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Saturday, 20 October 2018

Middle East & Africa Awards

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The Sweihan solar PV project was perceived as such a success by its procurer, ADWEA, that there is now talk of 1.5GW to 3GW a year of new solar PV projects in Abu Dhabi over the next few years. At 1,177MW, Sweihan itself will be the world’s largest solar PV plant.

Middle East & Africa Power Deal of the Year – Sweihan

The Sweihan solar PV project was perceived as such a success by its procurer, ADWEA, that there is now talk of 1.5GW to 3GW a year of new solar PV projects in Abu Dhabi over the next few years. At 1,177MW, Sweihan itself will be the world’s largest solar PV plant.

The tariff on the project is competitive, to say the least – US$0.0294/kWh. The Marubeni/Jinko team bid US$0.0242/kWh but during the all-important summer months it will receive 1.6x the tariff. The bidders were told to maximise power output at the site so gas-fired plant could be switched off during the summer. The bids were lodged in September 2016. The deal, despite its size, rattled though to financial close in May this year without too many hiccups in the traditional ADWEA style. The scheme is due into operation in Q2 2019.

Financing was made up of a five-year soft mini-perm, with a 26-year term, priced competitively at 120bp to 190bp. It will be interesting to see what happens at the end of the mini-perm, whether the debt is rolled over or put into the capital markets. MUFG acted as the documentation bank and global facility agent on the deal. The other banks were SMBC, Norinchukin, Natixis, BNP Paribas, Credit Agricole and First Abu Dhabi Bank.

Marubeni is Japan’s largest conglomerate and for this scheme tied up with China’s Jinko Solar, the largest global PV module manufacturer in 2016. Shapoorji Pallonji is the contractor. It is wrapping the deal including the Jinko panels. ADWEA will owns 60% of the project company. ADWEA was advised by Alderbrook Finance, Fichtner and Akin Gump. The Marubeni/Jinko team was advised by Norton Rose Fulbright, while the lenders were advised by Shearman & Sterling. Other advisers were JLT, Sgurr Energy and Operis.

Middle East & Africa Renewables Deal of the Year – DEWA solar

The 800MW solar PV project procured by DEWA was one of the first mega solar PV schemes that went out to tender. These types of schemes are now becoming common but when the DEWA bids were submitted, in May 2016, the concept was new. And the bid was highly competitive – at US$0.0299/kWh.

The scheme was DEWA’s third solar project – it had worked itself up via a 10MW project and then a 200MW scheme. One of the first mega deals, the financing took over a year to get to close but by then mega solar projects had become all the rage around the world – presumably spurred on by DEWA’s US$0.0299/kWh tariff.

Mubadala’s Masdar was the driving force behind the bidding. It originally bid with solar specialist FRV but EDF Energies Nouvelles soon replaced FRV. The team had a highly competitive EPC price from a team led by Spanish company Gransolar and including Acciona Industrial and Ghella. The project will be executed in three phases and is expected to be complete during the first half of 2020.

The financing is an eight-year US$650m soft mini-perm. It is priced at 175bp during construction, stepping up to 180bp during the rest of the soft mini-perm period and then 250bp to 350bp if the scheme is not refinanced. The deal is split between a US$450m conventional tranche and a US$250m Islamic tranche. The equity is split 60/40 between Masdar and EDF Energies Nouvelles, with SMBC providing an equity bridge loan to EDF Energies Nouvelles.

The senior debt has been provided by Union National Bank, Islamic Development Bank, Apicorp, Natixis, Siemens Financial Services, KDB and EDC. Synergy Consulting was the financial adviser to the consortium and Allen & Overy was the legal adviser. Clifford Chance advised the lenders. KPMG, Norton Rose Fulbright and Fichtner are advising DEWA on the procurement.

Middle East & Africa Resource Deal of the Year – APCO

You think you have seen it all and then along comes the Attarat Power Company (APCO) deal. The deal is actually an old fashioned project financing as the scheme is not banked on a tolling agreement. But what it finances is not run of the mill.

The scheme involves mining oil shale from an open cast mine within a 35km2 site, supplying water to the mine via two aquifers, one being at a depth of 1km, and then operating a 554MW power plant – all under the same funding umbella. The site is at Attarat, 100km south-east of Amman. Analysing all the components risks in the deal took a long time, even if the concept of a mine-mouth power plant is simple enough.

The scheme is involves a truly cosmopolitan range of international players – led by the Belt & Road Initiative (BRI) Chinese, a Malaysian power plant operator and oil shale specialists from Estonia. Then add in financial and legal advisers from the City of London.

The scheme will cost US$2.1bn and the project finance size is US$1.582bn. The lenders are Chinese – ICBC, Bank of China, China Construction Bank and China Exim. Chinese export credit rating agency Sinosure supplied its largest single cover package to the project. Standard Chartered is the onshore security agent and has provided a US$33m guarantee to back state utility Nepco on the deal.

