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
  • Managing risk in the GCC construction market

    19 December 2025

     

    The scale and complexity of construction projects under way in the GCC region has attracted global attention. And while large-scale project announcements continue to dominate the headlines, the underlying risks – insufficient financing, harsh contract clauses and a tendency to delay dispute resolution – are often overlooked.

    Around the region, many contractors are experiencing difficulties once projects have started because they mistakenly believe they have the necessary in-house skillsets to navigate these complex issues.

    MEED has convened a panel of construction consultants and specialists to develop a checklist to help contractors and subcontractors operating in the region to navigate the market’s challenges as the sector moves into 2026.

    The proactive steps are aimed at positioning a company so that it can maximise recovery and mitigate threats posed by unresolved claims and poor commercial or contractual administration.

    Systemic risk

    The regional market is characterised by several systemic issues that amplify risks for contractors. 

    The fundamental problem is finance. Projects frequently suffer because they are not fully financed from the start, which places financial strain on contractors. This problem is then compounded by the region’s traditional contractual environment, which means disputes are typically not finalised until well after jobs have been completed, creating cash flow problems for contractors, particularly near the end of such projects.

    Further financial strain is created by unconditional performance guarantees and retention. The combined requirement for advance payment bonds, a 10% performance bond and sometimes 5%-10% retention represents a significant draw on contractors’ cash flow. The growing tendency of employers to pull bonds further exacerbates the situation.

    Many contractors sign up to one-sided contracts so as to secure more work, rather than challenging their employers. Key contractual issues include:

    > Unrealistic timelines: Contractors set themselves up to fail by accepting unrealistic timescales on projects, despite the knowledge that the work often takes twice as long.

    > Deficient design: A major risk, particularly on high-profile projects, is a lack of specification and design progress. Many contracts, such as the heavily modified Silver Book – a standard contract published by the International Federation of Consulting Engineers (Fidic) for turnkey engineering, procurement and construction projects – presuppose that the contractor has sufficient information to design, build and deliver, even when there is substantive information missing, which renders lump-sum pricing obsolete and inevitably leads to dispute.

    > Lowest-bid mentality: Contractors often fail to factor necessary commercial support from legal and claims specialists into their tender figures, making their bid appear more competitive but leaving them without a budget to seek help until it is too late. As a result, projects are managed with budgets that are barely sufficient, rather than being run properly to a successful conclusion.

    Supply-chain erosion

    The quality and capacity of the subcontractor market, particularly in the mechanical, electrical and plumbing (MEP) field, has eroded significantly. 

    Some major MEP players have closed or left the market due to underpricing, prompting contractors to call in their performance bonds. This means the region is receiving progressively lower quality for increasingly higher costs, further straining the delivery phase for main contractors.

    The risk of subcontractor insolvency is increasing and must now be considered a primary project risk. Contractors should monitor financial health, diversify subcontractor dependencies, challenge allocated resources and secure step-in rights wherever possible.

    Many Silver Book contracts in the GCC now include heavily amended, employer-friendly clauses that push design and ground-risk even further onto the contractor – often beyond what Fidic intended. These amendments require careful review and firm pushback.

    The GCC remains a market of opportunity, but success in 2026 will belong to contractors that combine disciplined tendering, transparent commercial governance and early issue resolution. Optimism is not a strategy; preparation is. 

    A 10-point checklist for contractors in 2026

    1. Mandate contractual due diligence: Invest time and money into a thorough contract review before signing. Be prepared to challenge harsh clauses, particularly those unfairly allocating risk, such as unknown conditions and full design responsibility. Assume that bespoke rather than standard amendments govern your entitlement. Treat the special conditions as the real contract.

    2. Factor commercial support into the budget: Do not omit the cost of essential commercial support from the tender, such as quantity surveyor teams, quantum and delay specialists, legal review and claims preparation. Even if not visible in the front-line figures, this cost – which could be as low as 0.01% of the project value – must be factored in to ensure a budget for early and continuous engagement.

