Proposed Model
For issuance of Jualah sukuk, government chooses a contractor for establishing a certain property with particular costs. Then, enters the first Jualah contract with the SPV as its own agent to perform required measures to finance, build and operate the property against receiving a certain fee (certain amount of money or the right to operate for a certain period). In other words, the subject of the first Jualah contract (government / SPV) would be the following up of the work, raising funds and signing all required contracts to build and operate (Engineering, Procurement, Construction and Finance / EPCF).
The SPV issues Jualah sukuk and by pooling the investors’ funds and on behalf of security holders enters the second Jualah contract with the contractor which is selected by the government to establish the project and by finishing each phase of the project pays the specified fee to the contractor. So, the subject of the second Jualah would be establishment (Engineering, Procurement, Construction / EPC). Contractor, after finishing the project, delivers it to the government on behalf of the SPV, and by finishing the building period (or each phase of the building), the contractor would be the owner of the second fee (Ja’al ) and SPV would be the owner of the first fee (Ja’al).
In case the fee (Ja’al) of the first Jualah contract is the right to operate, SPV takes the property from the government and delivers it to the operator (which may be the contractor). The operator pays a certain commission fee for operating the property and the revenues shall be paid to the security holders. Jualah sukuk for project finance would be in different models as follows:
Operational Model of Jualah Sukuk for Project Finance against a Certain Fee (Ja’al)
Government chooses the contractor for establishing a specific project with certain construction costs (for example, 400 billion Rials) and introduces the contractor to the SPV. Then the Jualah operation shall be continued as follows:


1. SPV signs the first Jualah contract with government to finance and establish the project against a certain fee (for example, 800 billion Rials).
2. SPV issues 4 billion Rials of five year Jualah sukuk at a specific profit rate (20% annual).
3. SPV pools the investors’ funds.
4. SPV signs the second Jualah sukuk with contractor to establish the project against a specific fee (for example, 400 billion Rials).
5. SPV pays the pooled funds to the contractor with respect to provisions of the contract.
6. By finishing the construction period, SPV delivers the property to the government for putting into operation and government pays the specific fee to the payment agent.
7. The payment agent (Central Securities Depository and Settlement Company / CSDI) pays the fee to the security holders.
Shariah Board Resolution
Operational Model of Jualah Sukuk in form of Build – Operate – Transfer (BOT)
Government introduces a contractor to the SPV for building a specific project with certain costs (for example, 400 billion Rials). Then the whole process of Jualah operation shall be carried out as follows:
SPV signs the first Jualah contract with government to finance, build and operate the project against the right to operate for five years.
SPV issues a sum of 4 billion Rials of five year Jualah sukuk with a certain profit rate (for example, 20 %).
SPV pools the investors’ funds against Jualah sukuk.
SPV signs the second Jualah contract with contractor and operator to build and operate the project (for example, 400 billion Rials for building and 100 billion Rials for operation).
SPV pays the pooled funds to the contractor with respect to provisions of the contract.
By finishing the building period, SPV transfers the complete project to the operator. Operator pays a sum of 100 billion Rials to the SPV and pays the revenues, deducting the fee, to the account of the payment agent.
The payment agent (CSDI) pays the revenues to the security holders.

Shariah Board’s Opinion
Shariah board believes that all proposed models could be deemed as the instances of Jualah sukuk which are already approved by the board (June 2010). However, followings are the board’s opinion on Jualah sukuk:
Jualah sukuk indicates the participating ownership of security holders in all rights subject to Jualah contract of the SPV (on behalf of security holders).
The fee (Ja’al) could be in form of a certain sum of money or the right to put the project into operation for a specified period or a combination of both models.
The fee (Ja’al) of Jualah sukuk includes the principal, securities profit and operator’s fee.
If the fee (Ja’al) is defined as the right to operate and the revenue of operation in that certain period is less than the principal and securities profit plus the operator’s fee, government could make reconciliation (Musalaha ) on payment of the difference as a condition to the contract.
Contractor could also be the operator of the project.
Issuance of Jualah sukuk for incomplete projects is correct and permissible.
Prepayment or payment of a part of the fee (Ja’al) as an on-account payment during the building period shall be permissible.
Selling of Jualah sukuk in initial offering at discount or at premium shall be correct and SPV could, on behalf of security holders, make reconciliation with originator to take the excess funds which are pooled in initial offering and originator compensates the deficit from its own properties.
If the fee (Ja’al) is the right to operate the project for a specific period, government or a third person could encourage the security holders by undertaking voluntarily payment of principal and profit or a part of which in form of a reconciliation (Sulh ) contract.
Project shall be under the ownership of the government at each phase, unless otherwise is stipulated in the contract.
The contract between SPV and contractor could be designed in form of Juala, Ijarah or Istisna , and the contract between the SPV and operator could be designed as Jualah, Ijarah or vukalah .
Jualah sukuk could be issued by non-governmental public institutions to build or complete a particular project as explained above.



Sessions
Session Number Session Date Description
143 Mar 01 2017
144 Mar 15 2017
145 Apr 12 2017
146 Apr 26 2017

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