REGIONAL AKGROUND TRENDS IN G PROJE T FINANE …

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REGIONAL BACKGROUND TRENDS IN GCC PROJECT FINANCE

FEATURED DEALS: SALALAH II IPP—ACWA POWER JAZAN INDUSTRIAL GASES — KING & SPALDING

DEAL LIST: BAHRAIN KUWAIT OMAN QATAR SAUDI ARABIA UAE

CONTACT INFO/DISCLAIMER

PRIMARY AUTHORS David Graves, Reporter, Middle East +44 (0)20 3741 1050, [email protected]

Elias Lambrianos-Sabeh, Head of MENA +971 (0)44 33 75 71, [email protected]

Chris Haffenden, Managing Editor +44 (0)20 3741 1045, [email protected]

mailto:[email protected]



Page 2 DW-EU 20-JUN-16

GCC PF OUTLOOK—ENERGY & UTILITIES JUNE 2016

REGIONAL BACKGROUND

T he six countries of the Gulf Cooperation Council face a set of unprecedented challenges in the wake of the dramatic

oil price collapse. Some issues are region-wide (there can’t have been a MENA-focused conference in the last year that didn’t dwell on tightening bank liquidity) while others, such as Bahrain’s new-found junk status, are particular to individual countries. But regardless of the turbulent economic environment, there are a handful of certainties those assessing project finance opportunities can count on.

First, despite ongoing efforts at economic diversification, the region will continue to be dependent on hydrocarbons for the medium term. While diversification is now firmly on the agenda across the GCC – in April, Saudi Arabia’s deputy crown prince Mohammed bin Salman noted the Kingdom’s “dangerous” addiction to oil, and a diversified economy is explicitly targeted in the recently announced Saudi Arabia Vision 2030 plan – the IMF has previously emphasised how difficult enacting such a transformation is in practice, especially when reforms are not implemented before a drop in commodity prices.

On average between 2005 and 2015, some 88% of Saudi Arabia’s revenues derived from oil and gas, according to Moody’s, while the sector currently accounts for 90% of Qatar’s revenues and 85% of its exports, according to S&P Global Ratings. A dependence of this magnitude cannot be reversed overnight and, even with a number of high-profile projects being postponed or cancelled, investment in the oil and gas sector will continue to be a key economic driver in the region

Second, demand for power and water in the region will continue to grow apace. The population of the MENA region grew by some 100m people between 1950 and 2000 to 380m, the highest growth rate of any region globally. The last ten years have witnessed rapid population growth in the GCC, particularly in Saudi Arabia.

Meanwhile the GCC states are increasingly industrialising as part of the ongoing effort to diversify economies away from hydro-carbons. Providing the necessary power and water infrastructure to satisfy the rising commercial and personal demand will require considerable investment in utilities.

Research from energy sector-focused development bank Apicorp identified USD 53bn worth of committed energy sector investments in Saudi Arabia for the period 2016 to 2020, some USD 22bn of this in the power sector. The Kingdom has a further USD 102bn of planned investments in the energy sector more broadly.

(CONTINUES NEXT PAGE)

CHART 1: Europe Brent Spot Price FOB (USD/Bbl)

Europe Brent Spot Price FOB (Dollars / Barrel)

20

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160

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Source: Debtwire, EIA.

CHART 2: Population growth of GCC countries

1,384,3423,593,689

9,912,917

30,886,545

1,016,789 UAE

9,039,978

359,902Bahrain

Bahrain 1,361,930

1,154,375

4,236,057

223,715

Qatar 2,172,065

0

4,000,000

8,000,000

12,000,000

16,000,000

20,000,000

24,000,000

28,000,000

32,000,000

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pu

lati

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(m

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ns) Kuwait Saudi Arabia

UAE BahrainOman Qatar

Source: Debtwire, World Bank - Data from database: World Development Indicators.

CHART 3: Electric power consumption of GCC countries

4,874

Saudi Arabia

8,741 9,663

10,904

20,552 Bahrain

18,217

2,596 Oman

5,981

12,898

Kuwait

14,911

11,006

Qatar15,471

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

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kWh

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Source: Debtwire, World Bank - Data from database: World Development Indicators.

http://english.alarabiya.net/en/perspective/features/2016/04/26/Full-text-of-Saudi-Arabia-s-Vision-2030.html

https://www.imf.org/external/pubs/ft/sdn/2014/sdn1412.pdf

http://www.standardandpoors.com/en_US/web/guest/article/-/view/type/HTML/id/1591218

http://www.standardandpoors.com/en_US/web/guest/article/-/view/type/HTML/id/1591218

http://www.prb.org/Publications/Reports/2001/PopulationTrendsandChallengesintheMiddleEastandNorthAfrica.aspx

http://www.prb.org/Publications/Reports/2001/PopulationTrendsandChallengesintheMiddleEastandNorthAfrica.aspx

http://apicorp-arabia.com/Research/EnergyReseach/2016/REPORT%20-%20APICORP%20-%20MENA%20Energy%20Investments%20Outlook%202016.pdf

http://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm



REGIONAL BACKGROUND (CONT.)

According to the National Transformation Plan, by 2020 Saudi Arabia envisages 100% of its power plant electricity generation through “strategic partners”, from 27% today, presumably through a vast increase in the IPP programme. Another of the various initiatives unveiled in Saudi’s Vision 2030 plan is an ambitious 9.5GW renewables target and the country aims to have 3.45GW on-line by 2020 from nothing today.

Kuwait and Oman have USD 37bn and USD 29bn of committed investments respectively, with Kuwait having a further USD 36bn planned, according to Apicorp’s research. The UAE has USD 49bn in planned energy sector investments and Bahrain some USD 15bn planned.

But the question that will likely be playing on bankers’ minds is how these projects will be financed. Many of the largest projects in the region, such as Kuwait’s USD 15.5bn Al Zour Refinery Project and Saudi Arabia’s USD 5bn - 6bn Fadhili Gas Project, are expected to utilise on-balance sheet funding and an engineering-procurement-construction (EPC) framework.

Although debt will undoubtedly play a role financing many of them – KNPC recently signed a USD 3.98bn-equivalent 10-year local currency loan to part finance the Clean Fuels Project, with ECA and international bank tranches to follow, while Oman’s OOCEP is seeking a USD 1bn loan to fund its participation in the USD 16bn Khazzan ‘Block 61’ tight gas development – the extent to which limited- or non-recourse project finance solutions will be used remains uncertain.

Going forward however, IPP, IWP and other off-balance sheet financing solutions may well become increasingly attractive in light of significant budget deficits and expected sluggish growth.

CHART 4: GW installed capacity (2012 estimates)

4

15

6 8

54

27

Bahrain Kuwait Oman Qatar Saudi Arabia UAE

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inst

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apac

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GW installed capacity (2012 estimates) CIA World Factbook

Source: Debtwire, CIA World Factbook.

CHART 5: General government gross debt % of GDP

12.56

Bahrain

115.80

12.06

51.00

9.57

31.15

4.84

60.55

11.10

Qatar

68.99

08

1624324048566472808896

104112120128

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Bahrain Saudi ArabiaKuwait OmanQatar UAE

Source: Debtwire, IMF data and projections.

CHART 6: General government revenue % of GDP

56.48 Saudi Arabia

26.20

32.96

Qatar

Qatar 24.80

27.90

BahrainBahrain

22.49

60.56

Kuwait

44.1047.41

Oman 39.95

42.03

UAE26.31

18

26

34

42

50

58

66

74

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Saudi Arabia QatarBahrain KuwaitOman UAE


CHART 7: GDP Constant prices % change GCC Average

7.34

GCC Average

2.39

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http://vision2030.gov.sa/sites/default/files/NTP_En.pdf



TRENDS IN GCC PROJECT FINANCE

I n line with broader GCC market trends, market participants surveyed by Debtwire expect project finance debt pricing

to trend upwards over the coming year, not only in the oil and gas sector but across the board.

Indeed, energy bankers may have already priced the increase into their thinking, said one London-based oil and gas banker, but low dealflow in the oil, gas and petrochemical sectors over the last year could have reduced the move’s visibility.

The long lead time to close project finance deals also means recent pricing is still reflective of strong local bank liquidity that was in place up until late 2014, according to Richa Prasad, head of power and utilities at Sumitomo Mitsui Banking Corporation.

“I would expect that debt pricing will be a reflection of available liquidity over the next year, of which local bank liquidity has been a key component for certain countries,” she said.

“With continuing low oil prices, the deposit base for local banks is reducing and hence this should result in lower overall liquidity for the coming months which might have an impact on the terms and conditions being offered by these lenders.”

Bankers in the region agree with this assessment of the situation. “There is a challenging monetary situation in the country [Saudi Arabia],” said a project finance banker based in Saudi Arabia. “Loan to deposit ratios are high and banks are preparing for Basel regulations expected to penalise long-term deposits.”

“This leaves a fair bit of murkiness in the project finance market, because it works by sponsors placing a lot of cost on long term bank debt.”

Another factor set to drive pricing up – and another indirect consequence of the oil price drop – are recent sovereign downgrades; a factor of the GCC’s hydrocarbon dependence. Bahrain, Oman and Saudi Arabia have all been downgraded since the start of the year, with Bahrain having fallen to junk status in the view of S&P Global Ratings and Moody’s.

The downgrades will automatically push up pricing for projects located in these countries and bank country limits may be reduced.

“In this context, Export Credit Agency (ECA) cover will become increasingly important for projects to secure financing,” a second London-based banker said. “Projects that are unable to secure ECA cover will increasingly need to seek other forms of cover, such as paying sufficient margins to cover the costs of banks taking up other forms of insurance.”

Use of ECA cover will likely not be limited to project finance, a third London-based banker said, who is expecting ECA-backed corporate deals to be a big growth area in the GCC over the coming year. Borrowers have traditionally avoided the fees – which the banker said on average add around 1% to their financing cost – associated with securing an ECA guarantee.

However companies may have little choice but to pay up in the current environment, the banker said, adding that large govern-ment related companies such as SECo and DEWA are the most likely candidates to issue such deals.


OMAN – LOCALS TO LEAVE PF GAME?

In Oman, the severity of the local bank liquidity squeeze – both in US dollars and local currency – is such that local banks are likely to avoid long-term lending, including project finance, as much as possible for the time being, a project finance banker based in the country said.

“There is currently no clarity on how this is going to change in the future,” the banker said, adding that in the mean-time one option for project developers might be the use of shorter duration financing options such as mini perms if they want to mobilise local liquidity.

