KARACHI: An agreement was signed between a consortium of 12 banks on Thursday, whereby it was decided that banks would provide Rs159 billion to subscribe to the second Rs200 billion Sukuk issue, to partially pay off the circular debt, a leading bank official said.
[the_ad id=”31605″]Meezan Bank Limited is the lead arranger of the issue and would also invest Rs70 billion at a markup of KIBOR+0.8 percent in energy Sukuk. An official said Habib Bank (HBL) would invest Rs20 billion followed by Bank Islami Pakistan and Dubai Islamic Bank with Rs13 billion each. Bank Al Habib (Rs10 billion), Bank Al Falah (Rs8 billion), United Bank Limited (Rs5 billion), MCB Bank (Rs5 billion), Faysal Bank (Rs5 billion), National Bank (Rs4 billion), Bank of Khyber (Rs3 billion) and Habib Metropolitan Bank (Rs3 billion).
Moreover, mutual funds would invest Rs15 billion and insurance companies will put Rs3 billion in the Sukuk.
The agreement between Power Holding Private Limited (PHPL), which is 100% owned by the government of Pakistan, and banks would be signed next week and disbursement would also be made next week.
The government had unveiled plan to issue the sukuk in March when it raised Rs200 billion through its first ‘Pakistan Energy Sukuk-I’, which was oversubscribed by 1.5 times due to heavy participation from Islamic banks replete with the liquidity.
Sources said regulatory issues take time to get things in order as lot of the documents have to move from several authorities and due to Ramzan the working hours were short. The maturity period of the bonds would be similar to the last issue with tenor of 10 years and rate of returns of six months Karachi interbank offered rate plus 80 basis points.
“In the first installment, the amount of Rs60 billion was paid to Pakistan State Oil (PSO) through Hub Power Company (HUBC) and Kot Addu Power Company (KACPO) and other Generation Companies (GENCOs). Overall Independent Power Producers (IPPs) received 23% of their total overdue receivables,” Mohammad Sohail at Topline Securities said.
“The third round of Sukuk payment (Rs250-270 billion) is also under consideration of government to further lower the circular debt amount,” Sohail added.
The circular debt stood at Rs1.4 trillion at the beginning of 2019 compared to Rs1.14 trillion sometime during the tenure of previous Pakistan Muslim League-Nawaz government, which completed its term in May 2018.
The debt has piled up due to electricity leakages, theft and low recovery of bills from many state-owned offices, schools, police stations, mosques, monuments and others.
The sources said the government is set to contain the power sector’s circular debts to Rs250 billion by December 31.
Energy Minister Omar Ayub in May put the figures of circular debts at Rs450 billion. He told a media conference that the government wanted to bring it down to zero by the end of next year. Sources said the bonds would help alleviate the liquidity crisis facing the energy sector and ease pressure on the companies to clear dues against purchases of petroleum products and liquefied natural gas. Power sector owes billions of rupees to oil and gas suppliers among other companies.