Acwa Power raises $746m through sukuk issuance to fund growth

The offer attracted significant interest from investors and was 1.8-times oversubscribed

Paddy Padmanathan, president & chief executive of Acwa Power. The company raised 2.8 billion Saudi riyals through the issuance of sukuk or Islamic bonds. Victor Besa for The National.

Saudi Arabia’s Acwa Power successfully raised 2.8 billion Saudi riyals ($746 million) through the issuance of a 7-year sukuk, or Islamic bond, as the company continues to diversify its sources of funding to support its growth.

The issuance was the first the company has completed in the Saudi Arabian market and benefited from "significant interest from fund managers, government funds and insurance companies", the company said in a statement on Monday evening. The offer was 1.8-times oversubscribed.

“The success of the issuance is proof of the wider market’s faith in KSA’s bond market and Acwa Power’s strong credit fundamentals, which have attracted a diverse pool of sophisticated investors,” Paddy Padmanathan, president and chief executive of Acwa Power, said. “The issuance is also a vote of confidence from investors in our ability to capture large opportunities in Saudi Arabia and other growth markets.”

Companies in the Gulf have been taking advantage of low rates to raise debt as the region emerges from an economic downturn caused by the Covid-19 pandemic and last year's oil price plunge. Emerging markets specialist Franklin Templeton said this week it expects debt market issuance in the Gulf this year to be in line with last year's total of $250bn, but for a greater proportion of this to be issued by the corporate sector.

Acwa Power operates in 13 countries in the Middle East, Africa and South-East Asia. It has a portfolio of 64 assets with a total investment of $66bn, producing 42 gigawatts of power and 6.4 million cubic metres per day of desalinated water.

The transaction is also Acwa Power’s first since Saudi’s sovereign wealth fund, the  Public Investment Fund, became a 50 per cent shareholder in the company last year.

The sukuk issuance “marks a new phase in diversifying our company’s funding sources to cater for future growth, reinforcing our strong track record in delivering power and desalinated water … to communities in the kingdom and around the world”, Kashif Rana, chief financial officer at Acwa Power, said.

HSBC Saudi Arabia and Samba Capital acted as joint lead managers and bookrunners for the sukuk, while Norton Rose Fulbright provided legal counsel.

Earlier this year, Acwa Power secured financing for a $1bn power project it is developing in Uzbekistan as part of its strategy to boost its renewable energy portfolio in the Central Asian republic.

The company also signed an agreement with Dubai-based Neutral Fuels to supply net-zero biofuel – a clean form of fuel that lowers emissions – to power the kingdom's Red Sea tourism project on thecoast.