KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has granted approval to Burj Energy International Management, a UAE-based renewable energy producer, to float the South Asian nation’s first green energy modaraba worth Rs1 billion (approximately $5.5 million), the watchdog and company officials said.  

Modarabas are equity-like financing vehicles that are a small but significant part of Islamic finance in the world’s second-largest Muslim nation.

Modarabas, which date back to the 1980s, were the first Islamic business model established in Pakistan with a statutory framework and dedicated regulations. They are almost unique to Pakistan and a form of partnership where assets are managed on behalf of clients, with income and expenses shared under a pre-agreed ratio. They are therefore regarded as one of the purest forms of Islamic finance.

The approved floatation of the Burj Clean Energy Modaraba will be managed by Burj Modaraba Management Company.

The modaraba will engage in the business of generation and supply of renewable energy, and renting of commissioned renewable energy equipment and plants after the completion of a public offering, the SECP said in a statement issued on Monday.

“This is Pakistan's first renewable energy Modaraba that will invest in renewable hybrid, solar and wind, projects and reduce carbon footprint of the country,” Aamer Chishti, the director of Burj Energy International, told Arab News via from Dubai.

The floatation of the new modaraba will facilitate the growth of Shariah-compliant financial products in the financial services market, he said. After due process, the Burj modaraba would be listed on the Pakistan Stock Exchange (PSX) within a period of 12 months, with a public offering of 30 modaraba certificates of Rs10 each.  

“The initial paid up capital is Rs1 billion, of which Rs 300 million or 30%, would be raised through stock market and remaining Rs700 million or 70% would be sponsored by Burj Energy International Management International,” Chishti said. “We have up to 12 months to float it on PSX, however, our target is to complete the formalities within 6 months.”

The modaraba would invest in multiple projects of solar and wind power in Pakistan, mainly focusing on industrial, small and medium enterprises (SMEs) and residential entities.  

“Replacement of electricity with solar and wind power will offer huge savings to the industrial and residential consumers of energy”, Chishti said. “That will contribute to the goal of Pakistan to reduce the carbon footprint and towards net zero commitments of the country given to the international community.”

The company has so far generated 52 megawatts of renewable energy in Asia and reduced carbon emissions by 86,880 tones. It is working in Bangladesh and Malaysia through joint ventures and now planning to launch operations in Sri Lanka, Chishti said.

There are a total of 28 modarabas in Pakistan with an asset base of approximately Rs50 billion, according to a 2020 research report by The Pakistan Credit Rating Agency (PACRA).