meed-logo

line1 line2 line3
SIGN IN / REGISTER

Liquidity drives project finance appetite

27 October 2023

 

This report on project finance and PPP also includes: PPP activity rebounds in 2023

Activity in the Gulf region has triggered a boom in the project finance market, with Saudi Arabia leading the way on the back of schemes linked to its Vision 2030 strategy.

Deals are fanning out from power and water and infrastructure schemes into unexplored territory: hydrogen projects and ever-larger solar power plants have opened up opportunities for international and regional banks that are awash with liquidity and looking for long-term means to deploy it.

Deal advisers attest to the vibrancy of Saudi Arabia, the largest regional projects market with $1.2tn-worth of known work in the pipeline. The kingdom has seen the largest project financing this year, a facility worth at least $6bn arranged for the Neom green hydrogen project.

“Saudi Arabia is a market that really is firing on all cylinders,” says Rob Harker, a partner at law firm DLA Piper, which advised Neom Green Hydrogen Company in connection with its green hydrogen and ammonia project in Saudi Arabia.

“That demand is not limited to utility sector projects. In addition to the very large solar and wind projects – including a Saudi solar deal that is 1.1GW – we are also seeing a large volume of social infrastructure projects being procured across the GCC, including in education, healthcare, social accommodation and transport,” he adds. 

“Bank debt – both regional and international – is still the principal source of financing for these projects. However, robustly structured projects should also be attractive, particularly on a refinancing, to a capital markets issuance.”

Robust liquidity support

There is increased liquidity in the regional banking market, notes John Dewar, partner in international law firm Milbank’s global project, energy and infrastructure practice, which advised the export credit agencies (ECAs) and commercial banks in connection with Project Lightning, Abu Dhabi National Oil Company’s offshore power transmission project.

“With the bullish medium-term oil price outlook, there is significant liquidity in the Saudi and UAE bank markets, with these banks looking to on-lend their petrodollar deposits on a longer-term basis.”

This still poses some challenges. Analysts note that despite the bountiful credit availability, things can change.

“There is still a lot of liquidity in the system in the GCC, but some have voiced concerns that liquidity in the banking market could dry up in the future if they have to compete with projects that are much larger in scale,” says Christiane Kuti, a director at Fitch Ratings. 

“Overall liquidity in the market could get tight at some point, although we are not there at the moment.”

Even then, notes Kuti, a lower oil price could add impetus to the need to develop frameworks to make projects more bankable, and provide an opportunity for the capital market to play a bigger role.

Most of the larger deals are witnessing a heterodox mix of local and international banks participating. For example, a consortium of five local and international banks has agreed to provide $545m of financing for the Rabigh 4 independent water producer project in Saudi Arabia, with Standard Chartered Bank lining up alongside Bank of China and the local trio of Saudi National Bank, Riyad Bank and Saudi Investment Bank.

The Chinese bank presence is a pointer. “We have seen Chinese banks participating in project finance deals, and that is set to continue as they are not as constrained as some of the regional banks in terms of the tenor on which they can lend. Their ability to lend on a longer-term tenor is sometimes attractive for sponsors and developers,” a source tells MEED.

The flipside of this is that Chinese lenders are less knowledgeable about the market.

Global uncertainties

Despite the robust oil price climate, project financings across the Middle East and North Africa (Mena) region have had to cope with a choppy global interest rate environment, with inflationary pressures also impinging.

Higher interest rates have militated against the use of capital market instruments in some regional deals. For Abu Dhabi’s subsea transmission system deal, which reached financial close earlier this year, higher interest rates were responsible for adding $200m to the $3.8bn deal.

This has implications for other projects that are seeking refinancing on the capital market. In Saudi Arabia, BlackRock-led investors in Saudi Aramco’s gas pipeline network attempted early in 2023 to raise $4.5bn from a sale of bonds to refinance a multibillion-dollar loan. The 10-year mature sukuk (Islamic bond) tranche spread placed it about 120 basis points above where Aramco bonds maturing in October 2030 were trading, according to Reuters’ calculations.

Another consortium led by US-based energy infrastructure investment firm EIG Global Energy Partners had also looked to the bond markets to refinance.

