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Pakistan Energy Sukuk-2 of Rs 200bln to be released soon

Karachi, January 21, 2020: After the approval by the ECC yesterday, we expect the Energy Sukuk-2 of Rs200 billion to be released soon, as the meeting with IMF starts on Feb 3, 2020.

The payment will be directed towards the power sector (i.e. Gencos, Hub Power, Kot Addu Power, Nishat IPPs, AES IPPs etc.), we think.

From there, the liquidity will flow towards the Oil and Gas Marketing companies, and subsequently to the E&P sector.

The table below shows the cash received by the power companies through the Energy Sukuk-1, after which approximately Rs60 billion (~Rs128/share or 60 percent of the market cap) was paid to Pakistan State Oil (PSO) and around Rs8 billion to Oil and Gas Development Company (OGDC).

if a similar formula is applied, Rs55-60 billion will be paid to the listed IPPs out of the Rs200 billion. PSO is likely to receive a major chunk, which will help reduce its short term borrowings and potentially increase cash payout of the company.

Meezan Bank Limited (MEBL) is again expected to be the lead investor in the Energy Sukuk-2 (Rs70-75 billion), at a mark-up of KIBOR + 0.7 percent or 0.8 percent. We estimate it to have a positive impact of 2-3 percent on MEBL’s earnings. This quantum of amount also correlates to the Energy Sukuk-1, where MEBL led the consortium and invested Rs88 billion.

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