Pakistan Energy Sukuk II Oversubscribed by 70%, Saves Rs. 18 billion on Debt servicing

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Sukuk II book building

Pakistan Stock Exchange (PSX) today concluded the book building process for Sukuk II of Power Holding Limited (PHL) with impressive response from investors. This issuance of energy Sukuk is first ever debt issuance through book building in Pakistan. The Sukuk was oversubscribed by 70% and that too at 10 basis points lower than KIBOR rate. Dr. Abdul Hafeez Sheikh, Finance Minister of Pakistan shared the good news through social media asserting that the competitive book building will save Rs. 18 billion over 10 years on debt servicing.

The process of book building was a much-awaited process for Finance Ministry that was looking forward to raising financing for infrastructure and power sector circular debt that is beyond Rs. 1.6 trillion today. The book building process met with great enthusiasm from investors as government received bids worth Rs. 356 billion. The process continued for two days and got oversubscribed on the first day of issuance. The Sukuk placement attracted investors from various groups including commercial banks, NBFCs, Mutual funds, insurance firms, pension funds and high net worth individuals. For the first time, PSX observed that for a government guaranteed debt, Rs. 40 billion were bids by non-banks.

The Power Holding Limited (PHL) is a public sector entity which is owned by Ministry of Power. The Sukuk issued by the entity is aimed at resolving power sector crisis and its circular debt. The payment for Sukuk-II is semiannual and the rate is usually set around 6-month KIBOR rate. Due to successful bidding, the interest rate is set 0.10% lower than KIBOR saving billions for the government. Last year PHL listed its first energy Sukuk-I through PSX while this is the first Sukuk which aimed at book building. The federal government approved listing through PSX in a bid to offer transparent fund raising as PSX offers most transparent bidding mechanism.

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