As a result of the liquidity situation, banks in the country are lining up to issue in the Eurobond market – Bank Muscat placed a USD 500m 3.75% 2021 bond in April, Bank Dhofar has mandated banks for a potential issuance, and Bank Nizwa is reportedly looking to issue – but whether this will be sufficient to alleviate the pressure remains to be seen.

First summit meeting of the GCC.



TRENDS IN GCC PROJECT FINANCE (CONT.)

THE BIGGER THE CHALLENGE, THE GREATER THE OPPORTUNITY?

The increased cost of funding for major projects will present challenges for developers and government related entities – which are used to the region’s traditionally ultra-tight pricings – not least because of the novelty factor.

“High cost project finance has never been done in the Middle East, the concept is unfamiliar,” the Saudi Arabia-based project finance banker noted.

“The two Saudi deals being refinanced, Dhuruma [now signed] and Rabigh 1 [in docs], are the exceptions that prove the rule - they both signed at the height of the financial crisis, and at the time offered chunky margins. That they are being refinanced at tighter margins now, despite the oil situation, shows just how uncomfortable the region is with high cost project finance,” the banker said.

However, the Saudi Arabia-based banker added that pricing in the GCC is largely set by Japanese banks, as they have lower liquidity prices than anyone else. “It's their opinion that will really count.”

But while bank liquidity constraints may prove a barrier to participation for local banks, and developers and offtakers will be considering carefully the higher cost of finance, yields in the new price environment may lure in financial institutions that have been absent from the region for some time.

“I also expect the return of some international Project Finance banks, which have been largely priced out in the last few years due to internal regulatory and funding constraints, but which have since then made a lot of progress on their funding sources,” said Richa Prasad.

REGIONAL REQUIREMENTS

Market participants almost universally point to Saudi Arabia as having the greatest immediate infrastructure needs.

“The country currently has a significant [capacity] shortfall against forecast demand, and will have to invest heavily in the power and water sector over the next decade or two to keep up with demand growth,” said a fourth London-based project finance banker.

A number of high-profile initiatives to bolster private sector participation in the country have been announced already. The Saudi Electricity Company is expected to be split into four companies, with private sector participation expected, by the end of the year. Meanwhile, the potential five percent float of Aramco has dominated recent headlines.

Beyond the energy sector, the country is also expected to seek deals in the infrastructure, healthcare, education and transportation sectors, both in the form of privatisation of existing assets, as well as greenfield projects. A series of airport privatisations was announced toward the end of 2015, though the major Taif Airport PPP has stalled, according to local press reports.

Elsewhere in the region, Qatar is noted by bankers for having large infrastructure requirements but has traditionally used contractor financing to fund infrastructure requirements.

According to a Qatar-based loan banker, the country has yet to fully establish a framework to monetise infrastructure – which would be necessary if it wants to expand the project finance market beyond the power sector. However, one recent develop-ment bodes well, as Qatar is said to have appointed PwC and Eversheds as advisors for a new PPP framework.

Oman has a well-established regulatory framework in the power and desalination sector, which includes a requirement that all electricity companies engage in a 40% public listing within 4 years of construction.

“This has worked very well - it offers local investors a very stable return, and offers the developers an exit option allowing the re-deployment of capital,” said an Oman-based project finance banker.

Kuwait is also engaged in tendering a number of projects in the power sector, having implemented a new PPP law last year that, among other things, facilitated lending secured against project contracts and assets.


Credit ratings of GCC countries and Emirate of Abu Dhabi KEY=Downgraded this year

S&P Global Ratings Moody's Fitch

Bahrain BB (Stable) Ba2 (Negative) BBB- (Negative)

Kuwait AA (Stable) Aa2 (Negative) AA (Stable)

Oman BBB- (Stable) Baa1 (Stable) N/A

Qatar AA (Stable) Aa2 (Negative) AA (Stable)

Saudi Arabia A- (Stable) [Unsolicited rating] A1 (Stable) AA- (Negative)

Emirate of Abu Dhabi AA (Stable) Aa2 (Negative) AA (Stable)




“This [series of projects in Kuwait] is an attempt to catch up following a slow start,” said the fourth London-based banker.

“The new law introduced last year took the lessons learned from

the Az Zour Phase 1 IPP project, which took some three to four

years to come to fruition from initial tendering, and the country

is now putting the new framework to use under the rebranded

Kuwait Authorities for Partnership Projects.”

GOVERNMENTS BETWEEN A PPP AND A HARD PLACE

Given government belt-tightening, mobilising third party capital to finance infrastructure may seem like an obvious solution.

But historically the inclination to use IPP, IWP and other PPP-type financing models, as opposed to EPC contracts, has varied by country.

“IPPs are the standard model in Abu Dhabi, Oman and Qatar. Projects such as DEWA’s Hassyan Clean Coal IPP and the Moham- med Bin Rashid Al Maktoum Solar Park demonstrate the traction the model has in Dubai also,” said David Lloyd, Middle East

transaction advisory services power & utilities leader at EY.

“Perhaps the exception so far has been Saudi Arabia,” he noted. However, given the new budgetary environment in the Kingdom, there is likely to be something of a pendulum swing away from the on-balance sheet EPC model and toward the IPP model, Lloyd said, as the country increases its efforts to utilise third-party capital to meet the country’s burgeoning power and desalination needs.

There is a figure often quoted that Saudi Electricity Company is looking to invest some USD 100bn over the next decade, the third London-based banker added. However, the company abandoned its IPP programme some years ago and the only IPP in the works currently is a joint project with Aramco, the Fadhili IPP.

“Counterintuitively, the impact of the oil price slide, may in fact be good news for the project market [in Saudi], as the substantial budget deficit in the country is expected to encourage the country to seek private capital to meet capacity demand,” the banker said.

However, with project finance margins on the rise, sponsors will pass through the higher cost of bank funding to the offtaker

in the prices they offer. So the main question will be how the various GCC governments react to the higher prices being requested, rather than how the developers react to the higher cost of bank financing, according to the Saudi Arabia-based project finance banker

The issue of how to raise financing for critical infrastructure will be handled differently in each country, the banker continued. “For example Qatar will likely just tell the banks what to do, but Saudi has a greater need for funding and Saudi banks also have a fair bit of freedom - Aramco has leverage, sure, but not that much leverage,” the banker said.


SECo – THE JUGGERNAUT THAT’S TOO IMPORTANT TO FAIL

Vertically integrated Saudi Electricity Company (SECo) has

a virtual monopoly over the power market in the Kingdom.

While there is a regulator, the Electricity & Co-Generation

Regulatory Authority, with the ability to make suggestions

on tariff changes, any change requires ultimate sign off from

the King – which has, historically, made reform a slow process,

the fourth London-based project finance banker said.

“While there have been some changes to commercial and

government tariffs, changing residential tariffs is extremely

sensitive in a country where many people don’t earn a great

deal,” the banker said. Although there is little direct impact on

IPP sponsors who negotiate commercial long-term PPAs, the

difficulty of implementing subsidy reform does has an effect

on the creditworthiness of the country’s sole-offtaker, SECo.

While a country having a single offtaker available may seem

like a credit negative for projects, lenders actually take comfort

from this, the banker continued. “As there’s no viable

company and offers explicit and implicit support. In other

words, if SECo fails the only alternative would be to create

a replacement entity, essentially identical to SECo, to take

over the operations of SECo. It makes no commercial sense

for the government to allow that to happen.”




“PPPs will continue to be an option for governments looking to implement vital infrastructure projects in the region, but – even given the immediate fiscal advantages of such programmes – there is a limit to the number of availability payment concessions that can be awarded given limited government budgets.”, the second London-based project finance banker added.

“The market doesn’t offer the GCC bottomless pit of gold,” the banker said. “It's a bit like the PFI boom here [in the UK] 10-years ago or so, where the government loaded on tons of new schools and hospitals in a very short space of time and ‘forgot’ that in three-years’ time, once all the new schools and hospitals were built, they would have to start making the unitary charge payments for

all of them. For the next 25 years...”

NO TWO DEALS THE SAME…

While it is possible to identify some general market trends, it’s important to note that all project finance deals will continue being considered on a case-by-case basis, said the first London-based banker.

In an export-led sector like petrochemicals – where the government is not the main offtaker – the impact of country risk will be quite different to, for example, a power project being tendered with an availability payment contract. The prospects for commercially viable export-led projects are also less likely to be impacted by straitened government budgets. In fact, GCC oil and gas projects aren’t necessarily particularly difficult to pull off in the current environment, there just aren’t a huge number of them in the market at the moment, the first banker said.

One of the traditional advantages of project finance has been the ability to structure projects in such a way that the project has lower risk than the underlying country risk – something that has been important to financing many African projects, the second London-based banker said.

The need to balance country risk against project risk – the classic project finance seesaw – will continue to be a key consideration, the banker said.

Government tendered projects utilising the availability payment model – where the project owner is paid a fixed rate for a fixed period by the authority, rather than the revenues generated directly by payment from the users or end market for the project's products – transfers risk away from the markets for whatever the project's product is, and towards the government, the banker explained.

“There is a question of whether banks will be willing to finance projects where the risk is more weighted toward regional governments than to the project itself given the ongoing deterioration of sovereign creditworthiness in the region,” the banker said.

As projects will always be considered on their individual merits, perhaps the safest generalisation to make is that market con-

ditions in the region are encouraging potential lenders to devote more time to assessing the potential risks and rewards on offer.

“Given the current state of the global commodity markets, including oil and the impact that it is having on the world-wide

economy as well as the Middle East countries, there is a lot more analysis going on within each bank on the current macro-eco-nomic situation of the country in which any project is located, the credit strength of the key counter parties as well as the global outlook for the sector,” Richa Prasad concluded.

ALTERNATIVE FUNDING STREAMS – THE TIME FOR BONDS, ISLAMIC FINANCE AND FUNDS?

Developers will continue to seek to diversify funding sources, with one option being project bonds. To date, the GCC has seen limited issuance of project bonds. A couple of highly illiquid Saudi riyal-denominated project sukuk, largely bought on a hold-to-maturity basis, have been issued to finance the Sadara and Satorp projects. However the only issuers to date of tradable US dollar-denominated project bonds in the region have been Qatari LNG producer RasGas, Mubadala-led cross border gas project Dolphin Energy and the ADWEA-led Shuweihat IWPP refinancing.

However, weaker conditions in the bank market could prove conducive to a pickup in the capital markets in 2016, said Richa Prasad, who highlighted further opportunities in the Saudi local currency project sukuk market in particular.

