Saudi Electricity Company's Islamic debt has returned 50 per cent more than global peers since its debut almost nine months ago, boosted by the scarcity of corporate-bond investments in the region's biggest economy.
The state-controlled utility's dollar-denominated 2022 notes have handed investors 10 per cent since their sale at the end of March, according to data compiled by Bloomberg.
The Bank of America Merrill Lynch Global Utility Index returned 6.8 per cent over the same period.
Foreigners have limited avenues for exposure to the world's largest oil exporter, which is investing more than US$500 billion to build infrastructure and industry, and create jobs.
Saudi Arabia has 23 per cent less outstanding sovereign debt than neighbouring Qatar, whose economy is just over a quarter of the size, according to data compiled by Bloomberg.
Power generation capacity in the nation of 28 million people almost doubled in the 10 years to 2011 to 43,070 megawatts, according to the water and electricity ministry's data.
"Saudi Electricity's credit story is very compelling," said Sergey Dergachev, a senior portfolio manager at Frankfurt-based Union Investment Privatfonds. "Its business is vital for the whole of Saudi Arabia.
It has a great degree of state support and is by far the best proxy for Saudi sovereign risk in the eurobond market."
Saudi Arabia, which holds $627bn of net foreign assets at its central bank, saw its credit risk drop to the lowest in the Middle East this year. Five-year credit default swaps were at 72.8 basis points on Friday, down from a 2012 high of 151 in January, according to CMA, which is owned by McGraw-Hill and compiles prices quoted by dealers in the privately negotiated market.
The dearth of traded debt in the kingdom helped to drive the yield on Saudi Electricity's 4.211 per cent bonds due April 2022 down 103 basis points, or 1.03 percentage points, since their March 29 sale to 3.18 per cent on Friday.
* Bloomberg News
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