KARACHI: The Water and Power Development Authority (Wapda) has generated Rs100 billion from an Islamic bond for the development of 969-megawatt Neelum Jhelum hydropower project.
A consortium of 16 banks, led by the National Bank of Pakistan (NBP), agreed to fund the infrastructure corporate sukuk, based on diminishing Musharaka. The privately-placed sukuk with 10-year tenor was mandated in February.
Neelum Jhelum Hydropower Company Pvt Limited (NJHPC) has entered into a financing agreement with the banks.
Wapda Chairman Zafar Mehmood, NBP President and Chief Executive Officer (CEO) Syed Iqbal Ashraf, Member Finance Anwarul Haq at Wapda and NJHPC CEO Lt Gen (R) Muhammad Zubair witnessed the signing ceremony.
A document from the lead arranger showed that the project set a profit rate for its sukuk of 113 basis points over the 6-month Karachi Interbank Offered Rate. The local currency sukuk, which carries a Pakistan’s government guarantee covering the issuance amount and profit payments, was given a preliminary AAA rating by credit rating agency JCR-VIS.
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 Neelum Jhelum hydropower project is the world’s first project and its infrastructure works are near 80 percent of completion. However, the project has yet to achieve a financial close. Located near Muzaffarabad in Azad Kashmir, the project is estimated to cost Rs404 billion, with 77 percent of that being financed through debts.
The project is an underground power generation facility being constructed on River Neelum in Azad Jammu and Kashmir. The project will annually generate 5.15 billion units of low cost electricity.
