Saudi Electric Co. to Issue Dollar-Denominated Islamic Bonds

In a recent bourse filing, Saudi Electricity Company (SEC), which is 75% owned by Saudi Arabia’s sovereign Public Investment Fund, disclosed its plans to issue US dollar-denominated Islamic bonds (sukuk). As the kingdom’s sole electricity transmission provider, SEC has assembled a group of prominent financial institutions to serve as joint lead managers for the debt sale. These include HSBC, Standard Chartered, JPMorgan Securities, First Abu Dhabi Bank, MUFG Securities, Mizuho, SMBC Nikko, SNB Capital, Al Rajhi Capital, Saudi Fransi Capital, Abu Dhabi Islamic Bank, Bank of China, Abu Dhabi Commercial Bank, Natixis, and Societe Generale.

Beginning Friday, these institutions will liaise with fixed-income investors before the sukuk sale. Depending on SEC’s requirements and prevailing market conditions, the sukuk’s proceeds may adopt a green format. These factors will also determine the issuance amount, which will be decided later. The funds raised through the sukuk will cater to general corporate purposes, including capital expenditure. If issued as green sukuk, the proceeds will be allocated to eligible projects within the company’s Green Sukuk Framework. In 2020, SEC made history as the kingdom’s first issuer of green bonds by raising $1.3 billion from a dual-tranche green sukuk sale.

In the previous month, SEC secured 10 billion riyals ($2.66 billion) through a syndicated loan involving nine local banks, including Qatar National Bank’s Saudi branch. Furthermore, in August of the preceding year, the company raised $3 billion from another syndicated loan backed by 15 regional and international banks.
The upcoming dollar-denominated sukuk issuance emphasizes SEC’s ongoing commitment to diversify its funding sources and support its various projects. SEC is pivotal in developing Saudi Arabia’s energy infrastructure as the kingdom’s electric transmission monopoly. The sukuk issuance’s success will significantly contribute to the company’s growth and expansion.

The issuance comes amid increasing global interest in green and sustainable finance, particularly as nations and corporations strive to meet environmental, social, and governance (ESG) goals. As a key player in Saudi Arabia’s energy sector, SEC’s potential issuance of green sukuk underscores its dedication to sustainable development and environmental responsibility.

This development also aligns with the broader goals of Saudi Arabia’s Vision 2030 initiative, which aims to diversify the nation’s economy and reduce its reliance on oil revenues. By raising funds through green sukuk, SEC can contribute to the country’s ongoing efforts to enhance its renewable energy capacity and promote sustainability in the long run.

The issuance of green sukuk by the SEC is expected to attract attention from diverse investors, including those with a specific interest in ESG-compliant investments. As the global demand for green finance continues to grow, the successful issuance of such instruments could encourage other regional companies to explore similar funding options.

In conclusion, SEC’s planned dollar-denominated sukuk issuance highlights the company’s strategic efforts to diversify its funding sources and support ongoing projects in the kingdom’s energy infrastructure. By potentially issuing green sukuk, SEC reinforces its commitment to sustainable development and environmental responsibility, contributing to Saudi Arabia’s long-term vision and attracting the interest of ESG-focused investors worldwide.