Saudi Electricity Co. (SEC) can expect strong appetite for its debut foray into global debt markets, after the state-owned utility picked banks for roadshows ahead of a potential dollar-denominated Islamic bond. SEC will hold investor meetings in Asia, the Middle East and Europe starting March 21 following which the company may issue a sukuk, subject to market conditions. "The new Saudi Electric sukuk will be very well-received by investors as it promises to be a rare foray into dollar-denominated investment-grade territory," said John Bates, head of fixed income at London-based asset manager Silk Invest. "The company has majority Kingdom ownership, and given the highly liquid banking system there, margins are otherwise quite tight for international investors in the local market," Bates said, adding he expected at least a benchmark-sized issue with a broad investor base. Benchmark is normally understood to mean at least $500 million. HSBC and Deutsche Bank will arrange investor meetings which begin in Hong Kong and will take in Singapore, Malaysia, the UAE, and London, according to a roadshow schedule seen by Reuters. Germany and Switzerland may be added to the list. Ijara sukuk involves a transfer of tangible assets - most commonly real estate - from one party to the next, as Islamic law does not allow for debt or interest payments. SEC was awarded a $13.63 billion loan from the government in June to help it increase power production. It has an installed capacity of 50,000 megawatts and plans to boost its capacity to at least 80,000 megawatts by 2020. Meanwhile, Moody's Investors Service has affirmed Monday the A1 issuer rating of Saudi Electricity Company (SEC) with a stable outlook. At the same time, Moody's has lowered SEC's Baseline Credit Assessment (BCA) to 8 (equivalent to Baa1) from 7 (A3) to reflect the anticipated weakening in financial metrics stemming from the company's substantial capex program. Moody's has maintained the assumed government support level of “high” under the rating agency's joint default analysis approach for government-related issuers (GRIs). The rating affirmation reflects Moody's belief that the anticipated weakening in SEC's financial profile will be offset by the significant ongoing support as well as the assumption of high exceptional support for SEC.
