POWER HOLDING FLOATS ANOTHER SUKUK THROUGH PSX.

Byline: SHABBIR H. KAZMI

Power Holding Limited (PHL), a public sector entity fully owned by the Ministry of Energy, is issuing a debt instrument to address the liquidity constraints being faced by Pakistan's power sector. This is the first ever debt issuance through book building in the history of Pakistan Stock Exchange (PSX) and represents an important milestone.

The local bourse is playing a key role in helping the government overcome one of its biggest economic challenges, power sector circular debt. Pakistan Energy Sukuk-II (PES-II) is a Government of Pakistan (GoP) guaranteed Shariah compliant security of Rs200 billion which is 100% SLR eligible, having a 10-year maturity with semi-annual profit payment for investors. This is the second issue of the Energy Sukuk by PHL, where GoP has decided to issue the instrument through the local bourse to ensure transparency and competitive bidding. PSX offers a state-of-the-art, book building mechanism which is being used to determine the Cut-off Spread (-/+) in basis points (bps) over the 6 month Kibor rate that the issuer will pay on semi-annual basis to successful investors. The total issue size will be offered through private placement to eligible investors, followed by a technical listing of the Sukuk at PSX.

In this regard, Farrukh H. Khan, MD PSX stated, "This Sukuk issue through PSX state-of-the-art book building system is a watershed moment in the development of the debt market in Pakistan. GoP, Ministry of Finance and Securities and Exchange Commission of Pakistan (SECP) are focused on developing the capital market and this is an important step in that direction. We thank them for their support and are grateful that they have taken this important step." Discussing the process and benefits he stated, "Pakistan is finally following the globally accepted best practice of using a book building methodology to raise debt, which benefits both issuers and investors by bringing transparency and price discovery to the center of the debt raising process.

The book building process through the Stock Exchange will benefit the issuer in that it will enable price and demand discovery. Furthermore, it will give access to a wide investor base which will enhance liquidity and secondary market trading." Unlike the Sukuk issuance by PHL last year, investors who can participate in this issue include banks, financial institutions, companies or corporate bodies, mutual funds, voluntary pension schemes, private...