RIYADH: Global sukuk issuance is projected to hit between $190 billion and $200 billion in 2025, driven by increased activity in key markets such as Saudi Arabia and Indonesia, according to a recent analysis from S&P Global.

In its latest report, S&P Global noted that global sukuk issuances totaled $193.4 billion in 2024, a slight decrease from $197.8 billion in 2023. Despite this marginal decline, the market saw a notable 29 percent year-on-year increase in foreign-currency denominated sukuk, which surged to $72.7 billion in 2024.

The report highlighted that Malaysia and Gulf Cooperation Council countries, particularly Saudi Arabia, were the primary drivers of foreign-currency denominated sukuk issuances.

Sukuk, a Shariah-compliant bond, offers investors partial ownership in an issuer’s assets and is structured to adhere to Islamic finance principles.

“We expect foreign currency-denominated issuance to remain strong in 2025,” S&P Global said in its analysis.

The agency also anticipates that monetary easing will persist, albeit at a slower pace than initially expected. This, coupled with substantial financing needs in core Islamic finance nations, particularly due to ongoing economic diversification initiatives, is expected to prompt issuers to capitalize on favorable market conditions.

The S&P report comes at a time of significant activity in Saudi Arabia’s debt and sukuk markets. A December report from Kamco Invest indicated that Saudi Arabia would face the largest share of bond maturities in the GCC region from 2025 to 2029, reaching an estimated $168 billion.

Despite global geopolitical tensions, S&P Global forecasts that these will have little impact on sukuk issuance in 2025.

Mohamed Damak, head of Islamic Finance at S&P Global Ratings, stated: “Our forecasts assume no major shift in global liquidity compared to our base-case expectations and no significant escalation of geopolitical risks in the GCC that could disrupt the economic performance of top sukuk issuers.”

S&P Global also noted that the implementation of the Accounting and Auditing Organization for Islamic Financial Institutions’ Shariah Standard 62 is not expected to affect sukuk volumes until 2026.

This guideline, which was published as an exposure draft in late 2023, aims to standardize various aspects of the sukuk market, including asset backing, ownership transfer, and trading procedures.

“We believe the impact of AAOIFI’s Shariah Standard 62 will only materialize in 2026, at the earliest,” S&P Global said.

“There is uncertainty regarding whether market feedback will lead to any significant revisions to the original proposals, which we view as potentially disruptive for the industry.”

Fitch Ratings echoed similar concerns about the potential impact of these guidelines, suggesting that the final adoption could lead to significant changes in the structure of the sukuk market and may even increase fragmentation.

As sukuk markets continue to evolve, experts are closely monitoring the interplay between regulatory changes, geopolitical factors, and market dynamics that could shape the future of this vital segment of global finance.

LONDON: The Abu Dhabi Investment Authority is investing $500 million in Alpha Generation, a US power infrastructure company owned by private equity, the companies told Reuters on Monday, as the race to invest in power generation assets intensifies.

Formed a year ago by ArcLight Capital Partners to manage and operate the buyout firm’s power infrastructure investments, AlphaGen constitutes one of the largest portfolios of independent power assets in the US, with more than 11 gigawatts of generation capacity spread across six states.

“This investment, and the partnership between ourselves and ADIA, will help catalyze both the future growth of, and the value of, this strategic portfolio of assets,” Angelo Acconcia, partner at ArcLight, told Reuters in an interview.

ADIA’s $500 million is for a minority stake in AlphaGen, according to a joint statement from the parties. Acconcia declined to comment on the size of the minority stake or the valuation at which the ADIA investment valued AlphaGen.

The move by the sovereign wealth fund comes amid a frenzy of deals activity in the US power industry, as the boom in artificial intelligence and data centers, as well as electrification efforts in manufacturing and transportation, is driving power demand to record levels, with further growth projected through the rest of the decade and beyond.

This is making investments into the US power sector, whether for generation assets, transmission infrastructure, energy storage or associated companies, increasingly attractive both for money managers and existing industry players.

On Friday, in the largest US power acquisition in nearly two decades, Constellation Energy agreed a $16.4 billion deal to purchase Calpine from the investors which owned the independent power producer.

Unlike utilities, independent producers — such as the plants operated by AlphaGen — can sell power at market prices, allowing them to profit more when demand rises.

ArcLight, an energy-focused private equity firm founded in 2001, has owned, controlled, or operated more than 65 GW of generation assets and 47,000 miles of transmission infrastructure, according to the statement.

The ADIA investment into AlphaGen is subject to regulatory approvals and is expected to close in the first half of 2025, the statement added.