    3. Prepare a realistic baseline programme: Stop committing to programmes just to fit the tender. Develop a realistic programme from the start, identifying risks and including necessary code books to track delays early. Consider commissioning an independent programme review at the tender stage – this is common internationally and reduces later arguments about logic, durations and sequencing.

    4. Confirm project funding: Ensure that the project financing is fully in position before starting work. Many problems stem from projects that are only partially financed, leading to cash running out near completion. Gone are the days of not asking employers for greater transparency when it comes to funding projects.

    5. Establish a strong commercial and claims function: This is where commercial management starts. Set up systems to ensure contractual compliance, including seven-day claim notifications. Variations are inevitable, and proper substantiation is required to secure entitlement – if it is not recorded, it cannot be recovered. Diaries, cost records and notice logs remain the foundation of entitlement.

    6. Seek early specialist engagement: Prevention is better than a cure. Bring in specialists early to examine time and cost issues before problems arise. Consultants can provide advice, help set up the correct commercial systems and prevent the escalation of unresolved issues.

    7. Adopt an old-school approach to claims management: Technology is useful, but nothing beats resolving issues face to face. Engage directly with the employer’s team regularly to negotiate and agree claims early. This manages the client’s expectations when it comes to budgeting and allows the contractor to secure cash flow sooner. A simple early-warning culture – even when not contractually required – prevents surprises and builds trust with the client.

    8. Avoid wasting resources: Focus claims efforts only on events that are actually recoverable and demonstrably critical. Contractors often waste time chasing things that will not be recoverable. Prioritise issues that are both time-critical and clearly fall under the employer’s risk – everything else should be logged but not pursued aggressively.

    9. Upskill internal teams: Use specialist involvement as an opportunity to upskill your in-house commercial team. Have them sit alongside specialist consultants to learn proper commercial and contractual administration processes, creating a lasting work-culture benefit.
    10. Push for faster dispute resolution: When a dispute arises, advocate for a swift resolution mechanism like adjudication, mediation or expert determination to temporarily resolve cash flow issues. Dispute adjudication boards are intended to give quick, interim decisions. However, if not set up from the start of the project, the process becomes protracted – sometimes taking many months – so fails to provide the cash-flow relief contractors urgently need.  Where clients resist adjudication, propose interim binding mediation or expert determinations, or failing this, milestone-based dispute workshops – anything that accelerates getting cash back on site.

    MEED would like to thank Refki El-Mujtahed of REM Consultant Services (refki@rem-consultant.com; www.rem-consultant.com) for facilitating this article, as well as the following co-contributors:

    Aevum Consult | Lawrence Baker | lawrence.baker@aevumconsult.com | www.aevumconsult.com

    Decerno Consultancy | Lee Sporle | leesporle@decernoconsultancy.com | www.decernoconsultancy.com

    Desimone Consulting | Mark Winrow | Mark.Winrow@de-simone.com | www.de-simone.com

    Forttas | Derek O’Reilly & Martin Hall | derek.oreilly@forttas.com & martin.hall@forttas.com | www.forttas.com

    IDH Consult | Ian Hedderick | ian.hedderick@idhconsult.com | www.idhconsult.com

    White Consulting | Nigel White | nigelwhite@whiteconsulting-me.com | www.whiteconsulting-me.com

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15289183/main.gif
    Colin Foreman
  • Diriyah signs land lease deal with King Saud University

    19 December 2025

    Saudi Arabia gigaproject developer, Diriyah Company, has signed a long-term land lease agreement with Riyadh Valley Company, an investment arm of King Saud University.

    Diriyah Company will lease 552,000 square metres (sq m) of land from King Saud University for a period of 70 years. 

    The deal will enable the company to add the land bank to its second phase of the Diriyah Project, which is also known as DG2.

    The agreement was signed by Diriyah Company's Group CEO, Jerry Inzerillo, and the acting president of King Saud University and Riyadh Valley Company chairman, Ali Masmali.

