DUBAI: With the aim to overcome power crisis, the government has decided to guarantee Rs100 billion worth of sukuk bonds to fund Neelum-Jhelum hydropower plant.
The deal would be one of largest infrastructure sukuk sold to date, helping expand a funding format that has largely been confined to handling mid-sized deals with shorter tenors.
The 10-year sukuk, to be privately placed by the Neelum Jhelum Hydropower Company (Private) Limited, was given a preliminary AAA rating by credit rating agency JCR-VIS with a stable outlook.
The rating will be finalized upon review of legal documents and the issuance of the government guarantee, which will cover the issuance amount and profit payments, JCR-VIS said in a statement.
Unlike conventional bonds, sukuk are investment certificates which follow religious principles that forbid interest payments, instead paying returns linked to an underlying asset. The project’s total cost is estimated at Rs404 billion, with around three quarters of that being funded through debt.
The plant would generate 969 megawatts of power adding around five percent to the country’s total installed power generation capacity, with the first generating unit expected to start operation in mid 2017.
Infrastructure sukuk have been slow to appear, partly because they often require the transfer of assets into special purpose vehicles, which can be problematic for political or legislative reasons when it comes to large state projects.
The two auctions would exceed the total amount of sukuk the central bank has sold in the previous three year period.
