Middle East & Africa Awards

PFI Yearbook 2022
21 min read

Bank of the Year – Standard Chartered

Standard Chartered had a stand-out year in the region topped by its involvement in the US$12.1bn Jazan refinery utilities acquisition deal in Saudi Arabia where it was the financial adviser, a mandate won in early 2019 and that came good in 2021. This was a key deal given the high-level sponsor group – Air Products, Aramco and ACWA Power. The complex financing took time to put together during the Covid era and the deal itself has many moving parts but eventually it was transacted efficiently.

The bank backed another key ACWA Power/Aramco joint venture project, the 1,500MW Sudair solar plant financing in Saudi, which was the first Public Infrastructure Fund (PIF) solar deal. StanChart was the documentation bank, mandated lead arranger, hedge bank and offshore account bank. It played the same roles on another award winning deal, the Dubai waste to energy financing for an Itochu led team, plus modelling bank, onshore account bank, onshore security agent and commercial facility agent.

StanChart was heavily involved in two Saudi successful water deals for the Engie/Nesma team – Jubail 3B and Yanbu 4. It was involved right at the start as a pre-bid mandated lead arranger. In its role as documentation bank, it led the banking group in structuring the transaction from the pre-bid stage and assisted the sponsors in structuring the financing package and optimising the tariff for the bids.

The bank was involved in the award winning Basrah Gas Company (BGC) financing in Iraq, an important landmark for the country as it seeks to finance its reconstruction. And it was central to important debt financings in Nigeria including the US$2.3bn financing for the Ajaokuta-Kaduna-Kano (AKK) 614km domestic gas pipeline project being developed by Nigeria National Petroleum Corporation (NNPC). This is being funded by Chinese banks backed by Sinosure. Plus, it raised a US$635m loan for NNPC subsidiary Nigeria Petroleum Development Company (NPDC). The bank’s Dubai based project finance team is headed by Abbas Husain.

Deal of the Year – Warsan

The Dubai waste to energy (WtE) Warsan facility is the largest single WtE plant in the world, some introduction into the WtE sector for the emirate. The scheme has a strong Japanese influence, with Itochu as the lead private sponsor in the project company and JBIC providing half the debt. For JBIC this was one of its first deals in Dubai since the global financial crisis. But that said, the facility has a true mix of local and international players.

Local companies Dubai Holding and Dubal hold 51% of the project company equity. Itochu has 20% with local contractor Tech Group, Japanese equipment supplier Hitachi Zosen Inova (HZI) and Belgium contractor Besix holding the rest. The scheme is backed by the Government of Dubai, although the scheme will serve the municipality.

The US$900m 25-year debt package is provided by JBIC alongside commercial banks Credit Agricole, KfW IPEX, Mizuho, Siemens, Societe Generale, financial adviser SMBC and Standard Chartered. The commercial debt is 80% covered by Nexi. There is a US$240m equity bridge loan (EBL) provided by local banks Emirates NBD and Commercial Bank of Dubai on the Dubai Holding/Dubal portion and Mizuho on the HZI portion. Covington advised the sponsors on the deal and Allen & Overy advised the lenders

The project company, Dubai Waste Management Company (DWMC), will have a five combustion line moving grate scheme processing 1.9m tonnes of waste per year and producing 194MW of power. The project will be backed by waste-gate fees and a power offtake agreement with DEWA. The power element will be the main payment stream at 70%–80% of revenues. The plant will be at the former Warsan landfill site. The scheme will open in 2024. The operating concession on the project will run for 35 years. Dubai produces nearly 4m tpa of waste and the scheme will reduce the amount going to landfill by 75%.

PPP Deal of the Year – Yanbu 4

The Yanbu 4 project was the first of its kind – a Saudi Arabian independent water project (IWP) combined with a water transmission pipeline.

The 450,000m3 scheme, when combined with the 39km pipeline, became a major project costing US$880m. The decision to add the pipeline came after the deal had been tendered and therefore involved important trend setting negotiations for future water projects in the kingdom.