    Diriyah Company is already developing the area adjacent to King Saud University. In April, it awarded an estimated SR4bn ($1.1bn) contract for a utilities relocation package for the King Saud University project located in the second phase of the Diriyah Gate development (DG2).

    The contract was awarded to the joint venture of Beijing-headquartered China Railway Construction Corporation and China Railway Construction Group Central Plain Construction Company.

    The scope of the contract covers the design, construction and relocation of KSU's utilities and administration offices, as well as the construction of a district cooling plant, water storage facilities, a sewage treatment plant, a natural gas plant, a diesel transfer pumping station, a utility tunnel, irrigation water storage tanks, office buildings, warehouses and maintenance workshops.

    In addition to KSU, DG2 will feature residential developments, hotels, an opera house, the Saudi Museum of Contemporary Art, six academies, an arena and a mosque.

    The Diriyah masterplan envisages the city as a cultural and lifestyle tourism destination. Located northwest of Riyadh’s city centre, it will cover 14 square kilometres and combine 300 years of history, culture and heritage with hospitality facilities.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15287776/main.jpg
    Yasir Iqbal
  • Kuwait to sign Mubarak port agreement next week

    19 December 2025

    Kuwait and China are expected to sign the agreement to develop the subsequent phases of Kuwait’s Grand Mubarak Port next week.

    According to media reports, the announcement was made by Kuwait’s Public Works Minister ​Noura Al-Mashaan on Thursday.

    The contract value is estimated to be about KD1.2bn ($4bn).

    In May, Beijing-headquartered China Harbour Engineering Company, a subsidiary of China Communications Construction Company (CCCC), signed an early contractor involvement (ECI) agreement with Kuwait to develop the next phases of the project.

    The initial works include surveying, investigation, hydrological observation, geophysical exploration, testing, model testing, process simulation, design review, owner inspection, preliminary design of sand-retaining embankments, and on-site services and management.

    The project launch ceremony was held in mid-April. It was attended by several high-profile representatives from Kuwait and China, including Fu Xuyin, China’s vice-minister of the Ministry of Transport, Zhang Jianwei, the Chinese ambassador to Kuwait, and Nora Mohammad Al-Mashaan, Kuwait’s minister of public works.

    In January, MEED reported that Kuwait’s cabinet had approved a bid from China Communications Construction Company to implement all stages of its Mubarak Al-Kabeer Port project.

    The country ramped up its efforts on the project after meetings between Kuwaiti and Chinese officials in June last year.

    In 2023, the two countries signed a memorandum of understanding to develop port infrastructure.

    Phase one of the project cost $1.2bn and was completed in 2014.

    The project’s first phase included site levelling and the development of a marina, quay walls, berths, a navigational terminal and port buildings.

    The port is not operational because the phase one works did not include vital equipment such as cranes.

    It is understood that the completion of phase two will allow the port to start operations.

    The full scope for phase two of the project is expected to include:

    • Construction of loading and unloading facilities
    • Construction of quay walls and reclamation
    • Construction of the container yard and the back of the port
    • Infrastructure works
    • Construction of buildings
    • Construction of a container terminal
    • Construction of associated facilities
    • Installation of safety and security systems

    A third phase is also planned to further expand the port.

    The latest developments follow a series of agreements signed in September 2023 to deliver some of Kuwait’s immediate development goals for 2024-28. These agreements will position Chinese companies to play a leading role in the Fourth Kuwait Master Plan 2040.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15287252/main.jpg
    Yasir Iqbal
  • Metito consortium wins Mecca sewage scheme

    19 December 2025

    A team comprising Metito (UAE), Etihad Water & Electricity Company (UAE) and SkyBridge Company (UK) has been awarded a contract to develop the Hadda independent sewage treatment plant (ISTP) project in Mecca Province, Saudi Arabia.

    The contract was awarded by Saudi Water Partnership Company (SWPC), the kingdom’s principal off-taker for water and wastewater public-private partnership (PPP) projects.

    The project will be developed on a build-own-operate-transfer basis and is expected to begin operations in 2028, followed by a 25-year operating term.

