the holy war of islamic finance

KARACHI -(Dow Jones)- Pakistan's state-run power utility, - Water and Power Development Authority, or WAPDA, - has launched a PKR8 billion ($133.6 million) Islamic bond, the country's first such issue in the domestic market.

Pakistan Power Utility Launches PKR8 Billion Islamic Bond

KARACHI -(Dow Jones)- Pakistan's state-run power utility, - Water and Power Development Authority, or WAPDA, - has launched a PKR8 billion ($133.6 million) Islamic bond, the country's first such issue in the domestic market.

According to a statement issued Saturday by Jahangir Siddiqui & Co., one of the lead managers of the Islamic or Sukuk bond, the issue included a green-shoe option of PKR3 billion.

"Given the strong market response, WAPDA has decided to exercise the green- shoe option and issue Sukuk certificates of PKR8 billion," the statement said.

The seven-year Sukuk bond will mature Oct. 22, 2012, it added. The price guidance on the deal is 35 basis points over the six-month Karachi Interbank Offered Rate.

The offering is based on the Sharia principal of Ijarah - or leasing - and the revenue streams backing the offering are electricity payments from customers which will be directed to a special purpose vehicle called WAPDA First Sukuk Co. and then passed on as coupon payments.

Under Sharia law, Islamic bonds can't pay interest or have links to banned activities such as gambling. Islamic bonds typically get approval from a Sharia board to make sure that they comply with Sharia law. Most banks involved in Islamic banking have Sharia boards.

The proceeds from the issue would be used to upgrade the Mangla dam, located in central Punjab province, the statement said.

The issue is the first Islamic bond issuance in the domestic market.

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