“The EIG and BlackRock-led consortiums investing in Saudi Aramco’s oil and gas pipelines infrastructure have been looking to refinance more than $20bn of acquisition debt,” says Dewar. 

“Both have been active in the bond market, but the interest rate environment has moved against bonds, so there has been an increasing focus by borrowers on accessing other longer-term liquidity sources, particularly from the highly liquid regional banks.”

Capital market instruments

For the moment, capital market instruments are largely confined to refinancing rather than greenfield projects. However, once some of these projects are financed, it could encourage others to lend on that basis.

“Once a project has been up and running, and it has got consistent revenue from the offtaker of the electricity or the water, and they are paying an index-linked revenue stream that is 100 per cent take or pay and insulated from the erosion of any inflationary pressures, that is very attractive for bondholders, pension funds and other institutions that want stable revenues,” says one industry insider.

Beyond the Gulf, Egypt has managed to attract project finance for its renewable energy schemes, with significant ECA support. In March 2023, a $690m non-recourse financing was arranged for the 500MW Gulf of Suez Wind 2 project in Egypt. 

The renewable energy push has continued after Cairo’s hosting of the 2022 Conference of the Parties of the UN Framework Convention on Climate Change (Cop27). The drive has included the Amunet wind and Abydos solar projects closed by Amea Power, as well as the Gulf of Suez Wind 2 project sponsored by Engie, TTC-Eurus and Orascom.

“They are both important deals in a global context because they mark the first occasions on which the Japanese ECAs have co-financed with the International Finance Corporation and the European Bank for Reconstruction & Development, respectively, opening up important new financing opportunities in emerging markets,” says Dewar.

Support from ECAs is particularly valued in Egypt, given the economic challenges the country is facing. 

A planned polypropylene complex due to be developed in Egypt’s Suez Canal Economic Zone has been put on hold, with the $1.7bn project developed by Red Sea Refining & Petrochemical Company having been affected by the depreciation of the Egyptian pound.

More regional financing

Another emerging theme will be for the larger Mena banks to play a bigger role in regional project financings.

The likes of First Abu Dhabi Bank have been active across GCC borders, including in Saudi Arabia. Given their healthy liquidity profiles, the biggest banks in the GCC are better positioned for longer-tenor project finance deals than ever before. 

Not that it will be plain sailing. Structural impediments will still have to be overcome.

For example, most Saudi banks still need to get consent from the Saudi Arabian Monetary Agency (Sama) to participate in dollar loans. “That can constrain their ability to operate outside the kingdom,” says Dewar. 

“There is a regulatory preference for them to make Saudi riyal loans rather than dollars. But because of the increase in dollar liquidity, there is much more availability in the Saudi market than there was a year ago.”

Project finance will remain a critical part of the funding mix in the Mena region. As Fitch Ratings notes, the significant growth needed to achieve the GCC’s investment requirements cannot be attained using traditional financing channels, such as on-balance-sheet funding by governments. Instead, there is a need to broaden the investor base, including through project financing.

The likelihood of a more benign global interest rate environment in 2024 should pave the way for a reassertion of capital market-based deals, making the next few months busy ones for banks and deal-makers across the Mena region.

 PPP activity rebounds in 2023 

https://image.digitalinsightresearch.in/uploads/NewsArticle/11227315/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Riyadh tenders Quality Valley mixed-use PPP project

    9 July 2026

     

    Saudi Arabia’s State Properties General Authority, in collaboration with the National Centre for Privatisation & PPP, has tendered a contract to transform the Saudi Standards, Metrology & Quality Organisation's headquarters site in Riyadh’s Al-Muhammadiyah area into a mixed-use district.

    The firms have been allowed until 8 October to submit their proposals.

    Known as the Quality Valley Riyadh project, the public-private partnership (PPP) scheme will be developed on a design, build, finance, operate, maintain and transfer basis.

    In May, MEED reported that 59 firms had expressed interest in the contract to develop the project.