“I would expect this to be a more immediate route for corporate borrowers and possibly be explored for project refinancing rather than projects which also have construction risks and staggered drawdowns over a two- to four- year timeframe. If the cost of bank debt starts to increase, this may make DCM start to look more attractive again,” she said.

“However the actual utilization of DCM will continue to depend on so many factors, including the size of the project, size of the bond facility and the state of the capital markets themselves

for different rated entities.”





Any issuance would likely get lapped up, with pension funds in particular looking for attractive propositions in the long dated space, according to a London-based bond trader. However the trader noted that, due to their illiquidity, pricing of GCC project bonds in the secondary market may not be truly representative. There is a market expectation that there will likely be fresh project bonds coming from the UAE this year.

However, the second London based banker argued that the trad-itional bond investor will always treat project bonds cautiously: “Investors in debt capital markets are more risk averse than banks – understandably given that they include pension funds, insurance firms etc. The traditional problem with project bonds is that the investors are reluctant to take on construction risk.”

“But we have seen in the past when regional investors have money to spare that they are ready and willing to support project bonds, including construction risk in the case of deals like Sadara. For the project bond market to take off again, we will need to see the oil price increasing and the subsequent pickup in regional investor liquidity.”

The other pocket of liquidity that is open to Middle East projects is in the Shariah-compliant space, and its use in project finance is on the rise, according to Leroy Levy, a partner at law firm King & Spalding.

“Middle East based sponsors tend to show a strong preference for Islamic Finance,” he said, while foreign sponsors are beginning to realise that doing business in the region is likely to involve participating in an Islamic Financing. “It’s no longer a novel concept and more and more foreign investors are comfortable going down that road.”

David Graves: Reporter, MENAT, Debtwire CEEMEA

The opinions stated in these comments are those of the individual and in no way represent the views of or are endorsed by Sumitomo Mitsui Banking Corporation Europe Limited

CHART 8: Sovereign and Project Bond Yield (Mid) Curves (Close 07/06/16)

1.09

1.78 Qatar Sovereign, 1.852.32

2.55 2.53 2.58

3.36

3.80

4.38 4.41 4.48

Abu Dhabi Sovereign, 1.54

2.30

3.10

3.43Dolphin Energy,

2.98

2.40

RasGas, 3.68

4.484.72

Ruwais Power Company (Shuweihat S2 project bond), 5.09

0

1

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4

5

6

2016 2021 2026 2031 2036 2041 2046 2051

Yie

ld (

Mid

) %

Maturity

Qatar Sovereign

Abu Dhabi Sovereign

Dolphin Energy

RasGas

Ruwais Power Company (Shuweihat S2 project bond)

Source: Debtwire, Run from bond trader.

INFRA FUNDS – IT TAKES TIME TO GET COMFORTABLE

One source of capital that has been conspicuously absent

from the GCC project market is Infra Funds, both on the

equity and the debt side. Going forward, market partic-

ipants are optimistic that the role of funds could increase

in the region.

“Debt funds evaluate various opportunities for risk and

return and then choose their investments taking a holistic

view across geographies, sectors and even possibly products,”

said Richa Prasad, head of power and utilities at Sumitomo

Mitsui Banking Corporation. “With greater familiarity of

the Middle East region I would expect that there will be

hopefully more contribution of their capital to the region,

provided the returns meet their internal hurdles and alternate

investment options.”

Michelle Davies, a partner at Eversheds and head of the

firms’ Clean Energy and Sustainability Group, said: “Infra

funds tend to focus on more mature markets. For example

in the UK, the funds became engaged in the renewables

market a good five to 10 years after the market was estab-

lished. The funds also need to see scale in the market.”

“Dealing in less mature or less stable markets, we tend

to see mainly the development banks engaging in the first

round of projects – perhaps bringing in some commercial

banks under their umbrella. International and regional com-

mercial banks usually need to see projects operating and

being paid out under the PPAs before they feel sufficiently

comfortable to lend.”

“A mature power or other infra market where this has been

happening will clearly help [funds] reach this point sooner

with renewable energy projects. Infra funds tend to engage

also in the recycling of debt and so it could be a fair time

before they feel sufficiently comfortable and the recycling

process comes around,” concluded Davies.




SALALAH II IPP—ACWA POWER

I n August 2015, the Mitsui and ACWA Power led consortium

achieved financial close of the Salalah II IPP, a transaction which involved acquisition of an existing 273MW OCGT plant and the green-field development of a 445MW CCGT Plant.

Pascal MARTESE, Executive Director, Acquisitions and Project

Finance and Leslie ABRAHAM, Senior Manager, Acquisitions and

Project Finance of ACWA Power, provide a bird’s eye view of a

unique benchmark setting project.

The Salalah II IPP is located in Raysut, within the Salalah Free Zone,

in Oman. The 273MW OCGT plant (“Existing Plant”) comprises

of seven GE Frame 6 turbines and one GE aero-derivative gas

turbine. The green-field plant (“New Plant”) will be located ad-

jacent to the existing plant and comprises of four GE Frame

6F gas turbines, four HRSGs and two steam turbines, and two air

cooled condensers.

The Salalah II power project is connected to the Salalah power

system which operates isolated from the main interconnected

system of Oman. The project was awarded to the consortium of

Mitsui, ACWA Power and DIDIC (Dhofar International Development

and Investment Holding Company) after a competitive tendering

process. OPWP (Oman Power and Water Procurement Company)

is the sole offtaker.

The total investment amount in the project is approximately USD

620m, including the acquisition cost of DGC’s equity and is being

funded by debt and equity in the ratio 70/30. Both the Existing and

New Plant are owned by the Dhofar Generating Company (“DGC”),

which is the project company. The financial close was reached in

August 2015, and the New Plant is scheduled to be in operation

in early 2018.

ACQUISITION

Prior to the tendering process, the Existing Plant was the generating asset of the fully government-owned, vertically integrated Salalah generation, transmission and distribution system, operating under a concession regime with the government. The original private procurement project as conceived in 2001 included development of an OGCT generating asset and take-over of the transmission system under Dhofar Power Company (DPC) and Dhofar Generating Company (DGC) group. The power plant was commissioned in May 2003.

The original developer was Public Services Enterprise Group (PSEG) a US based diversified power company and the EPC contractor was Larsen & Toubro (L&T) one of the largest engi-neering companies and contractors in India. The concession arrangement was on a BOT for a period of 20 years until May 2023. Subsequently, the government entered into several dis-cussions with the stake-holders to restructure the arrangement to bring it in line with the IPP structure followed in the sector. In November 2006, PSEG divested its stake to a group of Malay-sian investors who in turn divested their interest to the Omani government by July 2009.

In January 2014, the generating asset was unbundled, the concession agreement was terminated and DGC entered into a PPA with OPWP. In line with Oman’s privatization objective for power generation, as part of the tendering process, the sponsors signed a share purchase agreement in April 2015 order to acquire 100% of the shares and shareholder loans in DGC, which was completed in June 2015 for a consideration amount equal to 60m OMR (USD 156m) plus an amount reflecting the net working capital and debt position of DGC. DGC also entered into a PPA amending agreement to reflect the technical and financial offer tendered by the sponsors.


Source: Shutterstock.



SALALAH II IPP—ACWA POWER (CONT.)

The acquisition of shares and shareholder loans in DGC was

financed by sponsors-backed Equity Bridge Loans (EBL) raised

at the level of the holding companies. The EBLs were arranged

individually by the sponsors to fund their respective share of the

acquisition. Lenders include Mizuho, Sumitomo Mitsui Banking

Corporation, Sumitomo Mitsui Trust Bank and Bank Muscat and

the financial close for the EBLs was achieved by May 2015, on

time for the completion of the SPA on 4 June 2015, and two

months prior to the financial close of the senior debt.

CONTRACTUAL STRUCTURE

The sponsors Mitsui, ACWA Power and DIDIC now own 45%, 45%

and 10% shares in DGC. Mitsui, one of the largest general trading

companies in Japan is a leading developer of power projects with

a gross capacity of 36GW across North and Central America,

East Asia, Australia, Japan as well as MENA region. ACWA Power

is a Saudi-based IPP developer with 17 GW of capacity (in con-

struction or operation) in the MENA and Sub-Saharan African

regions. DIDIC is one of the largest investment companies in Oman

with significant interests in the banking, insurance and other

diversified sectors.

The Omani Government has structured the IPP program with the

intention that the general public (particularly the Omani Public)

should have the opportunity to participate in projects developed

by private developers. Therefore, as a part of the IPP program, the

Sponsors are required to offer 40% of DGC’s issued shares to the

institutional and retail shareholders by no later than

the fourth anniversary of the SPA (June 2019) through a

listing on the Muscat Stock Market.

The EPC contract is a lump sum turnkey contract with

SEPCO III of China and key equipment from GE of USA.

The O&M contract is a fixed price contract including

long term gas turbine services and maintenance with

Dhofar O&M Company which is held by the Sponsors.

The O&M is fully subcontracted to NOMAC Oman, a

wholly owned subsidiary of ACWA Power.

The offtake of both the Existing and New Plants are

under the PPA with OPWP. As is the market standard in

Omani IPPs, the PPA term is the 15th anniversary of the

scheduled Commercial Operation Date. The natural gas

is procured by DGC under a gas supply agreement with

the Ministry of Oil and Gas.

A full suite of financing documents underpinned the long-term

limited recourse project financing, with the lenders also benefit-

ting from direct agreements with the Procurer (PPA Direct), the

gas supplier (NGSA Direct), the EPC Contractor (EPC Direct) and

the O&M Operator (O&M Direct).

FINANCING STRUCTURE

The senior loan is structured on a 100% uncovered, commercial

basis with a US Dollar tranche and Omani Riyal tranche. The

senior lenders include Standard Chartered Bank, KFW Ipex

Bank, Mizuho, Sumitomo Mitsui Banking Corporation, Sumitomo

Mitsui Trust Bank, Bank Dhofar and Bank Muscat. The loan has

a 17.5 year door-to-door tenor, including a construction period

of 2.5 years. The loan is structured to fully utilize the PPA term

and also includes a small balloon that is payable on maturity.

The amortization profile was sculpted to meet the requirement

of 1.2x flat DSCR.

The equity in the form of EBLs was drawn upfront, followed by

the drawdown of senior debt. As the acquisition price, exclusively

funded by the EBLs, exceeded the amount of equity required

to fund the project, such excess EBLs were prepaid at financial

close out of a drawdown of senior debt. During the construction

period of the New Plant, the Existing Plant will continue to

generate power and produce cash flows which are also used

to fund the construction in the base case.


