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Saudi Electricity to raise $2bn via dual-tranche sukuk

Total Gulf deposits with Egypt's central bank stood at $29.9 billion as of March 2023
The banks are banned from accessing the Iraqi central bank's daily dollar auction, a main source of hard currency in the country

Saudi Electricity Company, majority owned by the sovereign Public Investment Fund (PIF), is set to raise $2 billion from a sale of dual-tranche sukuk (Islamic bonds), a bank document on the deal showed.

The company’s offer is made up of 10-year green sukuk and 30-year conventional Islamic paper, the document showed.

Orders for the 10-year tranche topped $9.2 billion and the 30-year tranche drew more than $6.2 billion in demand, both excluding interest from joint lead managers, the document said.

The kingdom’s electric transmission provider launched $1.2 billion in 10-year green sukuk at a spread of 120 basis points (bps) over US Treasuries and $800 million in 30-year conventional sukuk at 205 bps over UST.

The spreads were tightened after higher-than-expected demand of $15.4 billion for both tranches. Initial guidance was for a spread of around 165 bps over UST for the 10-year notes and around 240 bps over the same benchmark for the 30-year Islamic bonds.

The huge demand was a result of investors looking to buy sukuk, a market that has long had a supply-demand imbalance, as well as a relative dearth of corporate issues from the Gulf region that is benefiting from high oil prices, an observer familiar with the matter said.

The demand was “not entirely regionally focused, it was actually quite widespread”, they said, adding Saudi Electricity had not issued bonds in more than two years.

Saudi Arabia’s Al Rajhi Bank, the world’s biggest Islamic bank, sold $1 billion in five-year sustainable sukuk last week.

HSBC, JPMorgan and Standard Chartered are joint global coordinators for Saudi Electricity’s sukuk sale.