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Sunday, May 28, 2023

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Saudi Electricity Company’s Sukuk: A dual success

National energy utility Saudi Electricity Company (SEC) successfully closed a dual-tranched Sukuk issuance worth a total of US$2 billion under its newly established international Sukuk program. NESSREEN TAMANO writes.

The Islamic issuance comprised a 10-year green Sukuk tranche worth US$1.2 billion, and a 30-year regular Sukuk tranche worth US$800 million.

The orderbook for the issue recorded total requests amounting to US$15.4 billion, with an oversubscription of 7.7 times the original issue size. More than 350 investors from local and international financial institutions participated.

“The offering supports our goals to finance projects through innovative and sustainable financing instruments that are consistent with the company’s objective to diversify its financing sources and increase its investor base in international markets,” said Khaled Al-Gnoon, CEO of SEC.

SEC had first announced its intention to establish the Sukuk program on the 30th March 2023. Proceeds from the issuance will be used to fund general corporate purposes, including capital expenditures, and to fund a portfolio of eligible green projects that will help contribute to climate change mitigation, as set out in SEC’s Green Sukuk Framework.

The framework was established in 2020 in conjunction with SEC’s sustainability strategy, and aims to facilitate the transition to a low-carbon and circular economy. It is also in line with the Green Bond Principles issued by the International Capital Market Association.

The electricity company regularly taps the Islamic finance market; recently, in February 2023, it secured a syndicated financing facility from a consortium of nine banks including four Saudi Islamic banks.

SEC had also in 2021 issued a Sukuk facility worth SAR167.92 billion (US$44.75 billion) — the world’s largest Islamic finance transaction to date — which had supported the Kingdom’s efforts to reform the electricity sector.

The company, owned by the Saudi Public Investment Fund, holds a monopoly on the generation, transmission and distribution of electric power in Saudi Arabia.

Saudi Electricity Company’s Sukuk US$2 billion Saudi Electricity Company 4th April 2023
Issuer Saudi Electricity Sukuk Programme Company (SESPC)
Obligor Saudi Electricity Company
Issue size Green Sukuk: US$1.2 billion Regular Sukuk: US$800 million
Type US dollar-denominated RegS senior unsecured
Tenor Green Sukuk: 10 years Regular Sukuk: 30 years
Maturity date Green Sukuk: 11th April 2033 Regular Sukuk: 11th April 2053
Profit rate (fixed) Green Sukuk: 4.63% p.a. Regular Sukuk: 5.68% p.a.
Listing London Stock Exchange
Joint lead managers HSBC Bank; Standard Chartered Bank; JPMorgan Securities; First Abu Dhabi Bank; MUFG Securities EMEA; Mizuho International; SMBC Nikko Capital Markets; SNB Capital; Al Rajhi Capital; Saudi Fransi Capital; Abu Dhabi Islamic Bank; Bank of China; Abu Dhabi Commercial Bank; Natixis; Societe Generale
Ratings Both Sukuk tranches rated ‘A’ by Fitch Ratings

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