RIYADH: Saudi Electricity Company, the Gulf's largest utility by market value, yesterday began a roadshow for its second Islamic bond issue which bankers expect will raise up to seven billion Saudi riyals ($1.87bn).
Bourse regulator the Capital Market Authority (CMA) said last week it had approved the issuance of the sukuk over the June 13-28 period.
Ali Al Barrak, Electricity's chief executive, earlier said the state-controlled firm would raise about 5bn riyals from the issue.
The issue will be Electricity's second after it raised 7bn riyals in 2007 from its maiden issue, having initially sought to raise only 2.5bn riyals. The 2007 sukuk was priced at 45 basis points above the Saudi Interbank Offered Rate (SIBOR).
Only institutional and individual investors resident in Saudi Arabia and with bank accounts in the kingdom were allowed to buy the five-year bonds.
Bankers, who have access to the issue's documents, said Electricity has applied to the CMA to raise a minimum of 3.5bn riyals.
"They will go for more. They can go for up to 7bn riyals," one banker said.
The issue is expected to be priced above Electricity's first issue, mainly because of the turmoil that has affected credit markets globally.
"Things have improved greatly for them ... A couple of months back, Electricity was facing a three-digit pricing," another banker said.
Saudi Electricity was currently carrying out projects worth 75bn riyals to be completed within three years, Al Barrak said.
The new five-year sukuk are set to be priced at between 50 and 99 basis points, the two bankers said.
The scarcity of quasi-sovereign debt instruments - that are either linked to the government or state run companies - is set to raise appetite for Electricity's sukuk.
"The Saudi government has not been issuing any debt recently and investors are anxious to diversify their exposure to establish some balance, especially amid this crisis," one banker said.
The global credit crunch and slowing economies in key Islamic financial centres are putting pressure on the $1 trillion Islamic bond industry.
The value of sukuk issued globally last year has fallen more than 56 per cent from 2007 to $14.9bn, according to Standard & Poor's. "A sukuk by a Saudi state-controlled firm looks the best debt to buy now," he added.
Fitch Ratings has assigned the planned issue an expected 'AA-' rating.
"The final rating is contingent upon the receipt of final documentation conforming materially to information already received and details regarding the sukuk amount," it said.