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
  • Contractors submit prices for Upper Zakum expansion project

    16 March 2026

     

    Contractors have submitted commercial proposals for the next expansion phase of the Upper Zakum offshore field development in Abu Dhabi, aimed at increasing the asset’s oil production potential to 1.5 million barrels a day (b/d).

    The offshore oil and gas production business of Abu Dhabi National Oil Company (Adnoc Offshore) has divided the UZ 1.5MMBD project’s engineering, procurement and construction (EPC) scope of work into three packages, MEED previously reported.

    Contractors submitted commercial bids for package 1 by the 23 February deadline and for packages 2 and 3 by the 27 February deadline, according to sources. The previous deadline for submission of commercial bids was 15 January.

    Adnoc Offshore is understood to have issued the main tender for EPC works for the UZ 1.5MMBD project in the third quarter of last year.

    Contractors submitted technical bids for package 1 by 21 November, while proposals for packages 2 and 3 were submitted by 14 November, MEED previously reported.

    In November 2024, MEED reported that Adnoc Offshore had awarded a contract for front-end engineering and design (feed) and pre-feed services on the project to France-headquartered contractor Technip Energies.

    A kick-off meeting between Adnoc Offshore and Technip Energies took place on 21 November 2024.

    Located 84 kilometres offshore in Abu Dhabi, Upper Zakum is the world’s second-largest offshore oil field and fourth-largest oil field.

    The UZ 1.5MMBD project is the latest crude output expansion undertaken by Adnoc Offshore at the Upper Zakum field development.

    Upper Zakum expansion

    The first phase of the programme to raise the Upper Zakum offshore field development’s oil production capacity to 1.2 million b/d was launched in 2019. The initial goal was to increase the field’s output potential to 1 million b/d by 2024, which was later increased to 1.2 million b/d, with the project execution timeline eventually extended.

    In April last year, MEED reported that Adnoc Offshore had awarded the main EPC contract for the UZ 1.2MMBD EPC-1 project to UAE-based Target Engineering Construction Company. The value of the contract was estimated to be $825m.

    The project’s main scope involved the EPC of several surface facilities and plants at the Upper Zakum offshore development’s four main artificial islands: Al-Ghallan, Umm Al-Anbar, Ettouk and Asseifiya – also known as Central Island, West Island, North Island and South Island, respectively.

    Spanish contractor Tecnicas Reunidas won the contract for the feed works on the UZ 1.2MMBD EPC-1 project in 2019. UK-headquartered Wood Group was appointed as the project management consultant for the EPC phase.

    In November 2024, MEED reported that Adnoc Offshore had also selected Target for the second phase of the Upper Zakum 1.2 million b/d project (UZ 1.2MMBD EPC-2). The value of the contract was estimated to be about $500m, according to sources.

    Target began work on the project in December last year, MEED previously reported.

    The scope of work on the UZ 1.2MMBD EPC-2 project covers the EPC of several structures on Assefiya Island.

    Adnoc Offshore performed the feed work on the UZ 1.2MMBD EPC-2 project in-house.

    Upper Zakum oil production

    Adnoc Offshore has committed to a total capital expenditure budget of approximately $30bn, along with its operating partners in the Upper Zakum hydrocarbons concession, Japan Oil Development Company (Jodco) and US-based ExxonMobil.

    The strategic objective is to first raise the asset’s oil output from 640,000 b/d to 750,000 b/d through the UZ 750 project, then to 1.2 million b/d through the two phases of the ongoing UZ 1.2MMBD project, and eventually to 1.5 million b/d.

    Zakum Development Company (Zadco), which later merged into Adnoc Offshore, awarded EPC contracts for the UZ 750 project in 2012 and early 2013.

    The $817m first package was awarded to a consortium of Abu Dhabi’s NMDC Energy (then known as National Petroleum Construction Company) and Technip Energies. Package two, the project’s largest EPC package, worth $3.7bn, was awarded to a consortium of UK-headquartered Petrofac and South Korea’s Daewoo Shipbuilding & Engineering.

    EPC work on UZ 750 began in 2014 and was completed in 2022.

    In October 2022, Adnoc Group subsidiary Adnoc Drilling set a world record for drilling the longest oil and gas well at the Upper Zakum concession, stretching 50,000 feet.

    The extended-reach wells will tap into an undeveloped part of the Upper Zakum reservoir, potentially increasing the field’s production capacity by 15,000 b/d without expanding or building any new infrastructure, Adnoc said.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15996020/main.jpg
    Indrajit Sen
  • Neom cancels The Line tunnels contracts

    16 March 2026

     

    Register for MEED’s 14-day trial access 

    Neom has cancelled the contracts related to the construction of the tunnel sections of The Line in northwest Saudi Arabia.

    In a stock exchange announcement filed on 13 March, South Korean contractor Hyundai E&C said that Neom cancelled its contract on 29 December last year.

    Hyundai E&C was executing the drill-and-blast section of The Line’s tunnels in a joint venture with Greece’s Archirodon and South Korean counterpart Samsung C&T.

    The firm said its share of the joint venture was about 35%, amounting to $483m.

    Neom awarded contracts for constructing the mountain tunnel sections of The Line in June 2022.

    The drill-and-blast works were split into four packages, with two contracting teams winning two packages each.

    The other joint-venture team comprised Spain’s FCC, the local Shibh Al-Jazira Contracting Company (Sajco) and Beijing-based China State Construction Engineering Corporation. 

    The tunnels formed part of the infrastructure backbone of Neom’s 170-kilometre The Line development, launched in January 2021.

    What began as Crown Prince Mohammed Bin Salman’s defining symbol of a post-oil Saudi Arabia unravelled with quiet finality over roughly two years. By April 2024, planners were reportedly being forced to cut the initial phase to just 2.4km by 2030.