FIGURE A: Salalah II IPP finance structure

Source: Debtwire, Pascal Martese, Leslie Abraham, ACWA Power.

DGC Existing Plant

New Plant

Holding Companies

Senior Lenders

Electricity Holding Company, govt of Oman entity

EBL Lenders

SEPCO III

Dhofar O&M Co.

GE

NOMAC Oman

EPC Contract

O&M Subcontract

LTSA

Oman Electricity Transmission Co.

Connection Agreement

Ministry of Housing

Usufruct Agreement

O&M Contract

OPWP

PPA

Ministry of Oil and Gas

Gas Supply Agreement

100%

45% 45%

SPA

Financing Agreements

Project Founders Agreement

10%

Mitsui DIDIC ACWA Power



SALALAH II IPP—ACWA POWER (CONT.)

Lenders derived comfort from the significant reliable operating

history of the Existing Plant, and the financing terms have no

requirement to back-stop such Existing Plant Revenues (EPR).

In order to diversify the pool of funds and improve their bargaining

positions, sponsors have also tapped into the Omani Riyal market.

The key challenge in utilizing Omani Riyal debt for long term funding

is that there is no mechanism in the market to fix interest rates

over the long term as there is no benchmark rate.

The sponsors have worked with the Oman Riyal lenders to put

in place an innovative structure that mitigates the risk of resetting

at higher level of rates than expected over the loan term, which

is acceptable to the USD Tranche lenders as well. This structure

enabled the sponsors to effectively tap into the Omani Riyal

market for long term financing without material concerns to

the USD co-lenders.

CONCLUSION

The Salalah II IPP represents an important milestone for the

sponsors. For OPWP, the transaction represents the fructifyca-

tion of the un-bundling and privatization objective for Dhofar

Generating Company that was ongoing since early 2000s.

ACWA Power has further solidified its footprint in Oman after

the acquisition of a majority stake in the 427 MW & 20 MIGD

Barka 1 IWPP in 2010, and the two water desalination expansions,

totalling 22.5 MIGD, contracted since then. This project also

represents Mitsui’s foray downstream into the Omani IPP sector.

The financial advisor for OPWP was Pricewaterhouse Coopers.

The legal advisors are DLA Piper, Allen & Overy and Shearman

and Sterling for OPWP, sponsors and lenders respectively.

Parsons Brinckerhoff Power acted as the lenders technical advisor

while Fitchner acted as the technical advisor for OPWP.



I n July 2015, Air Products of the US and ACWA Holding of Saudi Arabia achieved financial close of the largest project financing

of an air separation unit (ASU) project anywhere in the world.

The USD 2bn Jazan ASU project was one of the most important project financings of 2015 and ground breaking in a number of areas, not least because it was the first ever ASU to be financed exclusively on an Islamic finance basis. Leroy LEVY, Partner, King & Spalding, provides an overview of the deal.

JAZAN ECONOMIC CITY

The Jazan Economic City (JEC) is the home of the ASU project. The economic city is located on a 100 sq km site 60km northwest of Jazan city on the Red Sea coast. The industrial cities in Jubail and Yanbu have historically been the two major industrial power houses in the Kingdom of Saudi Arabia. These are world scale industrial cities which have been a magnate for domestic and international investment for many decades. With the drive towards mass employment and diversification of the economy, the govern-ment is now broadening the geographical spread of its industrial base. This has taken root in the form of Ras Al-Khair in the east (also known as the Mineral Industrial City), Waad Al-Shamal in the north close to the border with Jordan, various smaller industrial centres operated by Modon, the King Abdullah Economic City and now JEC. Of all of these, JEC is arguably the most interesting. The anchor investor is Saudi Aramco and with its multi-billion dollar investments, JEC is contributing towards the transformation of the Saudi economy.

The ASU project is a captive industrial gases plant providing feed-stock to Saudi Aramco’s 400,000 barrel a day oil refinery and a 4000 MW integrated gasification combined cycle power plant (IGCC). To provide an indication of the scale of the overall under-taking, the site of the refinery and IGCC covers some 16 sq km of land, seventy thousand people are expected to work on the site and the budget for the overall complex has been reported to range from anything between US$8.5 billion and US$20 billion. This is a highly complex project, located in one of the most remote parts of the Arabian peninsula, close to the Yemen border.

The diagram (Figure B, right) sets out a high level configuration of the complex.

UNDERSTANDING THE TECHNOLOGY

In the world of project finance, air separation unit projects are unusual. As far as the Middle East is concerned, there had never previously been a major project financing of an air separation unit. Previous project financings had been limited to the power, water, petrochemicals and metals sectors. In that regard, it was critical for the lenders to understand the project in order to allocate risk appropriately.

At the heart of the due diligence process was an understanding of the technical features of the IGCC and refinery and how they related to the ASU. The intention was to build an IGCC that was fully integrated with the refinery so as to optimize power, steam and hydrogen generation. The hydrogen, steam and electricity to be produced by the IGCC is intended to be used to support the operation of the refinery. The main feedstock to the IGCC was vacuum residue produced in the refinery plus imported high sulfur fuel oil. The objective was to gasify the two feeds to produce syngas. Once produced, the syngas is to be cooled, cleaned and forwarded to the gas turbines inside the power block to be combusted to generate power and steam.

The design feed capacity of the IGCC was expected to be about 110MBD of vacuum residue and/or heavy sulfur fuel oil with anticipated exports of approximately 2.4GW of net power to the national grid. The principle objective of the ASU was to produce gaseous oxygen (GOX) at distinct pressure levels for both the gasification unit and the IGCC sulfur recovery unit (SRU). In addition, the ASU was intended to generate gaseous nitrogen (GAN) at distinct pressure levels for the IGCC, refinery and marine terminal. Liquid oxygen (LOX) and liquid nitrogen (LIN) was also to be produced and stored to serve as a primary back-up for the ASU, and to provide additional gaseous oxygen and nitrogen for use during times of peak demand.

The ASU uses cryogenic technology. This is a process that takes large quantities of air from the atmosphere which are compressed, cooled and liquefied. There is then a process of distillation where the air is separated into its major component parts. Impurities are removed and oxygen and nitrogen are then made available to be used as feedstock for the refinery and power plant.


FIGURE B: Jazan Refinery Complex configuration

Source: Debtwire, Leroy Levy, King & Spalding.

JAZAN INDUSTRIAL GASES — KING & SPALDING

Refined products, gasoline, diesel etc.

JAZAN REFINERY

Vacuum Residue/HSFO

IGCC

H2 and Steam

Power

Crude OiI

ASU

Nitrogen

Oxygen



Oxygen is used to feed the IGCC and nitrogen is used to feed both the IGCC and refinery. In a typical large scale air separation unit, there are multiple trains, not dissimilar in concept to process plants found in other industrial sectors. The process is illustrated in the diagram (Figure C) below.

Reduced to its bare bones, the process can be split into two key categories. The “warm end” consisting of equipment required to clean and pressurize the air prior to processing. The “cold end” or “cold box” consisting of the heat exchangers and distillation columns needed to separate the air into product streams and then purify those streams. The equipment at the cold end operate at low temperatures and are sealed in cold boxes.

THE COMMERCIAL STRUCTURE AND BANKABILITY

The key objective for Saudi Aramco was to outsource the con-struction and operation of the ASU to the private sector. This was achieved by means of adopting a build own operate (BOO) structure, whereby a group of private sector developers form a special purpose vehicle (ASUCo) that raises finance for the con-struction of the project and takes responsibility for construction activities, in accordance with an agreed timeline and specification, and the operation and maintenance of the project.

The real challenge was to structure the project in such a way that the objectives of Saudi Aramco would be met, the investment would be attractive to private sector developers and the deal would be bankable for the domestic, regional and international financiers lending into the project.

This was achieved through an off-take agreement called the Nitrogen and Oxygen Supply Agreement (NOSA). Knowing that the success of the project was entirely dependent on the willing-ness of the banks to lend, Saudi Aramco took the decision to structure the NOSA in a way that bore significant similarities to a power purchase agreement (PPA), even though the sectors and technologies could not have been more different.

This decision ultimately paid off as the familiarity with the PPA structure and the adoption of a risk allocation broadly typical of a PPA provided the lenders with the comfort that they needed to ensure that the major risks such as payment delays, termination and force majeure would be dealt with in a conventional and familiar way in the context of international project finance principles.

KEY ASU ISSUES

Although there were many similarities with an independent power project, there were some substantial differences. For example, the project company is required to provide net depend- able capacity (NDC). This is conceptually similar to a power plant, although NDC in an industrial gases project is measured in tons per day. The ASU plant is therefore required to be designed to be capable of providing contracted capacity and deliver products at contracted capacity rates with an availability of not less than a certain percentage threshold. The products that the plant must be capable of providing must conform to a certain specification and pressure.


FIGURE C: ASU Process

Source: Debtwire, Leroy Levy, King & Spalding.

JAZAN INDUSTRIAL GASES — KING & SPALDING (CONT.)

Liquid Nitrogen

Liquid Oxygen

Air

Nitrogen Gas

Oxygen Gas

Compressor Pre-treatment Heat Exchanger Distillation

Cold Box



An inability to deliver to specification or pressure would amount

to an availability failure, even if the relevant quantity of product

is capable of being delivered. Although the requirement to deliver

according to specification is not a novel concept in the project

finance world, the idea of a pressure requirement is not always

seen. If Saudi Aramco draws more product than the plant is able

to supply, the plant will continue to supply product, but at a

declining pressure. This declining pressure will eventually lead

to the IGCC tripping with serious consequences to the IGCC

and refinery.

Because the ASU plant provides feedstock to the refinery and

IGCC, the success of the refinery and IGCC is completely dependent

on the performance of the ASU plant. Availability was therefore

a major issue for the project and the key objective was to ensure

that there were sufficient contractual mechanisms to guarantee

that availability remains high. This was achieved in a number of

different ways including creating the disincentives for low avail-

ability listed in Table 2, to the right.

CONCLUSION

Being a first of its kind, there was significant complexity involved

in negotiating the risk allocation. However, now that the deal

has closed, the expectation is that it will serve as a precedent

for future project financings of industrial gases projects in Saudi

Arabia and the wider Middle East.

The question is whether the envelope will be pushed out further

in the near future and the transaction used as a precedent not

just for greenfield projects, but also brownfield projects. There

are many industrial gases projects that have been procured on

balance sheet through an EPC contract and which are currently

operating. Conceptually, there are no fundamental reasons why

these projects cannot be acquired by the private sector under a

concession where the private sector finances any improvement

or expansion works and provides industrial gases at a lower price.

