Saudi Arabia’s ACWA Power Launches Second Domestic SAR1.8bn (US$480m) Sukuk Offering in January 2023 to Finance its Rapidly Expanding Energy Transition Business

ACWA Power, in which the Saudi sovereign wealth fund, Public Investment Fund (PIF), has a 50% equity stake, returned to the Sukuk market on 10 January 2023 with the launch of its second offering to date.

ACWA Power, a publicly listed company on the Saudi Arabian Tadawul stock exchange, successfully raised SAR1,800 million (US$479.53 million), through a senior, unsecured Sukuk Mudaraba/Murabaha floating rate issuance with a 7-year tenor along with a call option on the fifth-year anniversary of the issue date.

The Sukuk issuance comes under the company’s SAR5,000 million (US$1,332.04 million) Sukuk Issuance Programme. ACWA Power appointed HSBC Saudi Arabia and SNB Capital Company as Joint Lead Managers and Bookrunners for the transaction. In a filing to Tadawul (the Saudi Stock Exchange), ACWA Power confirmed that the Sukuk certificates are unlisted and will be distributed through private placement to qualified institutional and approved investors.

The Initial Pricing Guidance released on 10th January was tightened by 5-10 basis points (bps) per annum for the final pricing on 18th January of 3M SAIBOR + 95bps per annum with a step up to 3M SAIBOR + 105 bps pet annum on the 5th year anniversary of the Issue Date. The issuance closed at end January 2023, says ACWA Power, is the first double digit margin secured in the Saudi capital markets by any corporate issuer since 2017.

The issuance, confirmed ACWA Power, attracted strong investor interest from various new and repeat investors comprising of a diversified base of 22 banks, government funds, asset managers, and insurance companies. The order book was 2.2 times oversubscribed to reach  SAR4.02 billion (US1.07 billion), which enabled the issuer to optimise the allocation with non-bank investors accounting for 32.2%.

The diverse pool of repeat and new sophisticated investors in ACWA Power’s second Sukuk issuance reflects the trust, confidence, and faith in the Saudi debt capital market and ACWA Power’s strong credit fundamentals as well as the large and diverse growth opportunities for the company as it leads the energy transition in the Kingdom of Saudi Arabia and international markets. 

“The success of ACWA Power’s phase 2 Sukuk issuance under the SAR5 billion Sukuk programme,” explained Mohammad Abunayyan, Chairman of ACWA Power, “reflects the market’s faith in the Kingdom’s debt capital markets as well as ACWA Power’s fundamental strength and growth outlook to attract new and repeat sophisticated investors alike. We are committed to supporting the CMA and Tadawul’s ongoing efforts to strengthen and deepen the domestic Debt Capital Market base.”

Similarly, Abdulhameed Al Muhaidib, Chief Financial Officer of ACWA Power, maintained that “the strong and diverse investor appetite in ACWA Power’s second issuance and the record competitive pricing is a testament of investor confidence in our robust business model and credit quality. The Sukuk programme has helped diversify our funding sources as we continue our journey in the energy transition sector to deliver sustainable and affordable essentials for life, renewable energy and desalinated water, for millions of people in the Saudi Arabia and around the 11 additional countries in our portfolio.”

PIF acquired a 50% equity stake in the ACWA Power in 2020, as part of PIF’s strategy “to enable the growth of national champions to become regional and global leaders, whilst also realising sustainable investment returns.” Other major shareholders include the International Finance Corporation, the Saudi Public Pension Agency and a number of local industrial companies. 

ACWA Power issued its maiden Sukuk on 14 June 2021, raising SAR2.8 billion (US$746.67 million) in the process. That transaction was priced at 100 basis points + SAIBOR, which the company stressed was the lowest spread secured in the Saudi capital markets by a corporate or bank issuer since 2017.

The 2021 Sukuk issuance attracted “significant interest from fund managers, government funds and insurance companies accounting for approximately 30% of the issuance and resulting in an over-subscription of 1.8 times over the issue size.” The proceeds of that issuance were used for general corporate funding purposes besides phase 2 of ACWA Power’s investment in Jazan IGCC brownfield acquisition.

ACWA Power is a leading Saudi developer, investor, and operator of 68 power generation, water desalination and green hydrogen plants worldwide in operation, construction and advance development in 13 high growth markets with an overall estimated portfolio size of SAR256.6 billion at project cost as of 31 December 2022.

The company plays a central role central role in the Kingdom’s energy transition, especially to solar renewable energy and green hydrogen. Its overall strategy is to be at the forefront of energy transition by delivering reliable and responsible power, desalinated water and green hydrogen at low cost in Saudi Arabia, the wider GCC and attractive high-growth markets based on a de-risked and contracted business model.

The company has an active current project and investment portfolio across the GCC, Central Asia and South Africa. Some of the proceeds of the current Sukuk offering will be directed towards funding these activities.

ACWA Power in late 2022 also signed an extensive memorandum of understanding with the state-owned Industrial Development Corporation of South Africa (IDC), to establish a partnership in the development of green hydrogen and its derivatives in South Africa. ACWA Power has had a footprint in South Africa since 2016 and currently has two solar energy plants in Bokspoort and Redstone in the Northern Cape in South Africa.

The company reported interim (first nine months 2022) revenue/sales of SAR3,707.84 million compared with SAR3,763.324 million in the same period in 2021; increased Net Profit after Zakat and Tax of SAR883.424 million compared with SAR419.944 million in 2021; and Total Income of SAR5,299.957 million compared with SAR1,324.345 million in 2021.

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