This is the first time Tavanir is issuing salaf bonds to fund its development projects, according to Ali Naqavi, managing director of IRENEX, Securities and Exchange News Agency reported.
IRENEX is a commodity exchange where physical energy carriers (oil, gas, electricity) and commodity-based securities are traded.
"The aim is to fund power projects in 16 regional electricity companies," he was quoted as saying. Gilan company issues bonds on behalf of other regional companies.
Standard parallel salaf is an Islamic contract similar to futures with the difference being that the total price should be paid in advance.
Salaf securities are backed by underlying assets and enjoy high liquidity. "The securities also are seen as good financial instruments to hedge risks for manufactures".
Salaf contracts are issued to help fund improve power generation," he said, adding that private companies can tap into a variety of financial instruments in the capital market to raise funds.
Electricity-backed salaf contracts are priced based on power export tariffs determined by the Tavanir.
"Each contract is priced based on the average electricity export price during one year ending a month prior to the issuance of contracts," Rouholla Hassani Moqadam, the CEO of Mellat Investment Bank was quoted as saying by ISNA. His company is in charge of underwriting the securities.
The bonds matures in two years and can be traded under call and put option contracts. A call option gives the buyer the right, but not the obligation, to buy the underlying security at a 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.
Data released by Tehran Securities Exchange Technology Management Co. indicate that investors bought 89.165 million salaf securities worth 14.97 trillion rials on the day of offer.