It is yet to be seen whether there is appetite in the market for this.

However, with the current drive throughout the Middle East for

economic reform and energy efficiency, such deals may begin to

come to market in the not too distant future.

This article is reprinted from a King & Spalding publication

with permission from the author.

JAZAN INDUSTRIAL GASES — KING & SPALDING (CONT.)

TABLE 2: Availability risk scenarios

Risk Penalty

Pressure Drops

If Saudi Aramco draws product

from the ASU plant within the

contracted capacity and ASUCo

is not able to supply such

product, there will be a drop

in pressure (a “Pressure Drop”).

This will contractually trigger

a Pressure Drop penalty

on ASUCo.

Back Up Inventories

To ensure ASUCo’s ability to

make available the contracted

capacity of each type of product,

ASUCo must provide certain

levels of dedicated back-up

inventory. A failure to do so

will trigger a penalty.

Minimum Replenishment

Rate

If the back-up inventories

are not replenished

in accordance with

a given rate, a penalty

will be payable.

Consistent Availability Shortfalls

An availability shortfall can be

triggered in one of many ways,

for example, a Pressure Drop,

product that does not conform

to the relevant specification

and shortfall quantities.

Where these failures repeatedly

occur, a termination right

is triggered. The objective

is not to terminate the NOSA,

but create a disincentive

for poor performance.



PROJECT NAME: Bahrain LNG

COUNTRY: Bahrain

STAGE: Preferred bidder selected, financial close expected

CAPACITY: Initial capacity of 400m cubic feet per day, expandable to 800m.

PROJECT TYPE: Liquefied Natural Gas project

EXPECTED PROJECT COST: USD 655m

TENDERING AUTHORITY: NOGA and nogaholding

COMMENTS: In March, Bahrain LNG was reported to be holding talks with banks and export credit agencies (ECA) for the financing required to build a USD 655m receiving and regasification terminal. Bahrain LNG, a joint venture between nogaholding (30%), Teekay LNG (30%), Samsung (20%) and by Gulf Investment Corporation (20%), initially approached the market in September 2014 for the 20-year project financing, as reported by Debtwire, but had re-approached the market earlier this year. The National Oil & Gas Authority (NOGA) and nogaholding awarded the build-own-operate-transfer (BOOT) contract to the consortium on 2 December 2015. The contractors are being advised by Societe Generale, as reported. The project will be owned and operated under a 20-year agreement -- commencing 15 July 2018 -- by Manama-based NOGA acting as the off-taker, and nogaholding charged with the development of the terminal.

London-based Verus Partners was hired as financial advisor for the project while Norton Rose Fulbright is on the legal side. The front-end engineering design (FEED) mandate was awarded to Worley Parsons, while Houston-based Galway Group is consulting for nogaholding on the overall project.

The project, to be located in the Hidd Industrial area, will feature a floating storage unit, an offshore LNG receiving jetty and breakwater, a regasification platform, subsea gas pipelines from the platform to shore, an onshore gas receiving facility and nitrogen production facility. The LNG terminal is expected to be fully operational in the third quarter of 2017, with an initial capacity of 400m cubic feet per day, expandable to 800m.

LATEST DEBTWIRE OPP: 2195447

PROJECT NAME: BAPCO refinery upgrade

COUNTRY: Bahrain

STAGE: Expected to seek debt towards year end

PROJECT TYPE: Refinery upgrade

EXPECTED PROJECT COST: USD 5bn to USD 6bn

PROJECT SPONSOR: Bahrain Petroleum Company

COMMENTS: Bahrain Petroleum Company (BAPCO) will likely seek

debt towards the end of this year to fund modernisation work worth

between USD 5bn and USD 6bn. BAPCO had hired BNP Paribas and

HSBC for the first phase of the project, which comprised the front-end

engineering and design (FEED). Bids from EPC contractors are due on

5 October, according to press reports.

Debtwire reported in December 2014 that the Awali-based oil explorer

was looking for a financial advisor for the subsequent phases and was

planning to approach the market in 3Q15 to raise the multi-billion dollar

debt required for the upgrade. The plans were paused in light of the oil

crisis which impacted the small island monarchy of Bahrain, but are

expected to be revived later this year, a source told Debtwire.


PROJECT NAME: Al Dur 2 IWPP

COUNTRY: Bahrain

STAGE: Pre-tendering

CAPACITY: 1500MW

PROJECT TYPE: Independent Water and Power Producer

TENDERING AUTHORITY: Bahrain’s Electricity & Water Authority

COMMENTS: The Electricity & Water Authority (EWA) invited expres-

sions of interest (EOI) for a financial advisory role for the 1500MW

Al Dur 2 project in August 2015, according to local press reports.

The only bidder to submit a proposal was HSBC, according to a March

2016 report. The lender submitted a price of BD1.2m. However,

a source familiar told Debtwire that EWA is potentially considering

approaching the Big 4 consultancy firms to pitch for the role in order

to have a range of bids to choose from.

LATEST DEBTWIRE OPP: No previous opp – information compiled from

public sources and a source familiar with the situation.

DEALS IN BAHRAIN (YET TO SIGN)

The Bahrain Petroleum Company.

https://www.debtwire.com/intelligence/view/1869290





PROJECT NAME: Al-Zour North Phase 2 IWPP

COUNTRY: Kuwait

STAGE: RFP responses expected

CAPACITY: 1800 MW; 102MIGD

PROJECT TYPE: Combined cycle gas turbine project

EXPECTED PROJECT COST: USD 3.3bn

EXPECTED DEBT SIZE: USD 1.5bn to USD 2bn

TENDERING AUTHORITY: Kuwait Authority for Partnership Projects

COMMENTS: Following a number of delays, replies from qualified consortia are now expected in late-June. The project will likely be financed with an 80:20 debt/equity split. The Ministry of Electricity and Water will sign a 25-year offtake agreement with the winning consortium. The offtaker’s website lists Abengoa; ACWA Power/Al Mulla Group Holding Company; Korea Electric Power Corporation (KEPCO); Marubeni Corporation/Fouad Al Ghanim & Sons Group; Mitsubishi Corporation; Mitsui & Co; Sumitomo Corporation/Osaka Gas Co/National Industries Group Holding as qualified to apply to the RFP. KAPP has appointed BNP Paribas as financial advisor, Chadbourne as legal advisor, and Lahmeyer International as technical advisor for the Al-Zour North Phase 2 IWPP.


PROJECT NAME: Umm Al Hayman Wastewater Project

COUNTRY: Kuwait


CAPACITY: 500,000 cubic metres/day and an option to expand the capacity by an additional 200,000 cubic metres/day

PROJECT TYPE: Wastewater system and associated wastewater trans-mission and sewage effluent networks.


COMMENTS: According to a project document, Umm Al Hayman Waste-water Project has prequalified the following consortia: WTE Wassertechnik GmbH/International Financial Advisors; Kharafi National KSC/Alfanar Company; Marubeni Corporation; Ali Alghanim Sons General Trading Co WLL; Beijing Enterprises Water Group/Doosan Heavy Indus-tries & Construction Ltw/KCC Engineering & Contracting Co; Degremont SAS/Itochu Corporation/Abdullah Hamad Al Sagar and Brothers.

KAPP has appointed HSBC as financial advisor and Norton Rose Fulbright as legal advisor for the Umm Al Hayman project. The facility will be constructed under a 27.5-year Build-Operate-Transfer (BOT) agreement, with a two-and-a-half year construction period followed by a 25-year operations and maintenance period.


PROJECT NAME: Al Abdaliyah Integrated Solar Combined Cycle Power Project

COUNTRY: Kuwait


CAPACITY: 280MW, at least 60MW of which to be solar

PROJECT TYPE: Combined cycle Power Project


COMMENTS: The due date for submissions to the RFP for the 280MW Al Abdaliyah Integrated Solar Combined Cycle Power Project had been extended to the end of April or start of May, however further delays are expected. A 25-year offtake agreement will be agreed with the Ministry of Electricity and Water. KAPP has appointed HSBC as financial advisor and Texas-headquartered Vinson & Elkins as legal advisor for the project.

According to a project document, the consortia prequalified for the project are: ACWAPower/Acciona Energia SA/Al Mulla Group Holding Company; EDF International SAS/ToyotaTsusho Corporation/TSK Electronica y Electricidad SA/Abdullah Al-Hamad Al-Sagar & Brothers Company; ENGIE/Elecnor; JGC Corporation; Korea Electric Power Corporation (KEPCO)/KharafiNational KSCC/Aries Ingenieria y Sistemas SA; RWE AG; Sojitz Corporation/Abegoa SA/FouadAlghanim & Sons Group of Companies.


PROJECT NAME: Al Khairan IWPP

COUNTRY: Kuwait

STAGE: RFP to be issued

CAPACITY: 1800MW, 125 MIGD

PROJECT TYPE: Independent Water and Power Producer


COMMENTS: Al Khairan IWPP will have a minimum power capacity of 1,800MW and 125 MIGD desalination capacity and will operate under a 25-year offtake agreement with MEW. KAPP has appointed BNP Paribas as financial advisor, Chadbourne as legal advisor, and Lahmeyer International as technical advisor for the Al Khairan IWPP.

Prequalified consortia for the Al Khairan IWPP are Abengoa; ACWA Power/Al Mulla Group Holding Company; Korea Electric Power Cor-poration (KEPCO); Marubeni Corporation/Fouad Al Ghanim & Sons Group; Mitsubishi Corporation; Mitsui & Co; Sumitomo Corporation.


DEALS IN KUWAIT (YET TO SIGN)

The City of Kuwait.



http://www.ptb.gov.kw/Admin/DynamicFile.aspx?PHName=DownloadFile&PageID=4975&Published=1





PROJECT NAME: Kabd Municipal Solid Waste Treatment Facility

COUNTRY: Kuwait


PROJECT TYPE & CAPACITY: Treat some 3,275 tonnes of municipal solid waste per day using waste-to-energy technology to generate electricity.


COMMENTS: Submissions to the RFP for the Kabd Municipal Solid Waste Treatment Facility were due at the end of March, however market participants expected this to be delayed. KAPP has appointed PwC as financial advisor and Ashurst as legal advisor for the project.

