Thermal Power Plant Holding Company plans to sell standard salaf contracts worth 13.57 trillion rials ($52 million) in two phases to fund new projects, the company's CEO said.
Affiliated to the Energy Ministry, TPPHC sold salaf contracts worth 6.57 trillion rials ($26.2 million) on Tuesday in the first offer. No date was specified for the next round.
Salaf contracts were offered at Iran Energy Exchange, according to Mohsen Tarztalab, IRNA reported. Standard parallel salaf is an Islamic contract similar to futures with the difference being that the total price should be paid in advance.
The electricity-backed Salaf securities are offered on the derivatives market at IRENEX, which is a commodity exchange in Iran where physical energy carriers (oil, gas, electricity) and commodity-based securities are traded.
"This is the first time the energy bourse has financed the electricity industry and a company affiliated to the public sector," Tarztalab was quoted as saying.
He expressed hope that government-affiliated companies will be given more leeway to access the capital market. "This would be a step forward," he said, underlining the higher efficiency of funding from the capital market compared to the snail’s pace with which projects are funded from the government budget.
"State companies' reliance on government funds is the main reason why development projects have been held back. In some cases, completing projects takes so long that it simply losses economic viability.”
Outlining details of the first offer, he said 2.42 million salaf securities worth 6.57 trillion rials were sold. The contracts are at 17.5% paid annually and can be sold under call and put option contracts.
A call option gives the buyer the right, but not the obligation, to buy the underlying security at the specified price, at or within a specified time. A put option gives the buyer the right, but not the obligation to sell the underlying security at the specified price, at or within a specified time.
The contracts mature in 2 years and will be settled either via physical delivery or cash payment on maturity date.
Caption: The electricity-backed Salaf securities are offered on at Iran Energy Exchange.