Estonia’s Eesti was the original sponsor on the deal. It bought in YTL Power from Malaysia when the idea of using oil shale as fuel for a power plant came along. The two then selected Guangdong Yudean Group Co Ltd as EPC contractor and co-sponsor. Financial adviser was Evercore Partners and Slaughter & May was the international legal counsel. Local counsel was Ali Sharif Zu/bi Advocates & Legal Consultants. Other advisers were Mott MacDonald, Poyry and Aon UK.

Middle East & Africa Bond Deal of the Year – ACWA APMI One

The APMI One bond secured on the equity in eight ACWA Power schemes in Saudi Arabia certainly had its complexities. The financial structure is more akin to a New York investment vehicle than a Saudi power producer but in the end the deal came through – US814m of 22-year funding rated Baa3/BBB–.

For the sponsor, the deal frees up bank lines, equity bridge and intercompany loans and its balance sheet. It is non-recourse to the parent but certain other securities and pledges provide back-up to the investors. The deal was backed by cashflows from eight Saudi power and power and water projects plus all important revenues from ACWA’s operation and maintenance company NOMAC. Indeed, NOMAC and the Rawec inside the fence plant for the Petrorabigh scheme make up most of the revenues backing the bond. The other seven assets already have leverage via project finance loans.

The deal was originally floated at the end of 2016 but came back in early 2017 minus a sukuk option and the Rabigh 2 plant. Pricing came in at 5.95%. Jefferies was the structuring agent on the deal.

The global co-ordinators were Citigroup, Jefferies and CCB Singapore. Mizuho, NCB Capital and Standard Chartered were the joint lead managers and MUFG and SMBC Nikko were the co-managers. Shearman & Sterling advised the lead managers while a Chadbourne & Parke team, now at Covington, advised the issuer.

The deal has a surprising number of firsts. It is the first private investment-grade bond issue and the largest dollar bond offering from Saudi Arabia. It is the first time Moody’s and S&P have rated an emerging market power holdco deal at investment grade. And it is the first senior multi-asset transaction from the MENA region.

Middle East & Africa Petrochemicals Deal of the Year – SMC

Salalah Methanol Company (SMC) has been producing methanol since 2010. This year, it decided to diversify into fertilisers and raised US$730m of project finance to back the expansion project.

Oman continues to be a hub for project finance in the GCC region. Despite downgrades in the sovereign rating, the country continues to fund its schemes via the international capital markets. Last year it was Liwa, this year it has been Salalah LPG and Salalah Methanol, and next year it is likely to be Duqm.

Both the LPG and the methanol expansion deals have their merits. Given that SMC is a successfully operating company already, backed by a project financing from 2007, it was able to raise its new debt without the need to inject new equity from its shareholders – Oman Oil Company (OOC), Takamul Investment Company and SMC itself.

While the SMC deal is an expansion financing, the US$728m loan is structured to avoid principal repayments during construction and distribute dividends to the shareholders in that period. The debt repayments are back-ended and have a substantial balloon. In addition, OOC is allowed to replace the various lender accounts with its own guarantee in the future.

Standard Chartered was the financial adviser on the scheme, with Canada’s EDC heavily involved given SNC Lavalin’s role as EPC contractor on the scheme. The other banks in the financing are ING, Societe Generale, Europe Arab Bank, Apicorp, NBK, QNB, Bank Muscat, Bank Dhofar, Bank Sohar and Alhi Oman. Clifford Chance was the international lenders counsel while Al Busaidy Mansoor Jamal & Co was the local lenders counsel. Allen & Overy acted for the sponsors. HIS Markit was the technical and environmental consultant and JLT advised on insurance.

The new plant will utilise hydrogen-rich purge gas from the existing facility as feedstock. Revenues over 20 years are likely to top US$4bn.

Middle East & Africa Oil & Gas Deal of the Year – Coral LNG

Debt financing of about US$4.68bn was signed in June for one of Africa’s largest-ever project financings and what was said to be the first project financing of a floating LNG (FLNG) scheme. Financial close was reached at the end of November.

The gargantuan deal was structured during a perfect storm of low oil prices and government default. Export credit agency cover and the appetite of Chinese banks helped, with Chinese commercial banks acting as pathfinders for almost 12 months alongside the ECAs.

A US$1.75bn Chinese-led tranche, covered by Sinosure, brought in China Exim, Bank of China and ICBC on a tenor of 16 years. There was a Kexim direct tranche, estimated at about US$500; a K-sure and Kexim-covered tranche split US$800m and US$466m between the two respectively, and a BPI and Sace-covered tranche split US$450m and US$700m, respectively. A downsized uncovered tranche came in at about US$200m led by the South African banks.