    Unless otherwise stated, the interested companies are local. They now include:

    Developers / real estate developers:

    • Abdulrahman Saad Alrashid & Sons (Artar)
    • Ajdan Real Estate Development Company
    • AlBawani
    • Al-Gihaz Holding
    • Al-Ayuni Investment & Contracting
    • Alameriah Development
    • Alargan Projects Company
    • Al-Fahd Company
    • Alkhorayef Investment & Development
    • Al-Soliman Real Estate
    • Al-Saedan Real Estate
    • Asyad Holding Company
    • Arabian Construction Company (UAE)
    • Business Deal Company
    • Ezdihar Real Estate Company
    • Hay Developments
    • Heyazah Real Estate Development
    • Kinan International 
    • Ladun Investment Company
    • Lamar Holding (Bahrain)
    • Ledar Investment
    • Liwan Real Estate Development
    • Mada International
    • Naif Alrajhi Investment
    • Pan Kingdom Real Estate
    • Refad Investment & Real Estate Development
    • Retal Urban Development Company
    • Al-Mozaini Real Estate
    • Safari Group
    • SkyBridge (US)
    • Sumou Real Estate
    • Tatweer
    • Technical Development Company
    • Telad Real Estate
    • Zamil Group
    • Zeoof Real Estate Investment & Development

    Contractors:

    • Al-Kifah Holding Company
    • BEC Arabia
    • Buna Al-Khaleej Contracting Company
    • Saudi Binladin Group
    • Fanar Arabian International
    • International Hospitals Construction Company
    • Mohammed Ali Al-Swailem Trading & Contracting (Masco)
    • Mobco Civil Construction
    • Shar Company
    • Shibh Al-Jazira Contracting Company
    • Urbas Middle East (Spain)

    Consultants:

    • Alteraz Design Architectural & Engineering Consultant
    • Dar Al-Riyadh
    • Meinhardt Group (Singapore)
    • Equity Investors
    • Ahmed Al-Thunayan Investment Group
    • Aldrees Industrial and Trading Company
    • Tanami Holding
    • Own United
    • SAH First Investment Company  
    • ​Sumou Global Investment / Poly Manners Architecture
    • Financial Services Providers​​
    • GIB Capital
    • Mefic Capital
    • SNB Capital

    The project comprises commercial offices, a four-star hotel and retail facilities. The contract term is 32 years, in addition to a three-year construction period. The site covers about 191,000 square metres.

    UK-based PricewaterhouseCoopers, US-based engineering firm Jacobs and Saudi Arabia’s Al-Nowaisser & Al-Suwaylimi are advising on the project.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17603519/main.jpg
    Yasir Iqbal
  • Egypt gold project to start commercial production next year

    9 July 2026

    Egypt’s Abu Marawat gold project is on track to begin commercial production in 2027, according to a statement by the North African country’s Petroleum & Mineral Resources Ministry.

    This target was highlighted during a meeting with Abu Marawat Gold Mines Company to review and discuss the Environmental and Social Impact Assessment study for the gold mining and extraction project in the Abu Marwat area of ​​the Eastern Desert.

    Abu Marawat Gold Mines Company is the Egyptian joint-venture company set up to develop and run the Abu Marawat gold project.

    It is owned by Canada’s Aton Resources and Egypt’s Mineral Resources & Mining Industries Authority (MRMIA).

    During the meeting, Yasser Ramadan, chairman of the MRMIA, said that the Marawat project serves as a practical model for the Petroleum & Mineral Resources Ministry’s strategy to establish modern mining operations.

    The Abu Marwat project is located in the Arabian-Nubian Shield region of the Eastern Desert.

    The concession covers an area of more than 57 square kilometres.

    Aton Resources has been advancing the exploration and development of the Abu Marawat concession since its award in 2007, with active exploration starting on the ground in 2009.

    The meeting with Abu Marawat Gold Mines Company was attended by executives from the Petroleum & Mineral Resources Ministry, the MRMIA and the Egyptian Environmental Affairs Agency, as well as representatives from the Red Sea and Qena governorates, members of the House of Representatives and local community leaders.

    READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17603106/main.jpg
    Wil Crisp
  • Firms submit King Salman airport project prequalifications

    8 July 2026

     

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s King Salman International Airport Development Company (KSIADC) received prequalification statements on 1 July from contractors for two new packages at King Salman International airport (KSIA) in Riyadh.

    These include the construction of a permanent East-West corridor and landside access roads serving the North and South terminals.

    The scope covers the construction of roads, bridges and tunnels.

    The client is expected to float the tenders soon.

