Saudi Electricity picks banks for dollar sukuk sale

Saudi Electricity Co (SEC), the Gulf's largest utility, has picked two banks to arrange meetings with fixed income investors in Europe and the United States ahead of a possible debt issue, a statement from the lead managers said.

State-owned SEC has chosen Deutsche Bank and HSBC Holdings to arrange the roadshows, which begin on March 19 in Los Angeles and conclude in London on March 25.

A dollar-denominated bond issue may follow, subject to market conditions, the statement added.

Saudi Electric last tapped the international bond market in March 2012, pricing a $1.75 billion two-part Islamic bond split between a $500 million five-year portion and a $1.25 billion piece which had a 10-year lifespan.

The former was trading at a z-spread of 114 basis points at 0700 GMT, while the longer-running tranche was at 137 basis points, according to Thomson Reuters data.

The z-spread is a pricing tool aimed at expressing relative value by calculating the number of basis points that need to be added to a zero-coupon yield curve to make the bond's discounted cash flows equal the bond's present value.

Fitch Ratings affirmed Saudi Electric's AA- rating in February, citing high government ownership and its monopoly position against its weakening standalone credit fundamentals.