KE plans to raise Rs25bln via sukuk

KARACHI: K-Electric, the country’s only vertically-integrated power utility, aims to raise Rs25 billion through capital-boosting corporate Islamic bonds or sukuk, the company said on Thursday.

KE said the transaction shariah advisory board approved the plan of the issue, including Rs5 billion green shoe option, after signing the shariah pronouncement for the country’s largest-ever retail-listed corporate issue.

Sources said the company planned to float the sukuk as soon as possible. “Maybe this could be by this month-end or early next year,” an official said, requesting anonymity. KE serves more than 2.5 million customers across Karachi, Dhabeji and Gharo in Sindh, and Uthal, Vinder and Bela in Balochistan. It generates electricity from its own power generation units with installed capacity of 2,267 megawatts. In addition, the utility has arrangements with external power producers for around 1,360MW, including 800MW from the grid.

The company has so far invested more than $2.1 billion in infrastructure upgrades across the energy value chain over the last nine years. The power utility is also working on a $3 billion investment plan for over the next few years.

Pakistan’s top bank HBL is the exclusive shariah structuring adviser. HBL and National Bank of Pakistan are joint structuring agents for the transaction. The company didn’t share any further transaction details.

“It could be sold through private placement or/and public offering,” the official said. “Regulatory approvals are under process.” This would be the utility’s third issue in the country’s Islamic debt capital market.

In 2015, KE separately raised Rs22 billion and Rs6 billion through shariah-compliant bonds to refinance debts and finance developments. KE sukuk issue of Rs22 billion, including a green shoe option of Rs2 billion, was fully subscribed. The instrument has a tenor of seven years and was rated AA+ by the JCR-VIS Credit Rating Agency Limited.

In February same year, the utility raised Rs6 billion though a three-tranche sukuk, investment certificates, which follow religious principles. With abundance of money, Islamic financial institutions are ready to tap corporate and public sectors for liquidity management.

Islamic banking industry’s assets reached around Rs3 trillion till June-end 2019, accounting for 14.4 percent of the market share. The industry’s deposits amounted to Rs2.4 trillion with around 16 percent market share.

BankIslami also planned to raise Rs2 billion through first-ever listed Islamic additional tier-1 capital instrument. The government earlier this year raised Rs200 billion through sukuk to curtail circular debt haunting energy sector. Another one of an estimated Rs300 billion has also been planned to finance the troubled sector.