DUBAI, March 19 (Reuters) - Saudi Electricity Co can expect strong appet
ite 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,' says John Bates, head of fixed income at London-based asset manager Silk Invest.
'The company has majority Saudi 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.
SEC is majority-owned by the Saudi government, and carries a high probability of state support, as the kingdom's national electricity provider.
'SEC's business risk profile benefits from the company's quasi monopoly on generation and a monopoly on transmission and distribution, with minimal, if any, competition over the next several years at least,' ratings agency S&P said in a note on Monday.
'In addition, we factor in the strong forecast growth in electricity demand as well as ongoing government support,' S&P said, adding that the sukuk is due to be an ijara structure.
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.
But rising consumption costs contributed to a wider fourth-quarter loss, missing analyst expectations.
(Additional reporting by Mala Pancholia; Editing by Amran Abocar) Keywords: SAUDI ELECTRIC/SUKUK/
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