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SEC to reclassify SAR 168bn in gov’t liabilities into subordinated perpetual instrument

SEC to reclassify SAR 168bn in gov’t liabilities into subordinated perpetual instrument
The Saudi Electricity Company (SEC)
SAUDI ELECTRICITY
5110
-0.18% 22.26 -0.04

Riyadh – Mubasher: Saudi Electricity Company (SEC) has signed an agreement with the Saudi government to reclassify SEC’s net government liabilities of SAR 167.92 billion into a subordinated perpetual financial equity-like instrument with a redemption option and a profit rate of 4.5% annually.

The Shariah-compliant financial instrument is considered non-dilutive and represents about 33.4% of SEC’s total asset as at end of the third quarter (Q3) of 2020 and includes SAR 3.35 billion worth of dividends owed to Saudi Aramco, according to a bourse statement on Monday.

A working group has been formed to study the disputed amounts between SEC and Ministry of Finance worth SAR 10.3 billion.

SEC has received a letter from the Minister of Energy approving the cancellation of government fees which SEC was subject to pay and the implementation of a Regulatory Asset Based (RAB) Model as a mechanism to regulate SEC’s revenue, effective from 2021.

These developments are expected to play a key role in restructuring and strengthening SEC’s financial position while enabling it to fulfil all of its financial obligations.

Noteworthy, this transaction is considered the world's largest Islamic finance transaction to ever be executed, highlighting the kingdom's leadership and global preeminence in Islamic finance.