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
  • Contractor appointed for Oman power plants

    13 May 2026

     

    A consortium of China-headquartered Shandong Electric Power Construction No. 3 Company (Sepco 3) and South Korea’s Doosan Enerbility has been appointed as the main contractor on the Misfah and Duqm combined-cycle gas turbine power plants in Oman.

    The contracts cover the construction of two independent power producer (IPP) projects, with work scheduled to begin in the third quarter of 2026.

    State offtaker Nama Power & Water Procurement (Nama PWP) had previously signed power-purchase agreements (PPAs) for the development and operation of the plants.

    The developer’s contract was awarded to a consortium comprising Korea Western Power (Kowepo), Qatar’s Nebras Power, the UAE’s Etihad Water & Electricity (EtihadWE) and Oman’s Bhawan Infrastructure Services.

    The Misfah IPP will be led by Nebras Power and located in Wilayat Bousher in Muscat Governorate, with a planned capacity of 1,600MW.

    The Duqm IPP will be led by Kowepo and located in Wilayat Duqm in Al-Wusta Governorate, with a capacity of 800MW.

    According to Nama PWP, the total investment for the two projects is estimated at approximately RO1bn ($2.6bn).

    MEED reported last October that Nama PWP had received three bids for the development and operation of the gas-fired IPPs.

    The other bids included a consortium comprising China’s Shenzhen Energy Group and Oman National Engineering & Investment Company, and a lone bid from Saudi Arabia’s Acwa Power.

    Synergy Consulting is the financial adviser and lead adviser to Nama PWP for these projects.

    In November, Oman’s OQ Gas Networks received final investment approval to proceed with gas supply connections for the facilities.

    The Misfah IPP will receive 8.5 million cubic metres a day (cm/d) of natural gas. The Duqm IPP will be supplied with 4.5 million cm/d of natural gas.

    In March 2025, the same Sepco 3 and Doosan Enerbility consortium signed an engineering, procurement and construction contract with Saudi Electricity Company for the expansion of the Riyadh Power Plant 12 (PP12).

    Located about 150 kilometres northwest of Riyadh, the 1,863MW power plant is expected to be completed in 2028.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16816237/main.jpg
    Mark Dowdall
  • Financial challenge tests Iraq’s resolve

    13 May 2026

     

    On 21 April, as a fragile ceasefire held between the US and Iran, the Trump administration halted a $500m shipment in cash headed for Iraq, as it sought to clamp down on Iranian-backed Shia militias in the country. 

    That cash, derived from Iraqi oil exports and routed via the US Federal Reserve to the Central Bank of Iraq (CBI), is a vital cog in Iraq’s financial arteries, enabling it to cover foreign exchange demand.

    This was not the first time that Iraq’s financial system has felt the US’s warm breath on its neck.

    Back in February 2025, the US Treasury Department blacklisted five Iraqi banks from participating in dollar transactions, citing concerns about their role in illicit financial flows that benefited Iran’s Islamic Revolutionary Guards Corps.

    Iraq has also itself often circumscribed dollar use within its own financial system.

    In July 2023, the CBI banned 14 banks from conducting dollar transactions in a crackdown on dollar smuggling. In February 2024, it banned a further eight banks from dollar transactions as part of a crackdown on fraud and money laundering.

    Dollar pressure

    The recent halt in US dollar cash shipments has nevertheless added pressure to Iraq’s parallel currency market gap, says Lucila Bonilla, lead emerging market economist at Oxford Economics.  

    “The gap between the parallel exchange rate has widened noticeably against the official peg, to around 20%,” she says.

    “Dollar demand has risen as citizens and traders seek to hedge uncertainty – dollar deposits are up, and there are reports of a notable shift in the composition of cash holdings toward dollars.”

    Ratings agencies see the US move on Iraqi dollar use as a challenge, but one that might not prove too onerous.

    “Iraq can overcome a short-term war as it has $100bn of reserves and its debt profile is bearable,” says Gilbert Hobeika, a director at Fitch Ratings.

    “But a longer-term conflict will hurt Iraq as the economy is reliant on oil revenues and government involvement, while facing at the same time risk from the US stopping delivery of US dollars.”

    How persistent the pressure proves will depend largely on the duration of the Hormuz shock and how the relationship with the US evolves.

    “Forming a new government that is palatable to the US could ease the pressure, though Iraq’s protracted government formation process adds uncertainty to that timeline,” says Bonilla.

    The US-Iran war is putting even more pressure on banks.

    “There are uncertainties with regard to depositors,” says Hobeika. “The public sector banks have weak management and governance structures. Financial reporting is weak, and that puts pressure on asset quality and capitalisation.”

    If the conflict lasts a long time, the government will start withdrawing funds to pay salaries and contractors.

    “That will affect deposits at the public sector banks in the near term,” says Hobeika.

    State-heavy system

    Iraq’s banking system is dominated by a handful of state-owned banks with a market share of 75%-80%, and then 60-plus private banks competing for the remaining 20%-25% of the pie. 

