RIYADH, 14 March 2007 — Saudi Electricity Co. (SEC) may sell as much as SR15 billion ($4 billion) of Islamic bonds during the next 10 to 15 years to help finance expansion, a company executive told Reuters yesterday.
The official, who declined to be identified, said the bonds would be sold in no more than five batches with maturities of five to 10 years. The company will decide on the plan at a shareholder meeting next month.
The first batch of bonds, called sukuk, will be sold in the second half of the year, the official said, declining to give details.
The state-controlled company has said SR150 billion of investment is needed in the next decade to cope with rising demand for electricity in the world’s top oil exporter, which has a population of about 24 million.
“We plan to issue sukuk worth 10 percent of the investment needed for the next 10 years,” the official in Riyadh said. “We have not decided yet on the number of tranches but they should not exceed five as they will have maturities of five to 10 years,” he said. SEC Chief Executive Ali ibn Saleh Al-Barrak was quoted in yesterday’s Al-Watan newspaper as saying the firm would sell sukuk worth SR11 billion in the next 15 years, a figure the company official said was at the lower end of a range.
The newspaper did not give more details.
Islamic bonds are typically backed by physical assets that pay a dividend or rent to bondholders rather than interest.
Demand for sukuk in the Gulf is being driven in part by the collapse of share prices in the region, where four of seven markets lost more than 35 percent of their value last year, according to Khalid Howladar, a senior analyst at Moody’s Investors Service.
Gulf Arab corporate sales of sukuk more than doubled to $4.95 billion in the first half of 2006 compared with the year-earlier period, according to London-based law firm Trowers & Hamlins, which has offices in the Gulf.
SEC said in January it planned to invest SR15.8 billion this year to boost power generation, transmission and distribution capacity, including adding 1,609 megawatts of generating capacity by 2008.
