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
  • Kuwait on track to hit oil production target

    7 October 2026

    Kuwait is on track to meet its target of having 4 million barrels a day (b/d) of oil production capacity by 2035, according to Kuwait Petroleum Corporation (KPC) chief executive Shaikh Nawaf Al-Sabah.

    Al-Sabah also said Kuwait is on course to increase non-associated gas production to 2 billion cubic feet a day by 2040.

    His comments come amid an ongoing crisis in Kuwait’s oil and gas sector linked to the regional conflict that began when the US and Israel attacked Iran on 28 February.

    The subsequent war has significantly disrupted shipping through the Strait of Hormuz, which is a crucial export route for Kuwaiti crude oil.

    Kuwait is currently producing around 2 million b/d of oil, down from 2.6 million b/d before the US and Israel attack.

    Speaking at a conference in London, Al-Sabah said: “We have the capacity to go back up to our current maximum sustainable capacity of 3 million b/d, if we have the export routes available, and this comes down to the ability to move oil through the Strait.”

    KPC is investing $9bn-$10bn a year in capital expenditure to meet its oil and gas production goals, according to Al-Sabah.

    He said: “We are doing this because we recognise that it is our hydrocarbons that will be most in demand a decade from now, and two decades from now – in fact, for the rest of our lifetimes.”

    Project Seef

    KPC is pushing ahead with the Al-Seef project, which focuses on developing three large offshore oil discoveries, Al-Sabah said.

    The offshore fields are known as Nokhatha, Julaia and Jazza. The development was first announced in February this year, about two weeks before the US and Israel attack on Iran.

    Al-Sabah said KPC is continuing with the project and believes the three fields collectively hold more than 3 billion barrels of recoverable oil.

    He said: “We are asking international oil companies to partner with us to develop those resources under an operating services contract.

    “So, we’re moving ahead according to the exact same schedule that we had put together even before the war began.”

    Al-Sabah did not say which international oil companies KPC has approached to help develop the three offshore fields.

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

    Industry and logistics drive development at Neom; Saudi Arabia’s investment priorities realign amid conflict; MEED’s 2026 power developer ranking.

    Distributed to senior decision-makers in the region and around the world, the October 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20315147/main.jpg
    Wil Crisp
  • Al-Yamamah signs Saudi 380kV transmission deals

    6 October 2026

    Riyadh-headquartered Al-Yamamah Steel Industries has signed two supply contracts with Algihaz Contracting Company for the construction of 380kV ultra-high-voltage transmission lines in Saudi Arabia’s Western Region.

    The contracts cover the supply of steel towers and are worth a combined SR254.28m ($67.8m).

    In a disclosure to the Saudi Exchange (Tadawul), the firm said the first contract is valued at SR135.65m ($36.2m), while the second is worth SR118.63m ($31.6m).

    Both contracts have a one-year duration, with supply scheduled to begin in March 2027. The financial impact of the contracts is expected to start appearing in Al-Yamamah Steel’s results in the first quarter of 2027. 

    Algihaz is currently carrying out construction works for several transmission projects, including Saudi Energy’s $206m Bisha 380/132kV BSP connection project, for which it was appointed the main contractor in 2025.

    The project involves a double-circuit 380kV overhead transmission line connecting the Bisha PV bulk supply point to the existing bulk supply points in Aseer Province.

    The deals also add to a series of steel tower contracts secured by Al-Yamamah Steel for 380kV transmission projects in the Western Region.

    In September, the company signed a SR103.14m ($27.5m) contract with the Saudi branch of National Power Construction Corporation to supply steel towers for a 380kV ultra-high-voltage line. Supply under that contract is due to begin in February 2027. 

    Al-Yamamah Steel also signed a SR176.48m ($47.1m) contract in November 2025 with Arabian Electrical Transmission Line Construction Company to supply steel towers for another 380kV ultra-high-voltage line in the Western Region. 

    The company has expanded its tower production capacity in recent years to meet expected demand for steel towers used in electricity transmission lines. Its 2024 annual report said it had added production lines and a galvanising plant in Jeddah Industrial City for this purpose. 

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

    Industry and logistics drive development at Neom; Saudi Arabia’s investment priorities realign amid conflict; MEED’s 2026 power developer ranking.

    Distributed to senior decision-makers in the region and around the world, the October 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20308551/main.jpg
    Mark Dowdall
  • Eagle Hills plans new Syria projects

    6 October 2026

    Abu Dhabi-based real estate developer Eagle Hills has signed a framework agreement with Syria’s Ministry of Public Works & Housing to develop a series of residential and tourism community projects across several Syrian governorates.

    The first phase will include Damascus Heights in the capital and Latakia Yachts & Marina on the Mediterranean coast.

    Damascus Heights is planned as a mixed-use community comprising homes, retail, hospitality and business facilities, supported by schools, healthcare services, green areas and resident amenities.

    Latakia Yachts & Marina is planned as a waterfront destination anchored by a marina, with homes, hotels, branded residences and leisure offerings.

    During development and operation, the projects are expected to support economic activity and tourism, create jobs across construction, hospitality and services, and add new housing, community facilities and tourism infrastructure.

    Syrian professionals and businesses are expected to play a central role in both delivery and operations, creating opportunities for contractors, suppliers and service providers, strengthening local supply chains and SMEs, and supporting skills development and knowledge transfer.