A dozen commercial, non-Chinese banks were said to feature across the financing. The largest tickets, around US$300m to US$400m, were taken by HSBC, SMBC and Credit Agricole. The other banks were said to comprise Natixis, UniCredit, Societe Generale, BNP Paribas, ABN AMRO, Standard Bank, UBI Banca, Portugal’s Millennium BCP and Korea Development Bank.

Credit Agricole is advising the sponsors and Portland Advisers is advising the multilaterals. Allen & Overy is the lenders’ counsel and Linklaters the sponsors’ counsel.

Eni is the operator of Area 4 with a 50% indirect interest owned through Eni East Africa (EEA), which holds a 70% stake in Area 4. China National Petroleum Corporation (CNPC) owns the other 20% indirect interest in Area 4 through EEA. ExxonMobil signed a sale and purchase agreement with Eni in March to acquire a 25% indirect stake in Area 4 for US$2.8bn through Eni East Africa. The other concessionaires with stakes in Area 4 are Galp Energia (10%), KOGAS (10%) and Mozambique’s Empresa Nacional de Hidrocarbonetos (10%).

The project involves the construction of six subsea wells connected to a FLNG facility that will have a liquefaction capacity of over 3.3m tons of LNG per year, equivalent to about 5bcm. A Samsung Heavy Industries/Technip/JGC team won the contract to build the floating unit.

Middle East & Africa Logistics Deal of the Year – Nacala

What sub-Saharan Africa missed in the number of deals closed during 2017, it made up for in size. The Nacala rail and port logistics corridor, crossing Mozambique and Malawi, is the largest-ever infrastructure project financing on the continent.

Brazilian miner and project sponsor Vale signed financing documents worth US$2.73bn in November after years of complex inter-governmental negotiation and project structuring. The deal involved four separate companies, five concessions agreements and a mixture of greenfield and brownfield development.

Work on the corridor began in 2012, led by Vale and Mozambique’s state port and railway operator Portos e Caminhos de Ferro de Moçambique. It is Vale’s largest investment outside Brazil.

The coal export network required the upgrade of 682km of existing railway tracks between Mozambique and Malawi, the construction of a maritime terminal and 230km of new lines, including a 201km stretch connecting Moatize and Nkaya Junction in Malawi and another 29.3km stretch connecting Namarral to Nacala-à-Velha. The rolling stock, comprising 85 locomotives and 1,962 wagons, is held outside the project company.

The 912km rail line began operations in May this year. With trains running on the line, there is limited construction risk for lenders. Vale also offered some protection from the coal export risk on the limited-recourse deal.

Lenders include Japan Bank for International Cooperation (JBIC), providing US$1.030bn and the African Development Bank (AfDB) lending US$300m. A US$1bn Nippon Export & Investment (NEXI) insurance-covered tranche featured Standard Chartered, SMBC, Mizuho, Nippon Life Insurance Company, MUFG and Sumitomo Mitsui Trust Bank. A US$400m tranche insured by Export Credit Insurance of South Africa Ltd (ECIC) featured Absa, Investec, Rand Merchant Bank and Standard Bank.

HSBC is the financial adviser and White & Case is legal adviser to the sponsor for the project financing. Linklaters advised the lender group.

Middle East & Africa Transport Deal of the Year – Madagascar Airport

Financial close was reached on Madagascar’s national airports concession, with the first disbursement made in June. It is one of the first project financings in the country and the first African airports PPP to be financed in the past five years.

Ravinala Airports, owned by Meridiam, Aéroports de Paris Management, Bouygues Bâtiments International and Colas, was awarded the concession for the country’s two main international airports, Ivato in Antananarivo and Fascene on the island of Nosy Be, in 2015. It formally took over the concession in December last year and will expand, repair, operate and maintain the airports on a 28-year contract.

Debt financing is provided by the World Bank’s International Finance Corporation (IFC), Proparco, Emerging Africa Infrastructure Fund, Development Bank of Southern Africa and Opec Fund for International Development. CACIB acted as agent for the lenders.

The project, estimated at €250m, primarily aims to renovate both airports and create a new terminal at the Antananarivo airport, with a capacity of 1.5m passengers. It is part of the government’s objective to foster the economic growth of the country through developing tourism.

Traffic at the two airports is now projected to grow at relatively conservative levels of 4%–5% annually by the sponsors. Project revenues are mostly in euros and US dollars, meaning they face limited foreign currency risk.

There is no government guarantee or government support to finance the investment but payment obligations of the state, mainly termination indemnities, are covered by MIGA insurance for transfer restriction, war and civil disturbance, expropriation and breach of contract.

Law firm Gide advised the sponsor and Allen & Overy advised the lenders. In Madagascar, Lexel law firm advised the sponsor and MLO advised the lenders.

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com.

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