KARACHI: For the second time, the government is all set to borrow Rs200 billion from Islamic banks to partially pay off dues owed to energy firms, but this time it has invited consortiums to submit the desired return in order to acquire the loan at the minimum possible price.
At least one Shariah-compliant consortium, led by Meezan Bank, submitted the bid (desired return) for lending the money by Friday (February 14), which was the last date for the submission of financing proposals, an industry official told The Express Tribune on Saturday.
“I guess a maximum of two consortiums may have submitted bids considering that around Rs500-600 billion worth of excess liquidity is lying at the Shariah-compliant banks and Islamic windows operated by conventional banks,” he said.
The bids are scheduled to be opened in the presence of the consortiums’ representatives on Monday, he said.
The government-guaranteed Shariah-compliant bond is titled “Pakistan Energy Sukuk-II”.
The government floated the first Pakistan Energy Sukuk worth Rs200 billion at a return of Kibor plus 0.8% for a period of 10 years in March 2019.
The government was expected to launch the second energy Sukuk on the same terms and conditions, meaning that banks were supposed to receive Kibor plus 0.8% without competitive bidding, which took place last time.
“However, the government scrapped the previous conditions for the second issue of Sukuk and invited fresh financial proposals,” the industry official said. “The Sukuk is expected to be launched by mid-March 2020.”
Power Holding Limited (PHL), a public-sector company wholly owned by the government of Pakistan, will issue the 100% government-guaranteed Sukuk.
This will be SLR (statutory liquidity requirement) eligible based on Ijarah (sale and lease back arrangement) with a subsequent listing on the Pakistan Stock Exchange (PSX), according to a PHL tender.
Funds are being raised “to fulfill financing requirements including but not limited to the settlement of part of prevailing circular debt related to the energy sector,” the tender read.
The circular debt has accumulated to Rs1.8 trillion compared to around Rs1.4 trillion at the beginning of 2019. It stood at Rs1.14 trillion sometime during the tenure of previous Pakistan Muslim League-Nawaz (PML-N) government, it was learnt.
The second Sukuk was scheduled to be launched in June 2019 but it was delayed after the International Monetary Fund (IMF) barred the government from issuing a fresh guarantee for the Sukuk as it had fully utilised the capacity agreed under the ongoing IMF loan programme of $6 billion.
Later, the government persuaded the lender to relax the condition for the sovereign guarantee for the second energy Sukuk.
The IMF asked the government this week to raise electricity tariff for the second time since June-July 2019 in a bid to get rid of the increasing circular debt in the energy sector.
The debt accumulates due to power leakages and theft and low recovery of bills including from multiple state-owned offices, schools, police stations, mosques and monuments.
The situation caused a reduction in the working capital of independent power producers, oil and gas marketing firms like Pakistan State Oil (PSO), Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL).
Published in The Express Tribune, February 16th, 2020.