The following consortia are prequalified for the project: Constructions Industrielles de LaMéditerranée (CNIM)/Gulf Investment Corporation (GIC)/Al Mulla Group; EVN Umweltholdingund Betriebs GmbH/International Financial Advisors (IFA)/KCC Engineering & Con-tracting Co (KCCEC)/Steinmuller Babcock Environment GmbH (SBE); URBASER SA/Babcock & Wilcox/Veolia Proprete SAS/National Cleaning Co (NCC); Suez Environnment SAS/Itochu Corporation/Kharafi National KSC; FCC Medio Ambiente SA/ACWA Power/Beatona/FouadAlghanim and Sons General Trading and Contracting Company (FASGTC).


PROJECT NAME: Kuwait National Petroleum Company (KNPC) Clean Fuels Project

COUNTRY: Kuwait

STAGE: Debt RFP for Export Credit Agency tranche of debt expected

PROJECT TYPE: Increase capacity at Al Zour plant to 615,000 barrels per day and meet new clean fuels emissions standards at Mina Abdullah and Al-Ahmadi refineries.

PROJECT SPONSOR: KNPC

COMMENTS: KNPC was expected at end-May to launch a request for proposals for the export credit agency (ECA) debt portion of its USD 10bn fund-raising shortly. The financing will comprise direct loans from ECAs with the rest consisting of ECA-covered debt from commercial banks, exceeding USD 4bn .

In April KNPC signed a 10-year KWD 1.2bn (USD 3.98bn) loan, split between Islamic and conventional tranches. The borrower was back in February talking a margin of 100bps for the facilities. The Al Ahmadi-based company was considering two commercial bank facilities (one US dollar-denominated and one in Kuwaiti dinars), an export credit agency (ECA) financing and a piece extended by the Japan Bank for International Cooperation (JBIC). National Bank of Kuwait is advising the company, while HSBC has been appointed as the ECA coordinator. In November, KNPC asked banks to refresh their bids for the commercial portion of the debt after they had submitted their pitches on 17 May in response to the company’s RFP.

The company was meant to get back to interested banks at the end of August, but then postponed twice, first to the middle of September and then to the beginning of November.

The quasi-sovereign was likely to opt for a seven-year tenor for the commercial portion of the required funds, and was in September contemplating an all-in price of around 150bps over Libor, citing

Kuwait Foreign Petroleum Exploration Company (Kufpec) as a close comparable. KNPC sought advice in March 2014 for some USD 18bn needed to upgrade three of its refineries, a third of which was to be backed by cash.

The company then sent an RFP in January of last year to a select number of banks for the ECA portion of the planned debt. This was followed by a non-disclosure agreement (NDA) to banks in February for the USD 10bn-USD 12bn of bank debt required.

KNPC plans to raise as much as possible from the ECA and take the rest from commercial lenders.

In 2014, KNPC awarded contracts worth USD 12bn to three consortia, one led by UK-based Petrofac, one by Texas-based Fluor and a third headed by Japanese engineering group JGC Corp. The JGC contract was worth USD 4.8bn.


PROJECT NAME: Kuwait Petroleum Corporation

COUNTRY: Kuwait

STAGE: RFP for Financial Advisor issued

PROJECT TYPE: Vessels and regasification projects for Kuwait Oil Tanker Company

PROJECT SPONSOR: KPC

COMMENTS: Kuwait Petroleum Corporation (KPC) issued in early May a request for proposals (RFP) for a financial advisory role for a project that will be developed by one of its subsidiaries, two sources familiar with the situation told Debtwire. The subsidiary is Kuwait Oil Tanker Company, according to one of the sources, who added that the financing is needed for various vessels and a regasification project. However the subsidiary that the project is conducted through could change down the line, the source said.

The company is also contemplating issuing a bond via one of its sub-sidiaries, according to the second source familiar with the situation.

KPC CEO Nizar Al-Adsani announced in January that the company was looking at different financing options to fund its planned USD 100bn expenditure over the next five years. Funding could be sought from export credit agencies (ECAs), commercial banks, and local and inter-national financial institutions, he said. Corporate loans, project financing, reserve-based lending and cash flow-based debt are all on the table. KPC, the country’s national oil company, is also studying other ways of raising capital, including conventional bonds, sukuk, and project bonds, continued Al-Adsani.

In October, KPC signed a MoU with Ksure and Export-Import Bank of Korea, according to which the quasi-sovereign will secure funds worth around USD 12bn to finance the upstream, downstream, petrochem-ical and transportation activities of the group and its subsidiaries. Kuwait Petroleum Corporation’s 2030 plan envisages the launching of several mega projects and investing in refineries and petrochemicals outside Kuwait.

The building of the Al-Zour refinery and the Clean Fuel Project make part of the overall strategy, which also envisages increasing daily crude oil production to 4m barrels per day by 2020.


DEALS IN KUWAIT (YET TO SIGN)






PROJECT NAME: Salalah, Sharqiyah and Duqm IWPs

COUNTRY: Oman

STAGE: Tendering Salalah and Sharqiyah IWPs — RFP responses due August

CAPACITY: 240,000 cubic metres/day combined capacity

PROJECT TYPE: Reverse osmosis desalination plants

EXPECTED PROJECT COST: Between USD 100m to USD 150m each for Salalah and Sharqiyah IWPs

TENDERING AUTHORITY: Oman Power & Water Procurement Co.

COMMENTS: OPWP will receive responses in August to a request for proposals for its Salalah IWP and Sharqiyah IWP projects. The Salalah IWP is planned as a 100,000 cubic metres/day reverse osmosis plant located near Taqah, while the Sharqiyah IWP is expected to have an 80,000 cubic metres/day capacity. The two projects are expected to cost somewhere in the region of USD 100m to USD 150m each. The project sponsors will agree a 20-year offtake agreement with OPWP.

A group of consortia were prequalified for the three desalination projects in Oman earlier this year, the Salalah and Sharqiyah IWPs as well as the Duqm IWP. However, the proposed 60,000 cubic metres/day Duqm IWP project is less advanced than the other two. The consortia pre-qualified for the three projects are: Abengoa/Modern Channel Ser-vices; GSInima; Hyflux; Sembcorp; Marubeni; JGC; Sojitz Corporation; ACWA Power/Veolia Middle East S.A.S.; Dhofar International Development & Invest-ment Company; Tedagua; DegremontS.A.S./Itochu Corporation.


PROJECT NAME: Sohar and Ibri 3 IPPs

COUNTRY: Oman

STAGE: Preferred bidder selected – financial close expected 3Q16

CAPACITY: 3219MW

PROJECT TYPE: Natural gas-fired combined cycle power plants


EXPECTED DEBT SIZE: USD 1.35bn


COMMENTS: Oman's Sohar and Ibri Independent Power Projects (IPP) are expected to sign a USD 1.35bn 15-year-plus-construction project finance loan in 3Q16. The finance is expected to have a 17-year door-to-door maturity, comprising two-year construction period and a 15-year power purchase agreement. Bank Dhofar, Bank Muscat, Bank of Tokyo Mitsubishi (BTMU), BNP Paribas, KfW, Mitsubishi UFJ, Mizuho, Standard Chartered, Sumitomo Mitsui Banking Corporation (SMBC) and Sumitomo Mitsui Trust Bank are expected to provide the loan. The projects, which were tendered jointly, are sponsored on a build, own, operate (BOO) basis by Mitsui & Co. with a 50.1% stake, Acwa Power with a 44.9% stake and Dhofar International Development & Investment Holding (DIDIC) with the remaining 5% stake. ACWA Power typically self-arranges its project finance arrangements.


PROJECT NAME: Muscat IPP

COUNTRY: Oman

STAGE: Pre-tendering

CAPACITY: 800MW

PROJECT TYPE: Gas-fired IPP


COMMENTS: OPWP plans to tender for an 800MW gas-fired IPP in the Muscat region, according to local press reports. The prequalification process will begin before the end of 2016, and operations are expected to commence in 2021.

LATEST DEBTWIRE OPP: No previous opp—intel compiled from public sources.

PROJECT NAME: Salalah Methanol Company Ammonia Expansion

COUNTRY: Oman

STAGE: EPC contractor to be chosen

PROJECT TYPE: Ammonia expansion


EXPECTED DEBT REQUIREMENT: USD 650m to USD 700m

PROJECT LEAD SPONSOR: Oman Oil Company

COMMENTS: OOC is considering an ammonia expansion project by the Salalah Methanol Company (SMC). Incorporated in 2006, SMC is owned by OOC (90%) and Takamul Investment Company (Takamul) (10%). Standard Chartered is acting as financial advisor for the SMC expansion.

The company plans to build a 1000 MPTD Ammonia plant using purge gas from the plant’s existing methanol at the current Salalah Methanol site, according to a company website.

The expansion project is expected to cost around USD 400m, however the company is expected to roll up a refinancing of the existing project finance debt with the expansion costs into a single transaction sized between USD 650m and USD 700m, a banker familiar with the situation told Debtwire.

Samsung Engineering, Daelim Industrial, Hanwa Engineering & Con-struction, GS Engineering & Construction, L&T Hydrocarbon Engneering, CTCI Corporation, SNC-Lavalin, and Tecnicas Reunidas were prequalified for the contract for the EPC contract, according to press reports.


DEALS IN OMAN (YET TO SIGN)



link:%20http://timesofoman.com/article/81573/Oman/Government/Oman-plans-to-develop-800MW-power-project-in-Muscat

link:%20http://timesofoman.com/article/81573/Oman/Government/Oman-plans-to-develop-800MW-power-project-in-Muscat




PROJECT NAME: OMPET JV

COUNTRY: Oman

STAGE: EPC contractor to be chosen

PROJECT TYPE: PTA project

EXPECTED PROJECT COST: Up to USD 1bn

PROJECT LEAD SPONSOR: Oman Oil Company

COMMENTS: Oman Oil Company is considering a 1.1m tonne per year PTA project being developed by Oman International Petrochemical Industry Company (Ompet), a JV held by Oman Oil Company (50%), LG International (30%) and Takamul (20%). Originally slated as a joint PTA and PET project to be based in the Sohar Port Industrial Zone, the PET element of the project could potentially be dropped from the plan.

The company has received bids from EPC contractors, and as of April, was expected to award a contract shortly. The plant is expected to be funded through a project finance facility. The company has appointed SMBC as financial advisor for the project. Ompet is aiming to commence operations and sales in 2017, according to a company website. The feedstock for the PTA plant is paraxylene which will be supplied from Orpic Aromatics Plant.


