Water & Power Development Authority (WAPDA) has signed an agreement with a consortium of 16 commercial banks for the flotation of Rs100 billion Sukuk for Neelum-Jhelum Hydropower Project. This has been termed the country’s biggest ever funds mobilization for a public sector entity through Shariah compliant instrument.
The signing ceremony for the financing agreement was attended by Syed Iqbal Ashraf, President national bank of Pakistan (NBP), Zafar Mahmood, Chairman WAPDA, Muhammad Zubair, CEO Neelum-Jhelum Hydropower Company (NJHPC) and representatives of 16 commercial banks were also present on the occasion.
Addressing the ceremony, WAPDA chairman said, “This is the biggest ever funds mobilization for a public sector entity in the history of Pakistan. Achieving this milestone reflects not only investors’ confidence in Pakistan and WAPDA, but also indicates the potential of investment that hydropower sector offers”. This issuance will go a long way in arranging funds for other hydropower projects as well to be initiated in the near future, he added.
NBP is not only the lead arranger but also has the largest share (around Rs35 billion). According to Mufti Ahsan Waqar, Head of NBP Shariah Board, the financial close has been achieved and the Sukuk would be ready to trade at Pakistan Stock Exchange after completion of other formalities.
Other banks in the consortium are HBL, Allied Bank, United Bank, Bank Alfalah, Meezan Bank, Faysal Bank, Bank of Punjab, BankIslami Pakistan, Askari Bank, Bank Al Habib, Bank of Khyber, Dubai Islamic Bank, Pak-Brunei Investment Company and Pak-China Investment Company.
The Sukuk has a tenor of 10 years and it is backed by the sovereign guarantee by the Government of Pakistan (GoP). The Sukuk enjoys a preliminary rating of ‘AAA’ from JCR-VIS and it is expected to have a wider impact on the financial market of Pakistan, helping augment a funding format that has been predominantly constrained to smaller deals with shorter tenors. The Sukuk is expected to provide avenues for Islamic banks and mutual funds to invest their liquid funds in a tradable GoP guaranteed Islamic instrument.
NJHPC has an installed capacity of 969 megawatts and the project is located in Muzaffarabad (Azad Jammu and Kashmir). The project envisages diverting Neelum River water through tunnels which fall into Jhelum River after producing power. On completion, the project will be capable of producing 5.15 billion units of electricity each year.
This mega hydropower project has been undertaken long after completion of Mangla and Tarbela dam projects. This ‘green energy’ project will fetch up to Rs50 billion annually for WAPDA as per existing tariff. The first turbine will commence generation by the end June 2017.
According to the details made available, 90 per cent construction work is under high mountainous overburden and only 10pc above the surface. The construction work on the project is progressing at a fast pace and overall progress of the project is around 82 percent so far.