The pricing of a 5 billion riyals ($1.33 billion) Islamic bond issue by Saudi Electricity was 160 basis points over the Saudi interbank rate (Saibor), the firm's top executive said on Sunday.
The pricing of the sukuk marks a sharp rise compared to Electricity's maiden issue of 5 billion riyals in 2007 which was priced at 45 bps above Saibor.
"The market changed. The conditions prevailing in the global credit markets are the cause for this rise but it is still a good pricing," Ali Saleh al-Barrak told the news agency Reuters.
He cited as an example a recent sukuk issue by a utility firm in the UAE's emirate of Dubai which he said was priced at above 300 bps over the interbank lending rate there.
Electricity, the Gulf's largest utility by market value, ended on Sunday a roadshow for its second sukuk issue which bankers have widely expected would be priced at between 50 and 99 bps over Saibor due to the turmoil on global credit markets.
The scarcity of quasi-sovereign debt instruments - that are either linked to the government or state run companies - was expected to raise appetite for Electricity's new sukuk to diversify exposure amid this crisis.
Barrak said the new five-year issue has raised at least 10 billion riyals, but he declined to say how much the company ended up taking.
Bankers said the firm would take 7 billion riyals.
Barrak declined to comment on this figure.
"It has not been decided yet," he said.
Fitch Ratings has assigned the planned issue an expected 'AA-' rating.
Only institutional and individual investors resident in Saudi Arabia and with bank accounts in the kingdom were allowed to buy the five-year bonds.
Saudi Electricity is currently carrying out projects worth 75 billion riyals to be completed within three years, Barrak said last week.
The global credit crunch and slowing economies in key Islamic financial centres are putting pressure on the $1 trillion Islamic bond industry.
The value of sukuk issued globally in 2008 has fallen more than 56 percent from 2007 to $14.9 billion, according to Standard & Poor's.
Electricity's sukuk issue is the first after the launch earlier this month of a bonds market in Saudi Arabia which will help diversify financing sources for rated firms amid tight credit conditions.
Saudi Binladin Group and Abdul Latif Jameel Company, a family-owned conglomerate whose main business is the dealership of Toyota Motor Corp in Saudi Arabia, are also said to plan sukuk issues, bankers said.
Islamic bonds do not pay interest, which is banned as usury under Islamic law. Instead, sukuk issues offer investors a share of profits from approved investments. The sukuk is structured to resemble a floating rate note.