offshore US$25 million arranged by the ICD adding to foreign direct investment inflows and helping ease the foreign exchange reserves situation of Pakistan.

The transaction also utilized a concessionary financing scheme under the independent power producers segment offered by the State Bank of Pakistan to promote green banking and the use of renewable energy to ensure sustainable banking and development, as well as help the country overcome the dual challenge of energy shortage and climate change.

The project is expected to result in a reduction of carbon emissions and has the potential of generating additional revenue through the sale of carbon credits.

NASDA Green Energy’s syndicated long-term project finance facilities
PKR4.7 billion onshore and US$25 million offshore

18th November 2019
ObligorNASDA Green Energy
InstrumentSyndicated long-term project finance
Size of issueTotal value: US$51.12 million (at PKR180 per US$1)Breakdown:PKR4.7 billion (US$26.12 million) onshore financing (Musharakah);US$25 million offshore financing (Istisnah)
Profit rateMusharakah: State Bank of Pakistan Rate 3% + 2% margin;Istisnah: three-month LIBOR + 4.25%
Issuance price100%
PaymentQuarterly in arrears
CurrencyMusharakah: Pakistani rupeeIstisnah: US dollar
PurposeTo finance the design, construction and commissioning of the company’s 50 MW wind power project
Financial closing date18th November 2019
TenorMusharakah: 12 years;Istisnah: 14.5 years
Mandated lead advisor and arrangerMeezan Bank
FinanciersMeezan Bank and Islamic Corporation for the Development of the Private Sector
Principal advisorsHaidermota & Co (owner’s legal advisor)Clifford Chance (financiers’ offshore legal advisor)Vellani & Vellani (financiers’ onshore legal advisor)
Governing lawMusharakah: Pakistan law;Istisnah: English law
Underlying assetsProject’s fixed and moveable assets
Shariah advisorMeezan Bank

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