    The latest development follows KSIADC's selection of three groups to deliver the Terminal 6 apron, taxiways and other airfield infrastructure at KSIA.

    KSIADC, which is backed by Saudi sovereign wealth vehicle the Public Investment Fund, will initially deliver the project on an early contractor involvement basis.

    In March, MEED exclusively reported that KSIADC had selected three groups for the construction of Terminal 6.

    In November last year, MEED reported that KSIADC was targeting mid-2026 to award the contract for the construction of Terminal 6.

    MEED reported in May 2025 that US firm Bechtel Corporation had been appointed as the delivery partner for the terminals at KSIA.

    According to local media reports, KSIADC’s acting CEO, Marco Mejia, said the project developer has completed the project’s masterplan.

    The reports added that Terminal 6 will boost the airport’s capacity by 40 million passengers.

    The project is expected to be delivered before the start of Expo 2030 Riyadh.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17588533/main.jpg
    Yasir Iqbal
  • WEBINAR: Saudi Giga Projects: Market Update for Q3 2026

    8 July 2026

    Webinar: Saudi Giga Projects: Market Update for Q3 2026 
    Tuesday 21 July 2026 | 11:00 AM GST  |  Register now

    Agenda:

    • Saudi projects market outlook and giga projects update
    • 2026 contract awards, project activity and market performance
    • Giga project reprioritisation, funding allocation and delivery progress
    • Key project announcements, milestones and market developments to watch
    • Major contracts awarded across construction, infrastructure and utilities
    • Upcoming tenders and contract award opportunities over the next 6–12 months
    • Geopolitical risks and their impact on project execution and investment
    • Progress across NEOM, The Red Sea, Diriyah, Qiddiya and New Murabba
    • Major non-giga project opportunities and growth sectors across Saudi Arabia
    • Short-, medium- and long-term outlook for the Saudi projects market
    • Audience Q&A

    Hosted by: Yasir Iqbal, MEED's construction editor

    Click here to register

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17588750/main.jpg
    Yasir Iqbal
  • Genel Energy buys Egypt-focused oil company for $360m

    8 July 2026

    Register for MEED’s 14-day trial access 

    UK-listed Genel Energy has agreed to acquire Egypt-focused Capricorn Energy in a $360m all-cash deal.

    Genel said the acquisition will combine its Kurdistan production base with Capricorn’s portfolio of Egyptian oil and gas assets.

    The company also said the deal will allow it to obtain production in a country with a “well-established regulatory regime, stable contracts and attractive fiscal terms”.

    Several approvals are still required before the acquisition can be finalised.

    In a statement, Genel said: “Genel’s strategy is to build a business with resilient diversified cash flows that deliver sustainable value to shareholders.

    “The Genel board and Genel management are resolute in their belief that this can best be achieved through strategic acquisitions, which add substantial high-quality producing assets to its existing portfolio.”

    Genel’s existing oil and gas assets include its 25% non-operated working interest in the Tawke PSC in the Kurdistan Region of Iraq.

    The company said this asset generated working interest production averaging 17,520 barrels a day (b/d) of oil in 2025 and had operating costs of around $4 a barrel.

    The combined group is expected to hold reserves of 117 million barrels of oil equivalent and production of 41,003 b/d.

    Capricorn is headquartered in Edinburgh and has been listed on the London Stock Exchange for more than 30 years.

    Its core operations are in Egypt’s Western Desert region, where it holds onshore development and production assets.

    In May 2025, Capricorn agreed with Egyptian General Petroleum Corporation to consolidate eight of its 50:50 jointly owned concessions into a single integrated licence with enhanced commercial terms. Capricorn announced in March 2026 that it had received formal parliamentary ratification of the agreement.

    The deal has been announced at a time when Genel is seeing frequent disruption to operations at its assets in Iraqi Kurdistan.

    Production was temporarily suspended at the Tawke field in February after the US and Israel attacked Iran, increasing security concerns in the wider region.

    While the security situation is understood to have improved in the Iraqi Kurdistan region and many oil companies have resumed operations, there are now concerns that the Iraq-Turkiye Pipeline could be shut due to an agreement between the two countries expiring later this month.

    If the pipeline does stop operations, it will negatively impact Genel as it is the main route through which the company’s Iraqi oil is exported.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17587599/main.jpg
    Wil Crisp