    Eagle Hills is also inviting applications for investment participation from Syrians in Syria and abroad, with priority for qualified Syrian individuals, businesses and institutions. 

    Following the signing, both projects will proceed to implementation, with enabling and construction works expected to begin shortly in Damascus and Latakia.

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

    Industry and logistics drive development at Neom; Saudi Arabia’s investment priorities realign amid conflict; MEED’s 2026 power developer ranking.

    Distributed to senior decision-makers in the region and around the world, the October 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20308460/main.jpg
    Yasir Iqbal
  • Contractors submit revised bids for Dukhan field facilities upgrade

    6 October 2026

     

    Contractors have submitted revised proposals to QatarEnergy for a key tender to upgrade facilities at the Dukhan oil field in Qatar, about 80 kilometres west of Doha.

    Following the submission of the initial round of bids for the project on 9 August, QatarEnergy requested revised proposals from contractors, which they submitted by 27 September, sources told MEED.

    The following local contractors, among others, are understood to be bidding for the DPFU Phase 1B (Part 2) tender, according to information obtained by MEED Projects:

    • Doha Petroleum Construction Company (Dopet)
    • Galfar Al-Misnad Engineering & Contracting
    • Qatar Engineering & Construction Company (Q-con)

    QatarEnergy originally stipulated a bond validity of 150 days (until 23 December) and a bid validity of 120 days (until 23 November) for the project.

    The engineering, procurement, installation and commissioning scope covers upgrades to 56 oil manifolds, 108 gas-lift manifold slots, chemical injection systems and key pumping facilities, along with associated piping, instrumentation, control, electrical and civil works.

    The scope includes the demolition of obsolete equipment, degassing station enhancements, and full testing and handover. It also encompasses additional capacity enhancement works under Part 3, mainly the installation of new oil export and produced-water transfer pumps, along with supporting facility modifications.

    The project involves complex interfaces and shutdown-critical activities, requiring expertise in live-plant integration.

    QatarEnergy issued the tender for the DPFU Phase 1B (Part 2) project on 8 June and initially set a bid submission deadline of 26 July, later extending it to 9 August.

    Dukhan, Qatar’s first and only onshore oil field, was discovered in 1938, with oil production starting in 1939-40. The country currently produces about 1.8 million barrels a day (b/d) of crude, with the Dukhan field accounting for about 350,000 b/d.

    The Dukhan oil field covers about 80km by 8km and consists of four reservoirs: Khatiyah, Fahahil, Jaleha and Diyab. The first three are oil reservoirs. The more recently developed Diyab reservoir contains non-associated gas and is estimated to hold around 2 billion barrels of crude oil reserves. Diyab lies on Dukhan’s southern flank.

    ALSO READ: QatarEnergy selects contractors for offshore oil field expansion
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20306273/main5440.jpg
    Indrajit Sen
  • Dubai issues PMC tender for four stormwater projects

    6 October 2026

     

    Dubai Municipality has invited consultants to bid for a contract to provide construction supervision services for four stormwater projects.

    The bid submission deadline is 29 October.

    All four projects are part of the municipality’s Tasreef programme, intended to increase Dubai’s rainwater drainage capacity by 700% by 2033 and provide capacity for the emirate’s needs for the next 100 years.

    The tender for TF-06-S1 Supervision of Stormwater Drainage System Projects – Package 4 was issued on 6 October.

    The consultancy covers the following projects:

    • TF-06-C1: Construction of a stormwater pond connecting Al-Maktoum Airport and Dubai South
    • TF-06-C2: Construction of a stormwater drainage system connecting Al-Maktoum Airport and Dubai South
    • TF-07-C1: Construction of a stormwater drainage system on Sheikh Zayed Bin Hamdan Road connecting developers
    • TF-24-C1: Connecting developers’ areas to the stormwater networks in Dubailand 

    In documents seen by MEED, the municipality said it will require a dedicated supervision team for each project.

    The consultancy will cover construction supervision, including the deployment of resident engineers, civil engineers, inspectors, quantity surveyors, land surveyors and planning engineers. Mechanical engineers will also be required, along with health and safety personnel and NOC engineers, depending on the project. 

    TF-07-C1 is the same strategic stormwater drainage project that Dubai Municipality recently tendered for construction, with contractors preparing to submit bids on 22 October.

    The project covers more than 100 million square metres between Sheikh Mohammed Bin Zayed Road and Emirates Road, and from Expo Road to Dubailand.

    It will provide stormwater infrastructure and service connections for more than 20 private developers and Al-Yalayis 5, as well as supporting major roads in the Jebel Ali area. The construction scope includes a major gravity drainage system with pipeline diameters of up to 3,000mm.

    TF-24-C1 is one of three water infrastructure tenders issued by the municipality in August, as reported by MEED. The project will connect developers’ areas in Dubailand to the stormwater network. It includes 18 kilometres (km) of stormwater drainage pipelines with diameters of up to 1,800mm and 3.5km of gravity sewer pipelines with diameters of up to 1,000mm.

    Bidding for the engineering, procurement and construction contract was recently extended to 1 October, with Nael Construction & Contracting and Al-Nasr Contracting Company among those expected to make an offer for the project.

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

    Industry and logistics drive development at Neom; Saudi Arabia’s investment priorities realign amid conflict; MEED’s 2026 power developer ranking.

    Distributed to senior decision-makers in the region and around the world, the October 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/20305174/main.jpg
    Mark Dowdall