Islamic Banks Successfully Issue Rs. 200 Billion Pakistan Energy Sukuk II

Islamic Banks Successfully Issue Rs. 200 Billion Pakistan Energy Sukuk II

Meezan Bank, Pakistan’s first and largest Islamic bank has played a leading role in successfully concluding the issuance of Pakistan Energy Sukuk (PES) II worth approximately Rs. 200 billion by Power Holding Limited (PHL), a public sector entity fully owned by the Ministry of Energy and Government of Pakistan.

The milestone transaction, powered by the key Islamic finance players of the country, was concluded successfully in May 2020.

The Sukuk aims to help the government address the challenges of resolving circular debt in the country’s power sector. Meezan Bank acted as an Investment Agent and Trustee for this issue. In addition, Meezan Bank was also the Joint Financial Advisor along with Dubai Islamic Bank Pakistan and Bank Alfalah Islamic.

This is the second issuance of this series of Sukuk, bringing the total size of Shariah-compliant Energy Sukuk to approximately Rs. 400 billion. National Bank Limited along with Taurus Securities Limited led the Book Building process to conduct Pakistan’s first and largest book building for a Sukuk issue through Pakistan Stock Exchange (PSX).

This issue could not have been possible without the support of the Securities and Exchange Commission of Pakistan (SECP), State Bank of Pakistan (SBP), and Ministry of Finance also played a significant role in the successful conclusion of the transaction.

The Sukuk issue was oversubscribed 1.7 times and the rate of return paid by PHL was very competitive and saved the government significant financing cost. The Sukuk issuance is a strong indicator of the potential and feasibility of Islamic finance and promises the immense potential for delivering large ticket deals to the government for the benefit of the economy. It will also enable the government to move away from interest-based borrowing and shift towards Shariah-compliant financing as per the requirement of the constitution of Pakistan.

The underlying Shariah Structure of the Sukuk is based on Ijarah Sale and Lease Back. Transaction is structured for 10 years, with six-monthly profit (rental) payments at a rate equivalent to 6 Month KIBOR -10 bps, as determined through the book-building process. The entire issue would be redeemed at maturity i.e. after the completion of 10 years.

Meezan Bank is the first and largest Islamic bank of Pakistan and the 7th largest bank in the country. With a network of more than 780 branches in more than 230 cities, it has the largest Islamic banking network in Pakistan.