PROJECT NAME: Oman Gas Company LPG Project

COUNTRY: Oman

PROJECT TYPE: Liquefied Petroleum Gas Processing Plant

EXPECTED PROJECT COST: Up to USD 500m

PROJECT LEAD SPONSOR: Oman Gas Company

COMMENTS: Bankers are gearing up for the Oman Gas Company’s (OGC) new liquefied petroleum gas processing plant. Sources expect that the deal could hit bankers’ desks around 3Q16. A newswire report, citing CEO Yousuf Al Ojaili, in April 2014 suggested the project would cost some USD 500m, with around 60% of that funded in debt by local and international banks. However the total project cost being discussed now is less than that, sources said. The project was targeted to be operational by 2018.


PROJECT NAME: Sohar Bitumen Refinery Project

COUNTRY: Oman

PROJECT TYPE: Bitumen Refinery


PROJECT LEAD SPONSOR: ORPIC

COMMENTS: Oman Oil Refineries and Petroleum Industries Company’s (Orpic), owned jointly by OOC and the Sultanate of Oman, is contem-plating a Bitumen Refinery at Sohar, part of Orpic’s Sohar Refinery Improvement Project (SRIP). A source told Debtwire that the market expects the company would start approaching banks in 2H16 - possibly around July or August. The project is expected to cost around USD 800m. The project could seek a joint venture partner down the line, however there are no private sponsors in place at the moment.

In October 2015, India’s McNally Bharat Engineering Company announced that a 50/50 special purpose vehicle (SPV) with Oman’s EMC Group had won a USD 315m contract from Sohar Bitumen to build the refinery. The delivery period for the project is 24-months from the date of receipt of advance from the customer, according to the announcement.

LATEST OPP: 2220107

PROJECT NAME: Duqm Refinery

COUNTRY: Oman

PROJECT TYPE: Oil refinery

EXPECTED PROJECT COST: USD 6bn

PROJECT LEAD SPONSORS: Oman Oil Company and IPIC

COMMENTS: Duqm Refinery and Petrochemical Industries Company, a joint venture between Oman Oil Company (OOC) and International Petroleum Investment Company (IPIC), is expected to push financing talks to early 2017 for its USD 6bn plant. Credit Agricole is acting as financial advisor to the project.

In 2009, IPIC entered into an agreement with OOC to assess the feasibility of building an oil refinery in the town of Duqm. The venture will construct a 900-hectare site with a processing capacity of about 230,000 barrels per day to process a mixture of Abu Dhabi, Omani and other UAE crude oil, according to materials on IPIC’s website.

LATEST OPP: 2220107

DEALS IN OMAN (YET TO SIGN)







PROJECT NAME: Sohar IWP

COUNTRY: Oman

STAGE: Signed – April 2016

CAPACITY: 250,000 cubic metres per day

PROJECT TYPE: Desalination IWP

PROJECT COST: USD 259.8m-equivalent (OMR 100m)

DEBT SIZE: USD 181.8m-equivalent (OMR 70m)


COMMENTS: Sohar Independent Water Project (IWP) was awarded to a consortium consisting of Sacyr SA subsidiary Valoriza Agua (51%), Oman Brunei Investment Company (25%) and Sogex Oman (24%) by OPWP. The project company will be known as Myah Gulf Oman Desalination Company. The project signed in April an OMR 70m (USD 260m) project finance facility.

The debt carries a flat 4.5% margin until the project reaches commercial production, at which point the margin will be reset with reference to the weighted average deposit rate. There is a 7.5% cap on the rate to which the margin can increase. The facility carries 1.25% upfront fees and a 50bps commitment fee per annum. The loan was provided by Bank Dhofar, Bank Muscat, Bank Sohar and Oman Arab Bank.

The project sponsors agreed a 20-year offtake agreement with OPWP. Valoriza appointed Deloitte as financial advisor for the project. OPWP appointed Project Financing Solutions as financial advisor, Fichtner as technical advisor and DLA Piper as legal advisor, according to a report in Infra News, part of the Mergermarket Group. Operations are expected to begin in 2018.


PROJECT NAME: Barka IWP

COUNTRY: Oman

STAGE: Signed—April 2016

CAPACITY: 281,000 cubic metres per day

PROJECT TYPE: Desalination IWP

DEBT SIZE: Around USD 300m

PROJECT LEAD SPONSORS: Oman Power & Water Procurement Co.

COMMENTS: Barka Independent Water Project (IWP) signed a project finance loan of around USD 300m last month.

The facility was expected to be provided by Bank of Tokyo Mitsubishi, Credit Agricole, KfW and Sumitomo Mitsui Banking Corporation. The development of the plant was awarded by Oman Power and Water Procurement Company (OPWP) to a consortium comprising Itochu, Degremont and WJ Towell, as reported. The sponsors agreed a 20-year offtake agreement with OPWP.

LATEST OPP: 2231278

DEALS IN OMAN (SIGNED)

The Oman Power and Water Procurement Company.





PROJECT NAME: Facility D (Umm Al Houl) IWPP

COUNTRY: Qatar

STAGE: Signed - January 2016

CAPACITY: 2400MW / 590,000 cubic meters per day

PROJECT TYPE: Natural gas-fired combined cycle power plant

PROJECT COST: USD 3.15bn

DEBT SIZE: USD 2.538bn

OFFTAKER: Qatar General Electricity & Water Corporation

COMMENTS: Project company Umm Al Houl Power (UHP) is held by Mitsubishi Corporation, Qatar Petroleum, Qatar Electricity & Water Company, Qatar Foundation for Education, Science and Community Development and Tokyo Electric Power Company.

Lenders to the project included a loan of USD 1.269bn from Japan Bank for International Cooperation as well as commercial bank partici-pation from Bank of Tokyo-Mitsubishi, Mizuho Bank, Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ Trust and Banking Corporation, Sumitomo Mitsui Trust Bank, the Norinchukin Bank, Qatar National Bank and KfW IPEX-Bank. The plant is being built on a Build Own Operate Transfer basis, with a 25-year offtake agreement with Qatar General Electricity & Water Corporation.


DEALS IN QATAR (SIGNED)

Qatar General Electricity & Water Corporation.




PROJECT NAME: Fadhili IPP

COUNTRY: Saudi Arabia

STAGE: Tendering - Engie expected to win bid

CAPACITY: 1300MW to 1600MW

PROJECT TYPE: Cogeneration plant

EXPECTED PROJECT COST: USD 1.2bn to USD 1.5bn

TENDERING AUTHORITY: Saudi Electricity Company / Saudi Aramco

COMMENTS: Greenfield cogeneration plant in Saudi Arabia with 20-year power and steam offtake agreements with the Saudi Electricity Company and Saudi Aramco respectively. As of end-March, France-based Engie was expected to be awarded preferred bidder status, however no formal award had been made. The project will be held 40% by the winning bidder, with 60% split between Saudi Electricity Company and Saudi Aramco, according to the SEC website. Commercial operations are expected to commence in 2020.


PROJECT NAME: Rafha & Al Jouf solar PV IPPs; Umiju wind IPP


STAGE: Expressions of interest due

CAPACITY: 110MW to 150MW combined

PROJECT TYPE: Solar PV and Wind IPPs

TENDERING AUTHORITY: Saudi Electricity Company

COMMENTS: Saudi Electricity Company has issued a request for expres-sions of interest for the 50MW Rafha and Al Jouf solar PV projects, with responses due from potential developers on June 20. SECo was also reportedly contemplating a wind IPP with capacity between 10MW and 50MW located in Umiju. HSBC is acting as financial advisor, DLA Piper is acting as legal advisor and DNV GL is acting as technical consultant for the solar PV projects.

LATEST DEBTWIRE OPP: No previous opp—intel compiled by Debtwire from a source familiar and public sources.

PROJECT NAME: Rabigh 1 IPP refinancing


STAGE: In documentation, expected to sign imminently

CAPACITY: 1204MW

PROJECT TYPE: Steam Turbine Power Plant

EXPECTED PROJECT COST: More than USD 1.925bn-equivalent

OFFTAKER: Saudi Electricity Company

COMMENTS: The power project’s equity is 40% held by ACWA Power, 40% by the Korean Electric Power Company (KEPCO) and 20% by Saudi Electricity Company (SECo) via the special purpose vehicle Rabigh Electricity Company. The Saudi riyal is expected to carry a margin of Saibor+ 165bps for seven years, before ratcheting to Saibor+ 225bps for the remaining 10 years. The refinancing loan will mature six months prior to the expiry of the power purchase agreement. The refinancing will also comprise a US dollar-denominated tranche, sources said, adding that the final facility may be larger than the original financing. Local banks expected to participate in the deal include Alinma Bank, Al Rajhi Bank, ANB, National Commercial Bank, SABB, Samba and Banque Saudi Fransi.

The original project finance agreement was signed in July 2009, with a total project cost of around USD 2.5bn-equivalent. The plant achieved commercial operations in 2Q13. The financing was split between USD 1.925bn equivalent of 20-year debt with a 15% balloon payment and USD 575m equivalent in equity, according to press reports. The local banks provided a USD 500m equity bridge loan.

The local banks participating were Alinma Bank, Al Rajhi Bank, National Commercial Bank, SABB, Samba and Banque Saudi Fransi, according to a separate press report. International banks participating in the facility were Bank of China, CALYON, HSBC, Standard Chartered and The Export-Import Bank of Korea.

SECo agreed a 20 year offtake agreement with the project company. The project was the first IPP in the GCC to be undertaken without a government guarantee.


DEALS IN SAUDI ARABIA (YET TO SIGN)

A Saudi Electricity Company plant.





PROJECT NAME: Yanbu Aramco Sinopec Refinery (Yasref) refinancing


STAGE: Signed – April 2016

CAPACITY: 400,000 bbl/day

PROJECT TYPE: Full conversion refinery

REFINANCING SIZE: USD 4.7bn

COMMENTS: In April, Yasref, a joint venture between the Saudi Aramco (62.5%) and Sinopec (37.5%), signed a USD 4.7bn seven-year refi-nancing to allow Aramco to extract equity from the refinery project.

Lead coordinators, bookrunners and mandated lead arrangers (MLAs) were Sumitomo Mitsui Banking Corporation and Riyad Bank for the international and local bank tranches respectively. International bank coordinators, book runners and MLAs were Bank of China, China Con-struction Bank, Bank of Communications, Export Development Canada (EDC) and JPMorgan. International bookrunners and MLAs were Bank of Tokyo Mitsubishi (MUFJ), Deutsche Bank and Mizuho. The international MLAs were BNP Paribas, Citi, Credit Agricole, Credit Suisse, HSBC, QNB and Standard Chartered. The international lead arranger was Morgan Stanley. Local coordinators, book runners and MLAs were Al Rajhi Bank and Banque Saudi Fransi. Local bookrunners and MLAs were National Commercial Bank, SAMBA and Saudi British Bank. Al Bilad Bank partici-pated as a local MLA, while Arab National Bank and GIB participated as local lead arrangers.