    The plant will provide an initial treatment capacity of 100,000 cubic metres a day and will feature a treated sewage effluent (TSE) reuse system with a storage tank and a 38-kilometre pipeline designed to handle 350,000 cubic metres a day.

    Earlier in December, MEED reported that the team had been named preferred bidder at a levelised tariff of SR2.354 ($0.63) a cubic metre.

    SWPC selected the Miahona-led consortium as the reserve bidder for this project with the second-lowest submitted bid of SR2.599($0.69) a cubic metre.

    According to SWPC, the TSE reuse system accounted for 31% of the preferred tariff for the Arana ISTP and 27% for the Hadda ISTP.

    In March last year, SWPC signed a 25-year water-purchase agreement with a team comprising the local Miahona Company and Belgium-based Besix for the contract to develop and operate the Al-Haer ISTP in Riyadh, as part of the third batch of the kingdom’s ISTP programme.

    Four months later, the Saudi-listed Power & Water Utility Company for Jubail & Yanbu (Marafiq) joined the developer consortium.

    The Miahona/Besix team offered to develop the project for SR1.9407 ($0.5173) a cubic metre, while the second-lowest bid, from a team comprising Spain’s Acciona and the local Tawzea, was SR2.2041($0.588) a cubic metre.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15287185/main.jpg
    Yasir Iqbal
  • Morocco awards $1bn Casablanca airport terminal deal

    19 December 2025

    Morocco’s National Airports Office (ONDA) has awarded a MD12bn ($1.2bn) contract to build the new terminal at Casablanca’s Mohammed V International airport.

    The contract was awarded to the joint venture of local firms Societe Generale des Travaux du Maroc (SGTM) and Travaux Generaux de Construction de Casablanca (TGCC).

    Construction work on the Mohammed V International airport expansion is expected to begin immediately.

    The project is slated for completion in 2029.

    The expansion will cover more than 600,000 square metres (sq m) and increase the airport’s capacity to 30 million passengers a year.

    The project is designed by a consortium comprising the local branch of French engineering firm Egis Batiment International, Morocco’s Ala Concept and UK-based RSHP Architects.

    The scope of work covers preparatory works, structural works, waterproofing, steel structural works, building facades, electrical, mechanical and plumbing (MEP) works, data centre works, HVAC systems and other associated works.

    The tender also covers the construction of a 300-key airside hotel.

    The new terminal is expected to be ready in time for the 2030 Fifa World Cup, which Morocco is co-hosting alongside Portugal and Spain.

    ONDA tendered the project contract on 4 November, with a bid submission deadline of 16 December, as MEED reported.

    In July, ONDA began early works on the new terminal building, awarding an estimated MD294m ($29m) deal for enabling works to local firm Societe de Travaux Agricoles Marocaine.

    In January, Morocco’s Transport & Logistics Minister, Abdessamad Kayouh, said that the study to expand the airport’s capacity was nearing completion.

    The project is part of Morocco’s MD42bn ($4.3bn) plan to expand key airports in anticipation of increased passenger flow for the 2030 football World Cup.

    Morocco plans to upgrade several airports, including those in Tangier, Marrakech and Agadir, increasing their respective annual passenger capacities to 7 million, 16 million and 7 million.

    There are also plans to add a new terminal at Rabat-Sale airport, raising its capacity to 4 million passengers annually, and to increase Fez airport’s capacity to 5 million passengers annually. 

    The new terminal at Mohammed V International airport will be connected to a high-speed train network linking Kenitra to Marrakech.

    READ THE DECEMBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Prospects widen as Middle East rail projects are delivered; India’s L&T storms up MEED’s EPC contractor ranking; Manama balances growth with fiscal challenges

    Distributed to senior decision-makers in the region and around the world, the December 2025 edition of MEED Business Review includes:

    > BAHRAIN MARKET FOCUS: Manama pursues reform amid strain
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15287093/main.jpg
    Yasir Iqbal