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
  • Dubai tenders Warsan waste-to-energy consultancy contract

    16 February 2026

    Dubai Municipality has issued a tender for consultancy services on the second phase of the Warsan waste-to-energy (WTE) plant.

    The tender covers feasibility, procurement and construction supervision services for the project.

    The bid submission deadline is 25 February.

    The project relates to the planned expansion of the Warsan WTE plant in Dubai. The scheme has an estimated budget of $500m.

    The facility will be located in Warsan 2, next to the Al-Aweer sewage treatment plant.  As MEED understands, it will use treated wastewater from that facility.

    The project scope includes construction of treatment lines, a boiler hall, waste bunkers, a flue gas treatment system, a main electrical station and associated infrastructure.

    The contract duration is six years

    Expansion strategy

    The original Warsan WTE plant, Dubai’s first major WTE public-private partnership (PPP) project, reached full commercial operations in 2024.

    Located in the Warsan area, the AED4bn ($1.1bn) facility treats 1.9 million tonnes of municipal solid waste annually, generating up to 220MW of thermal energy that is fed into the local grid.

    In February 2023, state utility Dubai Electricity & Water Authority (Dewa) and Dubai Waste Management Company signed the power-purchase agreement (PPA) for the project.

    Dubai Waste Management Company, the special-purpose vehicle implementing the scheme, reached financial close in June 2021 for the project.

    The main contractor was a consortium of Belgium’s Besix Group and Hitachi Zosen Inova of Switzerland.

    The expansion aligns with Dubai’s long-term waste strategy. In February 2022, the emirate approved a AED74.5bn budget covering waste management initiatives from 2021 to 2041.

    The strategy promotes innovation in waste management, recycling and energy conservation. It anticipates private sector contributions of AED70.5bn, equivalent to about 95% of the total planned investment.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15660272/main.jpg
    Mark Dowdall
  • Saudi Arabia wastewater plant reaches financial close

    16 February 2026

     

    The planned $500m industrial wastewater treatment plant (IWWTP) in Jubail in Saudi Arabia’s Eastern Province has reached financial close, sources have confirmed to MEED.

    Located in Jubail Second Industrial City, the facility will treat and recycle wastewater from Satorp’s under-construction Amiral chemical derivatives complex, also in Jubail.

    The project reached financial close after hedging arrangements were completed on 12 February, sources said.

    A consortium of Saudi utilities provider Marafiq, the regional business of France’s Veolia and Bahrain/Saudi Arabia-based Lamar Holding is developing the project under a 30-year concession agreement.

    Saudi Aramco Total Refining & Petrochemical Company (Satorp), a joint venture of Saudi Aramco and France’s TotalEnergies, awarded the contract last September.

    As MEED exclusively reported, Egypt’s Orascom Construction is the engineering, procurement and construction (EPC) contractor for the project, which is expected to be commissioned in 2028.

    Marafiq, formally Power & Water Utility Company for Jubail and Yanbu, will own a 40% stake in the dedicated project company. Veolia Middle East will hold a 35% stake, and Lamar Holding’s Lamar Arabia for Energy will hold the other 25%.

    The planned IWWTP, which will primarily serve the $11bn sprawling Amiral chemicals zone, will implement advanced water treatment and recovery technologies to process complex industrial effluents, including spent caustic streams. Treated water will be reintegrated into the industrial processes, supporting closed-loop reuse and energy efficiency.

    As of February, more than 50% of construction on Satorp’s Amiral facility has been completed. Commissioning is targeted for the end of 2027.

    Construction is also ongoing on a separate industrial wastewater treatment plant (IWTP8) in Jubail. Saudi Services for Electro Mechanic Works is the contractor for the development’s fourth expansion phase.

    The Marafiq-owned project is scheduled to be completed by the end of the quarter.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15660112/main.jpg
    Mark Dowdall
  • Riyadh tenders Expo 2030 site offices contract

    16 February 2026

     

    Saudi Arabia’s Expo 2030 Riyadh Company (ERC), tasked with delivering the Expo 2030 Riyadh venue, has tendered a contract that includes the construction of site offices required for the initial construction works.

    MEED understands that the package was retendered in early February, with a bid submission deadline of 26 February.

    The contract was first tendered in May last year, with bids submitted in July, as MEED reported.

    The tendering activity follows the Royal Commission for Riyadh City (RCRC) issuing a design-and-build tender for the construction of a new metro station serving the Expo 2030 site.

    The new metro station will be located on Line 4 (Yellow Line) of the Riyadh Metro network.

    MEED understands that the tender was floated in early February, with a bid submission deadline of 3 May.

    Construction work on the Expo 2030 Riyadh site is progressing at an accelerated pace. In January, ERC awarded an estimated SR1bn ($267m) contract to deliver the initial infrastructure works at the site.