    “Private banks have struggled to compete in a market with limited opportunities, small deposit bases and a narrow range of products, often focusing on very basic activities,” says Lea Hanna, an analyst at Moody’s.

    “In 2019, we had a wave of Islamic banks getting bans on dealing with US dollars – reducing what had been a primary source of business.”

    A few private banks have benefitted since then, namely those with majority ownership by foreign banks such as National Bank of Iraq, a subsidiary of Capital Bank of Jordan, and Bank of Baghdad, a subsidiary of Jordan Kuwait Bank.

    “Supported by their affiliates, these banks are relatively well run compared to domestic peers and have ample capital buffers,” says Hanna.

    “They have captured a large market share of US dollar transfers thanks to their strong US correspondent banking relationships that allow them easier access to US dollars. They have seen a surge in their profitability and an increase in their deposit base.”

    Financial reform

    The CBI has attempted to introduce reforms to the banking system, as part of a wider effort to enable it to channel funding to the private sector.

    In early 2025, it increased the minimum issued and paid-up capital requirement to ID400bn ($305m), along with a requirement to establish correspondent banking relationships for foreign-currency trading. The plan was to increase these in ID50bn increments every six months, to hasten sector consolidation.

    However, of Fitch’s rated banks, just two – state-owned Trade Bank of Iraq and Mansour Bank, a subsidiary of Qatar National Bank – met the full capital requirement.

    “While a lot of banks managed to increase their capital, a number of them didn’t and have been struggling to improve their systems and compliance with anti-terrorism and anti-money laundering regulations,” says Hobeika.

    “These systems take a long time to improve, and it costs the banks too. For that reason, they have agreed with the central bank to postpone implementation to 2027/28.”

    The expectation is that the number of private Iraqi banks will shrink from 60 to about half that number by 2028.

    “Iraq’s banking sector is undergoing a significant overhaul, with the Central Bank pushing through higher capital requirements, improved anti-money-laundering compliance, and a shift towards commercial banks managing their own international correspondent relationships. These moves are welcomed,” says Bonilla.

    But the harder work remains, argues Bonilla: state-owned banks still carry high levels of non-performing loans, weak governance and a history of politically directed lending, while private sector credit remains among the lowest in the region.

    “The stakes are high as the IMF estimates that a comprehensive reform of the financial sector, alongside broader governance and regulatory changes, could double Iraq’s non-oil growth potential over the medium term, adding around 4 percentage points to GDP,” says Bonilla.

    “For now, the reforms address the plumbing. The structural transformation of a banking system to serve the private sector is still largely ahead.”

    Clouded outlook

    So far, Iraq’s financial system seems to have averted a worst-case scenario of large-scale deposit withdrawals related to the Iran conflict.

    Any deposit withdrawals seem to be more related to the introduction of a digital custom system ASYCUDA (Automated System for Customs Data) aimed at helping the government collect revenues, which saw a lot of traders trying to bypass the custom charges.

    “This drove some exporters or traders to source US dollars outside the banking system, in the parallel market, to avoid stricter requirements and up-front payment of customs duties. That has now eased,” says Hanna.

    Looking ahead, Fitch anticipates that most government financing is likely to come from the CBI through indirect purchases of government securities.

    The central bank’s total claims on the central government represented about 52% of the domestic debt stock and 25% of the total debt stock at end-2024, notes the agency.

    It envisages that a smaller portion will come from the government’s cash deposits, anticipated to fall to an average 12% by 2027.

    Fitch says the CBI’s balance sheet limits refinancing risks, while the FX reserves are large enough to absorb the expansion of that balance sheet without putting pressure on the exchange-rate peg with the US dollar.

    Surging foreign direct investment comes as a source of comfort, with annual inflows rising from around $2bn in 2022 to $5bn-$7bn from 2023 onwards. 

    Reform of the financial system will remain at the top of the new government’s in-tray.

    The regional environment is unconducive to this mammoth task, and it can only hope that an end to the conflict would support ongoing Iraqi efforts to build a financial system comparable to that of some of its Gulf neighbours.

    MEED’s June 2026 report on Iraq also includes:

    > OVERVIEW: Iraq enters era of resilience, reform and rising risks
    > OIL & GAS: Iraqi oil and gas sector in crisis
    > POWER & WATER: Focus shifts to delivery of Iraq utilities expansion
    > CONSTRUCTION: Momentum builds in Iraq’s post-war construction sector

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16799540/main.gif
    James Gavin
  • JinkoSolar signs 2GW deal for Abu Dhabi solar project

    13 May 2026

    China’s JinkoSolar has signed an agreement with Abu Dhabi Future Energy Company (Masdar) to supply 2GW of photovoltaic (PV) modules for the round-the-clock renewable energy project in Abu Dhabi.

    The agreement covers the supply of JinkoSolar’s Tiger Neo series modules for the project, which is being developed by Masdar in collaboration with Emirates Water & Electricity Company (Ewec).

