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KUALA LUMPUR: Malaysia’s biggest electricity company plans to tap the dollar debt market for the first time in two decades with its debut offering of global Islamic bonds.

Tenaga Nasional Bhd (TNB) is asking bankers to submit pitches for a US$3 billion (RM13 billion) sukuk programme, according to people familiar with the matter, and proceeds will be used to fund overseas investments, including the purchase of a 30 per cent stake in Turkish power firm Gama Enerji AS for US$243 million.

The company last issued dollar-denominated debt in 1996, when it sold 100-year conventional notes.

The planned sale would help stem a slump in issuance of global Islamic bonds.

“Timing is everything and TNB’s plan is telling people the ringgit won’t depreciate too much from here and that it will stand to benefit from the debt sale,” said Pheim Asset Management Asia Sdn Bhd investment director James Lau.

Offerings of global securities that pay returns on assets to comply with Islam’s ban on interest slumped 28 per cent last year to a five-year low of US$34.7 billion, data compiled by Bloomberg show.

CIMB Group Holdings Bhd, the top sukuk arranger worldwide for seven of the last nine years, predicts a pick-up this year to at least US$40 billion.

Bankers’ proposals for TNB’s sukuk programme had to be submitted by the end of this week, the people said.

TNB planned to add 5,000 megawatts (MW) of regional capacity as part of a five-year expansion, said chief executive officer Datuk Seri Azman Mohd in a December 14 statement. That is sufficient to power 12.5 million homes.

The company has a market capitalisation of RM74.8 billion and a total installed capacity of 10,818MW. It sold the country’s third-biggest sukuk in November — an RM8.93 billion offering — to part-finance the construction of a 2,000MW coal-fired power plant.

TNB is rated “BBB+”, the third-lowest investment grade by Standard & Poor’s and Fitch Ratings. The yield on the company’s existing conventional dollar bonds due 2025 climbed 31 basis points last year  to 4.39 per cent and was 4.33 per cent yesterday, data compiled by Bloomberg show.

Were five-year notes to be included in TNB’s coming sukuk programme, the securities would be “considered attractive” at a yield of 160 basis points above similar-maturity United States Treasuries, according to Maybank Islamic Asset Management Sdn Bhd.

“The sooner the better for TNB to tap the dollar sukuk market as we expect borrowing costs to rise,” said Maybank Islamic Asset Management chief investment officer Syhiful Zamri Abdul Azid yesterday.

Meanwhile, TNB shares moved into negative territory yesterday despite reports of the US$3 billion sukuk programme. The stock fell eight sen to RM13.24 with 4.68 million shares traded. Agencies

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