    The contract was awarded to the local firm Nesma & Partners.

    The scope of work covers about 50 kilometres (km) of integrated infrastructure networks, including internal roads and essential utilities such as water, sewage, electrical and communication systems, and electric vehicle charging stations.

    Contractors are also bidding for infrastructure lots two and three. In December, MEED reported that ERC had floated another tender for the project’s initial infrastructure works.

    The masterplan encompasses an area of 6 square kilometres, making it one of the largest sites designated for a World Expo event. Situated to the north of the Saudi capital, the site will be located near the future King Salman International airport, providing direct access to various landmarks within Riyadh.

    Countries participating in Expo 2030 Riyadh will have the option to construct permanent pavilions. This initiative is expected to create opportunities for business and investment growth in the region.

    The expo is forecast to attract more than 40 million visitors.

    In a statement, the Public Investment Fund said: “During its construction phases, Expo 2030 Riyadh and its legacy are projected to contribute around $64bn to Saudi GDP and generate approximately 171,000 direct and indirect jobs. Once operational, it is expected to contribute approximately $5.6bn to GDP.”

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15659580/main.jpg
    Yasir Iqbal
  • Acwa refinances $2.45bn Hassyan IPP debt

    16 February 2026

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s Acwa has announced it has refinanced the existing debt facilities of the Hassyan independent power project (IPP) in Dubai.

    In a post on social media platform LinkedIn, the developer said the transaction is the largest refinancing it has completed, valued at $2.45bn.

    It added that the deal is backed by a new group of lenders. These lenders have yet to be disclosed.

    The Hassyan IPP has a generation capacity of 2,400MW and reached full commercial operations in 2023.

    The project was originally developed as a coal-fired IPP. It was later converted to operate on natural gas instead, reflecting changes in Dubai’s power generation strategy.

    A consortium comprising Acwa – formerly Acwa Power – and China’s Harbin Electric won the contract to develop the project in 2016.

    Acwa and Harbin Electric hold 26.95% and 14.7% stakes, respectively, in the project company Hassyan Energy Company. Dubai Electricity & Water Authority (Dewa) holds 51%, while Silk Road Fund owns 7.35%.

    The Hassyan plant forms part of Dewa’s wider generation portfolio. Other major assets include the Jebel Ali and Al-Aweer power complexes, Mohammed Bin Rashid Al-Maktoum (MBR) Solar Park and the Hatta hydroelectric project.

    MBR Solar Park is the largest single-site solar park in the world, with a planned capacity target of 7,260MW by 2030.

    Dewa recently extended the bid deadline for its seventh phase, which will add 2,000MW from photovoltaic solar panels and includes a 1,400MW battery energy storage system with a six-hour capacity.

    The new bid submission deadline is 1 May.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15659537/main.jpg
    Mark Dowdall
  • SWPC rebrands as Sharakat to reinforce PPP focus

    13 February 2026

    Register for MEED’s 14-day trial access 

    Saudi Water Partnership Company (SWPC) has unveiled a new corporate identity as part of a strategy to reinforce the role of public-private partnerships (PPPs).

    At a ceremony in Riyadh, the company said it will operate under the name Sharakat, reflecting its “evolution and expanding mandate in the kingdom’s water sector”.

    The new identity comes as Saudi Arabia expands the use of PPPs to deliver infrastructure projects.

    In January, the government launched a National Privatisation Strategy targeting more than 220 PPP contracts by 2030, including projects in the water sector.

    The government is targeting over $64bn (SR240bn) in private capital investments in this period, which it said would be “a new phase focused on execution and accelerating delivery”.

    Previously, the 2018 privatisation programme had focused on the ‘foundational phase’.

    SWPC has served as the principal offtaker of all water in Saudi Arabia since 2017. Its mandate covers desalinated water, transmission and treatment projects. It also includes small-scale plants, collection networks and strategic water reservoirs.

    The total investment value of its current projects exceeds SR56bn ($14.9bn), the offtaker said.

    According to MEED Projects, SWPC has over $11bn-worth of PPP projects in the pipeline, with two projects ($2.10bn) currently under bid evaluation.

    In December, local firm Vision Invest was named as the preferred bidder to develop and operate the 859-kilometre Riyadh-Qassim independent water transmission pipeline project. 

    The consortium of Miahona (Saudi Arabia), Marafiq Company and Buhur for Investment was also named as the preferred bidder for the Arana independent sewage treatment plant (ISTP).

    Financial close for both projects is expected in 2026.

    Meanwhile, SWPC has issued a request for proposals for the $150m Riyadh East ISTP, which will have a treatment capacity of 200,000 cubic metres a day (cm/d), expandable to 400,000 cm/day in the second phase.

    The bid submission deadline is 2 April. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15647732/main.jpg
    Mark Dowdall