    The landmark $6bn project combines a 5.2GW solar PV plant with a 19 gigawatt-hour battery energy storage system (bess).

    It entered construction in October 2025 with India’s Larsen & Toubro and Power China working as contractors. It is known as the world’s first gigascale round-the-clock renewable energy project.

    Masdar had earlier selected JinkoSolar and JA Solar as preferred suppliers for solar PV modules, and CATL (Contemporary Amperex Technology) as preferred supplier for the bess segment.

    The project is designed to provide baseload renewable power and address intermittency challenges associated with solar generation. The developers said the scheme will serve as a model for similar projects internationally.

    JinkoSolar said the Tiger Neo modules supplied for the project are based on N-type TOPCon technology and have been adapted to meet the technical requirements of the development.

    Senior executives from both companies attended the signing ceremony in Abu Dhabi, including Mohamed Jameel Al-Ramahi, CEO of Masdar, and Charlie Cao, CEO of JinkoSolar.

    Jinko has won several major contracts in recent years, including a contract to supply solar PV modules with a capacity of 3GW for Saudi Arabia’s Haden and Al-Khushaybi solar projects.

    It also recently announced the signing of a 2GW solar PV module supply agreement with China Energy Engineering Corporation (CEEC) for Saudi Arabia’s Phase Six Khurais PV project.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16813268/main1816.jpg
    Mark Dowdall
  • Dubai opens prequalification for Jebel Ali STP expansion

    13 May 2026

     

    Dubai Municipality has issued a request for qualifications for the Jebel Ali sewerage treatment plant (STP) expansion – phase 3 project.

    The DS150/3 project will be delivered under a public-private partnership (PPP) model on a design, build, finance, own, operate and transfer basis.

    The project involves the development of a new water resource recovery facility with an ultimate treatment capacity of up to 1 million cubic metres a day (cm/d).

    It is being procured through Dubai Municipality’s Sewerage and Recycled Water Projects Department and will be delivered through a two-stage operational approach over a 30-year concession period.

    The bid submission deadline is 18 June.

    UK-headquartered Deloitte is acting as financial adviser, Aecom as technical adviser and CMS as legal adviser.

    Dubai Municipality said the project will also include additional land uses and community-focused amenities as part of broader sustainability and urban integration objectives.

    Phase one and two expansion

    In April, the deadline was extended for contractors to submit bids for an engineering, procurement and construction (EPC) contract covering the expansion of the Jebel Ali STP phases one and two.

    Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cm/d, with the expansion estimated to cost $300m.

    The new bid submission deadline is 11 June.

    UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16812872/main.jpg
    Mark Dowdall
  • Iraq LNG project delayed until next year

    13 May 2026

    Register for MEED’s 14-day trial access 

    Iraq’s first liquefied natural gas (LNG) import terminal, which has an estimated project value of $450m, is now expected to become operational in 2027 due to delays caused by the regional war and disruption to shipping through the Strait of Hormuz.

    Work on jetty reinforcement and fixed terminal infrastructure at the Port of Khor Al-Zubair has been delayed, according to a statement from US-based Excelerate Energy, which is contracted to develop the facility.

    In its statement, the company said: “We are revising our full-year guidance to reflect the delayed startup of our Iraq terminal due to the ongoing conflict in the Middle East.”

    It added: “The Iraq project fundamentals remain unchanged. Looking ahead, we continue to have confidence in our sequenced earnings growth through 2028.”

    In October 2025, Excelerate signed a definitive commercial agreement with a subsidiary of Iraq’s Ministry of Electricity for the development of the country’s first LNG import terminal.

    The integrated project includes a five-year agreement for regasification services and LNG supply, with extension options, and a minimum contracted offtake of 250 million standard cubic feet a day (cf/d).

    Excelerate said: “Jetty reinforcement and construction of the fixed terminal infrastructure have been delayed temporarily due to the conflict in the Middle East and the terminal is no longer expected to commence operations in the third quarter of 2026 as previously disclosed.

    “Project startup is now expected in 2027. The long-term fundamentals supporting the project remain unchanged, driven by chronic power shortages and limited domestic gas processing capacity in Iraq.

    “Current conditions further reinforce the country’s need for reliable and scalable LNG import infrastructure and construction will resume as conditions allow.”

    Earlier this year, Iraq’s Ministry of Electricity said that the terminal was on track to come online on 1 June, ahead of expected gas shortages during the summer months.

    Then, in late April, the ministry said the project had been delayed by several months and was expected to come online in August at the earliest.

    Although Iraq is Opec’s second-largest oil producer after Saudi Arabia, it is a net natural gas importer because its lack of infrastructure investment has meant that, until 2023, it flared roughly half of the estimated 3.12 billion cf/d of gas produced in association with crude oil.

    Iraq’s reliance on flaring associated gas instead of gathering and processing it has prevented the country from fully realising its potential as a gas producer and forced the Iraqi government to rely on costly gas and electricity imports from Iran.

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

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16803348/main.jpg
    Wil Crisp