In an attempt to resolve Pakistan’s circular debt, the Ministry of Energy on Friday issued a Rs200 billion ‘Pakistan Energy Sukuk’. It has been issued by Power Holding Private Limited, a fully owned company of the Government of Pakistan, and is a Shariah-compliant instrument. A consortium of Islamic banks led by Meezan Bank helped in structuring the Sukuk, which will also act as investment agent and trustee of the bond.
A meeting of the Economic Coordination Committee (ECC) on January 29 had formally allowed the power division of the energy ministry to proceed with raising Rs200 billion Syndicated Islamic Term Finance Facility from Islamic banks against already approved term sheets for cash settlement of the circular debt, including Rs47 billion to provincial governments on account of net hydel profit.
The funds would be used to ease out the liquidity crunch engulfing the entire energy chain, including oil and gas suppliers, distribution companies, Water and Power Development Authority and power producers.
The financing has been declared a statutory liquidity ratio (SLR) eligible product by the State Bank of Pakistan (SBP) for all banks in the country. The Sukuk is asset-based and comprises of the assets of power distribution companies.
It is based on the Ijarah or Islamic leasing structure and has a 10-year maturity with semi-annual rental payment.
The bond will be listed in the Pakistan Stock Exchange and a large number of investors will be eligible to invest in it.
The Sukuk will provide much-needed liquidity to the energy sector and help the government to resolve the circular debt crisis.