    By July last year, with the sovereign wealth fund facing tightening liquidity, the kingdom was reported to have conducted a “strategic review” to determine whether The Line was feasible – a process described as a “recalibration” of Vision 2030.

    Resources are now being directed to projects essential for the Fifa World Cup 2034, Expo 2030, and critical housing, healthcare and education targets.

    According to media reports, the government has pivoted towards repositioning what remains of Neom as an industrial and data centre hub, leveraging the Red Sea coastline’s access to seawater cooling for artificial intelligence (AI) infrastructure.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15995688/main.gif
    Yasir Iqbal
  • Bidders get more time for Riyadh East sewage treatment plant

    16 March 2026

     

    State water offtaker Sharakat, formerly Saudi Water Partnership Company (SWPC), has extended the bid submission deadline for the Riyadh East independent sewage treatment plant (ISTP).

    The new deadline is 30 June. The original deadline was 2 April.

    The project will be developed under a build‑own‑operate‑transfer (BOOT) model with a 25‑year concession term.

    The plant will have a treatment capacity of 200,000 cubic metres a day (cm/d) in its first phase, expanding to 500,000 cm/d in the second phase.

    It includes the development of a treated sewage effluent transmission pipeline, forming part of the kingdom’s wider programme to expand wastewater treatment capacity through public-private partnerships.

    The request for proposals (RFP) was issued last October. 

    In 2024, Sharakat prequalified 53 companies that could bid for the Riyadh East ISTP, part of seven planned ISTP projects it said it would procure between 2024 and 2026

    WSP is the technical adviser and KPMG Middle East is the lead and financial adviser on the project.

    The targeted commercial operation date for the facility is 2029.

    ISTP plans

    Sharakat’s current ISTP portfolio includes 10 large plants that are operational, under construction or under tendering, with a combined initial treatment capacity of 1.79 million cm/d.

    These projects include North Taif, Jeddah Airport, West Dammam, Madinah 3, Buraydah 2, Tabuk 2, Al-Haer, Arana, Hadda and Riyadh East. 

    In December, two consortiums were selected for contracts to develop and operate the Hadda and Arana ISTP projects in Mecca province.

    That same month, Sharakat prequalified 63 developers for upcoming ISTP projects under a revised prequalification process.

    According to Sharakat’s newly released seven-year statement, it has identified six additional large ISTPs in the development pipeline.

    These include:

    • Kharj (75,000 cm/d)
    • Abu Arish (50,000)
    • Hafar Al-Batin (100,000)
    • Riyadh North (TBD)
    • Najran South (50,000)
    • Khamis Mushait (50,000)

    The company is also pursuing a nationwide small sewage treatment plant programme covering about 139 smaller ISTPs grouped into seven clusters.

    These are designed to add roughly 521,450 cm/d of additional treatment capacity across the kingdom.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15993509/main.jpg
    Mark Dowdall
  • Modon launches Tara Park on Abu Dhabi’s Reem Island

    16 March 2026

    Abu Dhabi-based Modon Holding has launched the Tara Park residential project in the Reem Island area.

    The project comprises two residential towers with a total of 340 residential units.

    The development includes a 527-metre jogging track.

    The latest project launch follows Modon Holding’s launch of the Bashayer residential waterfront community on Hudayriyat Island.

    The project will comprise 157 four- and five-bedroom villas centred around a clubhouse with a rooftop infinity pool, and 330 one- to four-bedroom apartments across two low-rise buildings.

    The development comprises a 3.5-kilometre waterfront promenade and a park.

    In October last year, Modon Holding launched the Maysan residential development on Abu Dhabi’s Reem Island.

    This development covers an area of about 600,000 square metres.

    Maysan is being developed in several phases. The project’s first phase involves developing two districts: Mayar and Thoraya.

    The first district, Mayar, consists of 132 mansions. The four-storey mansions will be located within a gated community featuring a central park and walking trails.

    The second district, Thoraya, features 184 townhouses. It will include gardens, play areas, a gym and other associated facilities.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15993317/main.jpg
    Yasir Iqbal
  • Jordan begins prequalification for Amman water project

    16 March 2026

    Jordan’s Ministry of Investment has issued a request for qualifications (RFQ) for a non-revenue water (NRW) reduction project in the southern and southeastern areas of Amman.

    The project will be delivered under a public-private partnership (PPP) model using a design, build, finance, operate and maintain structure. It aims to reduce water losses and improve the efficiency of water distribution networks in the targeted areas.

    The initiative is being led by the Ministry of Investment through its PPP unit in collaboration with the Ministry of Water & Irrigation, the Water Authority of Jordan and Miyahuna.

    The procurement is expected to attract international water operators, engineering contractors and infrastructure investors with experience in NRW reduction programmes.

    The bid submission deadline is 23 April.

    Jordan has prioritised reducing NRW as part of efforts to improve the efficiency of its water sector. The country is among the most water-scarce in the world, and losses from distribution networks are estimated to account for about 45% of water supplied.

    NRW reduction programmes typically involve measures such as network rehabilitation, leak detection, pressure management and improved metering to reduce physical and commercial losses across water systems.

    Jordan is also advancing its $6bn Aqaba-Amman water desalination and conveyance project that aims to meet about 40% of Jordan’s municipal water demand by 2040.

    As MEED recently reported, the project is nearing financial close. Once complete, it will supply about 300 million cubic metres of potable water a year from the Red Sea to Amman and other regions.

    In February, the Water Authority of Jordan signed a four-year performance-based management contract with France’s Veolia to support water and wastewater services in the country’s northern governorates.

    Under the contract, Veolia will provide operations, maintenance and management services to Yarmouk Water Company, the public utility responsible for water supply and wastewater services in the region.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15993071/main.jpg
    Mark Dowdall