RIYADH: Saudi Arabia’s sovereign wealth fund raised US$3bil (RM14bil) with its debut bond deal in the currency that also marks its first foray into ethical finance.
The Public Investment Fund or PIF, as it is known, sold the debt in three tranches, including a world-first dollar century green bond.
PIF joins a host of oil-rich nations in raising green debt as they diversify sources of long-term funding and reinforce commitments to environmentally-friendly projects.
But none has attempted a century-long dollar green debt, let alone in a debut sale. PIF issued US$500mil (RM2.3bil) from the 100-year notes.
“Notwithstanding the recent increase in rates, they remain low by historical levels.
Locking in term funding by selling century bonds will help PIF efficiently finance their multi-decade economic vision,” said Doug Bitcon, the Dubai-based head of credit strategies at Rasmala Investment Bank.
Downside is that this paper will not have a natural regional bid and is likely to be quite volatile in times of market stress.”
The bond comes as Saudi Arabia – one of the world’s largest oil exporters – seeks to diversify away from crude sales. The kingdom pledged to neutralise greenhouse gas emissions within its borders by 2060, and has earmarked billions for carbon-capture technology as part of that goal.
The debt offering comes just as the Organisation of the Petroleum Exporting Countries and allies (Opec+) agreed to make a large production cut to keep oil prices high yesterday, drawing an immediate rebuke from the United States.
The move was defended by ministers from the producers group as necessary to protect the oil industry and their own economies from the risk of a global slowdown.
“The Opec+ cartel has just delivered a massive snub to Western governments facing the worst energy crisis in half a century,” writes Bloomberg Opinion columnist Javier Blas.
“Look past the buzzwords accompanying yesterday’s cut in oil production – preemptive move, uncertain outlook – and it’s difficult to see the move as anything but an attack on a global economy that desperately needs the price of crude to remain subdued.”
The PIF is a major backer of many of the country’s green ambitions and will use proceeds from the bond sale to finance, refinance or invest in one or more green projects like renewable energy, according to the bond prospectus.
The PIF has been mandated to develop 70% of the kingdom’s renewable energy programme and expects to make more than US$10bil (RM46.3bil) of investment in green projects by 2026, according to the document.
“Issuing a century bond definitely raises a lot of attention, and is an interesting option for investors especially Taiwan lifers with longer time horizon,” said Sergey Dergachev, senior portfolio manager and head of emerging-market corporate debt at Union Investment Privatfonds GmbH in Frankfurt. “I am sure guidance will tighten somewhat.”
The kingdom plans to increase the mix of solar and wind energy in its local grid to 50% by 2030, with natural gas set to make up the rest. The country is also investing heavily in hydrogen, which is seen as crucial to its eventual shift away from oil and gas. — Bloomberg