A Reuters report, citing a company statement, said the deal carried a margin of L+ 105bps for the US dollar tranche and S+ 100bps for the Saudi riyal tranche. The report added that the loan was split between a USD 3.1bn dollar tranche and a SAR 6bn Saudi riyal tranche, meanwhile a source close previously told Debtwire that the fees ranged from 50bps to 90bps across both the local and international tranches.

Located in Yanbu Industrial City, the full conversion facility processes Arabian Heavy crude, producing gasoline, high-quality diesel, and liquefied petroleum gases (LPG) as well as byproducts sulphur and petroleum coke for export, according to the company website. The refinery reached full capacity in June 2015, processing 400,000 barrels per day, according to press reports.


PROJECT NAME: Riyadh PP11 refinancing


STAGE: Signed – March 2016

PROJECT CAPACITY: 1750MW

PROJECT TYPE: Gas fired IPP

REFINANCING SIZE: In excess of USD 1.1bn-equivalent

TENDERING AUTHORITY: Saudi Electricity Company

COMMENTS: Dhuruma Electricity Company, the project company behind the Riyadh PP11 independent power project, closed on 1 March a refinancing of the project debt. Dhuruma Electricity Company is 50% held by Saudi Electricity Company (SEC), 20% by Engie (formerly GDF Suez), 15% by Aljomaih Holding Co. and 15% by Blue Horizon, a subsidiary of Japan’s Sojitz Corporation.

A US dollar-denominated international tranche in excess of USD 500m was provided by KfW IPEX, Export Development Canada and commercial banks Mitsubishi UFJ Trust and Banking Corporation, Mizuho, Societe Generale, Standard Chartered Bank, Sumitomo Mitsui Banking Corpor-ation (SMBC) and Sumitomo Mitsui Trust Bank. Mizuho and SMBC took tickets of over USD 100m each.

A Saudi riyal-denominated istisna'a-ijara tranche of in excess of SAR 1.4 billion was provided by Banque Saudi Fransi, Samba Financial Group and The Saudi British Bank (SABB), each of which took an equal participation.

A Saudi riyal-denominated wakala-ijara tranche of in excess of SAR 900 million was provided by The National Commercial Bank and Al Inma Bank, each of which took an equal participation.

Clifford Chance acted as legal advisor to Dhuruma Electricity Company.

The original project cost around USD 2.1bn, according to a deal sheet. The original finance, signed in 2010, consisted of a USD 378m 17-year loan from the Export-Import Bank of the United States (US ExIm), according to a deal sheet. A USD 530m uncovered 20-year commercial tranche with a 20% balloon was provided by CIC, Credit Agricole, Export Development Canada (EDC), Intesa, KfW, Societe Generale, and Standard Chartered. The debt finance was rounded out with USD 645m-equivalent SAR-denominated 20-year Islamic facilities, also with a 20% balloon, provided by Alinma Bank, NCB, Samba and Saudi Fransi.

The non-US ExIm facilities carried a margin of Libor+ 250bps increasing 15bps every three years until it reaches 340bps. Fees ranged between 250bps and 300bps. A USD 512m equity bridge loan was provided by KfW, NCB and Sumitomo Trust. Citi acted as financial advisor to SEC.

SEC agreed a 20-year offtake agreement with the project company. The Engie-led consortium won the project tender with a bid of SAR 0.1079 per kWh, according to the deal sheet.


DEALS IN SAUDI ARABIA (SIGNED)





PROJECT NAME: Hassyan Clean Coal IPP

COUNTRY: UAE –Dubai

STAGE: Preferred bidder selected – financial close expected end-3Q16/start-4Q16

CAPACITY: 2400 MW

PROJECT TYPE: Clean coal IPP


EXPECTED DEBT SIZE: USD 2.6bn

TENDERING AUTHORITY: Dubai Electricity & Water Authority

COMMENTS: DEWA picked a consortium led by ACWA Power and Harbin to develop the Hassyan Clean Coal IPP in October 2015. Initially slated as a 1200MW capacity project, ACWA Power later proposed an increase in capacity - which has been accepted by DEWA— to double the capacity of the project. The project finance debt will have a 17- or 18-year maturity and financial close is now expected in 3Q16 or 4Q16, having initially been targeted for May.

EY is acting as Financial Advisor to DEWA. ACWA Power typically self-arranges its project financing. DEWA will agree a 25-year offtake agree-ment with the project company. At the time of being awarded preferred bidder status, ACWA Power announced it was holding discussions with Commercial Bank of China, Bank of China, First Gulf Bank and Standard Chartered for the required debt. More recently the company revealed that China’s Silk Road fund would participate in both the debt and equity required. Saudi Arabia–based lenders could also participate in the debt. DEWA will retain a 51% stake, while ACWA Power, Harbin and minority partner Silk Road Fund will hold the remaining 49%.


PROJECT NAME: Mohammed Bin Rashid Al Maktoum Solar Park – Phase 3

COUNTRY: UAE—Dubai

STAGE: Tendering – Submissions opened

CAPACITY: 800 MW

PROJECT TYPE: Solar PV IPP


EXPECTED DEBT SIZE: USD 800m to USD 900m

TENDERING AUTHORITY: Dubai Electricity & Water Authority

COMMENTS: Masdar reportedly submitted a record-low bid of 2.99 USD cents per kWh for the third phase of the park, though it is uncertain whether this is for the entire 800MW or one of the smaller packages.

DEWA extended the deadline for developers to bid for the third phase of its solar PV project until May. KPMG is acting as financial advisor to DEWA. Bidders were invited to submit proposals under three models: a mandatory minimum proposal for the 200MW Phase A, or optional proposals for Phase A and B totalling 500MW, or for Phases A, B and C for the entire 800MW capacity. Among the 21 developers qualified to proceed to the RFP stage were Acciona-Swicorp, ACWA Power, EDF-Nebras, FRV-Masdar, JinkoSolar, REC Solar and SunEdison, according to press reports.


PROJECT NAME: Sweihan Solar IPP

COUNTRY: UAE – Abu Dhabi

STAGE: Tendering - bidder selection expected by mid-2016

CAPACITY: 350 MW

PROJECT TYPE: Solar PV IPP

EXPECTED PROJECT COST: USD 500m to USD 550m*

TENDERING AUTHORITY: Abu Dhabi Water & Electricity Authority

COMMENTS: In December 2015 ADWEA called for expressions of interest to build, co-own and operate a 40% stake in the Sweihan IPP. ADWEA will retain the remaining 60% and act as offtaker. Closing date for expressions of interest was 13 January, with a request for proposals to follow. The tendering authority has selected Alderbrook Finance as financial advisor, Akin Gump Strauss Hauer & Feld as legal advisor and Fichtner as technical advisor. Financial close is expected in 1H17 with commercial operations expected to begin in 2019. A list of prequalified developers can be found here.


*Debtwire estimate using market norms for solar project cost.

PROJECT NAME: Umm Al Quwain Desalination IWP

COUNTRY: UAE—Umm Al Quwain

STAGE: Expressions of Interest

CAPACITY: 45 MIGD

PROJECT TYPE: Sea Water Reverse Osmosis IWP

TENDERING AUTHORITY: Federal Electricity & Water Authority

COMMENTS: FEWA invited interested parties to express interest by 7 April for an IWP to be located in the Emirate of Umm Al Quwain. According to the invitation, the selected consortium will be responsible for the development, financing, construction, operation, maintenance and ownership of a greenfield water treatment facility together with associated infrastructure. The project will be located in the Northern area of the Emirate of Umm Al Quwain, adjacent to the border with Ras Al Khaimah approximately 20 km North of Umm Al Quwain city and in the vicinity of the coastline of the Arabian Gulf. A request for qualification is expected to follow.


DEALS IN UAE (YET TO SIGN)

The Abu Dhabi Water & Electricity Authority Building.



http://www.adwea.ae/en/press/press-releases/press-release-concerning-the-350mw-solar-photovoltaic-(pv)-independent-power-project-located-at-sweihan,-the-emirate-of-abu-dhabi.aspx

http://www.thenational.ae/business/energy/adwea-selects-advisers-for-350-megawatt-solar-park-in-abu-dhabi

http://www.fewa.gov.ae/en/TenderAndRegistration/Pages/EOI-Invitation.aspx



PROJECT NAME: Fujairah 1 (F1) expansion and refinancing project bond

COUNTRY: UAE – Abu Dhabi

STAGE: Awaiting suitable market conditions

CAPACITY: 882MW, 100 mGD

PROJECT TYPE: IWPP

EXPECTED BOND SIZE: USD 350m

OFFTAKER: ADWEC

COMMENTS: Banks have been picked to arrange the planned Fujairah 1 (F1) Independent Water and Power Plant project bond, with Citi and HSBC expected to be part of the arranging group. The USD 350m bond will be used to refinance debt linked to the F1 independent water and power plant as well as expand the plant’s capacity. The bond is expected to have a 20-year maturity.

The project company, Emirates SembCorp Water and Power Company, appointed boutique firm Alderbrook Finance as an advisor for the bond issuance, as reported. Sumitomo Mitsui Banking Corporation (SMBC) is acting as financial advisor to the sponsor.

In 2006 the plant was part-privatised, with Singapore’s SembCorp acquiring a 40% stake in project company with the remaining 60% held by government owned Abu Dhabi National Energy Company (TAQA) majority owned by Abu Dhabi Water and Electricity Authority (ADWEA).

The total cost of acquisition and of expanding the facility was USD 1.726bn, and was funded through a non-recourse project finance loan, an equity bridge loan, and from the operating cash flows from the existing plant. Financial close was reached in November 2006, according to SembCorp’s annual report.

A USD 200m expansion was undertaken in July 2013 with the aim of adding 30 million imperial gallons per day (mGD) of capacity to the plant’s output, bringing total output to 130 mGD. Abu Dhabi Water and Electricity Company is acting as the offtaker. The plant has gross power generation capacity of 882 MW, according to a company website.


DEALS IN UAE (YET TO SIGN)

http://www.debtwire.com/intelligence/view/334649

http://www.sembcorp.com/en/src/downloads/annual-reports/Sembcorp_AnnualReport_2006.pdf

http://www.debtwire.com/intelligence/view/1614702

http://www.emsembcorp.com/index.php?cmd=cms__view&article_id=7


DW-EU 20-JUN-16

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REGIONAL AKGROUND TRENDS IN G PROJE T FINANE …