Eventually, the project finance debt totalled US$700m with US$240m coming from South Korean export credit agency Kexim, which fully funded the pipeline. The commercial funding banks on the soft mini-perm deal were KDB, MUFG, NCB, Riyad and Standard Chartered.

The water pipe will revert to the public sector once built but the Kexim loan will remain in place and rank alongside the commercial debt. The tariff on the scheme has been increased as a result but the Engie/Mowah/Nesma team and its lenders will only be exposed to the IWP operating risk during the operating phase. However, they will be exposed to construction risk on all the project.

The scheme has the first solar integrated (11MW) seawater reverse osmosis (SWRO) project in Saudi Arabia, which includes two days of production storage tanks with a capacity of 900,000m3 to increase the availability and reliability of water supplies.

The solar capacity provides up to 20% of the plant’s specific power consumption, thus reducing reliance on the grid, reducing costs and improving overall environmental performance. The scheme includes the development of other electrical special facilities including a sub-station and overhead lines connecting to the grid, which are to be transferred to National Grid SA ahead of the project commercial operation date.

It is the first desalination project in the kingdom that will provide both the two holy capitals Makkah and Madinah together with the drinking water.

Covington and Herbert Smith Freehills advised on the deal while SMBC, DLA Piper and ILF are advising the client, Saudi Water Partnerships Company (SWPC).

ESG Platform Deal of the Year – REPDO

The REPDO round two solar programme in Saudi Arabia saw some of the most competitive solar price tariffs achieved on a global basis. With solar equipment prices ramping up, perhaps these levels might not now be seen for some time. The prices achieved in the programme were referenced to a further project, Sudair, which was procured by the Public Investment Fund (PIF).

The Renewable Energy Project Development Office (REPDO) is part of the Saudi Ministry of Energy. It is charged with procuring renewable energy projects on a competitive basis. PIF, by contrast, procures its schemes on a bilateral basis but referencing the tender prices achieved by REPDO. The bids for round two were submitted in April 2020 and a year later, given Covid etc, all the deals were signed in. REPDO is headed by Faisal A Alyemni who has been in the job since August 2019. SMBC, DLA Piper and Fichtner advised REPDO.

Marubeni and Al Jomaih led the 300MW Rabigh scheme backed by a JBIC loan with Mizuho and Al Rajhi as the banks on the US$157m financing. Bracewell and Alderbrook advised the sponsors on the deal and Pinsent Masons advised the lenders. China Energy Engineering Group Guangdong Power is the EPC contractor. The tariff achieved was US$0.017 per kWh.

Masdar, EDF Renewables and Nesma, a local company run by Faisal S Alturki, led the Jeddah 300MW scheme. The project cost is US$230m and the debt equity split 70/30. Norinchukin, Riyad and SMBC supplied the project debt, with Riyad and SMBC supplying the equity bridge loan (EBL). Synergy Consulting and Allen & Overy advised the sponsors and Clifford Chance advised the lenders. Larsen & Toubro (L&T) is the EPC contractor. The tariff achieved was US$0.0162 per kWh.

The two smaller projects, the 50MW Madinah and 20MW Rafha, were won by Al Blagha Holding for the Investments/Al Fanar/Desert Technologies Industries team. Al Blagha is owned by the Al Balwi family. Its development arm Tamasuk is headed by former HSBC project financier Matthew Nathan. The team bid US$0.019 per kWh for Madinah and US$0.034/kWh for Rafha. Project debt is from Al Rajhi. Alfanar is the EPC contractor. Synegy Consulting and Eversheds advised the team. Hogan Lovells and technical adviser ATA advised the lender. Financial close on these schemes, once land lease issues have been resolved, will be early in the new year.

ACWA Power won two schemes, the 200MW Qurayyat and 600MW Al Faisaliah projects, with local contractors Al Babtain and Al Faisaliah, but financial close has been delayed into the new year given solar panel supply issues. Al Faisaliah saw a world record US$0.0104/kWh winning tariff.

REPDO was able to procure competitive prices in its round three competition later in the year despite the rise in solar prices. ACWA Power has been made preferred bidder on the Ar Rass 700MW solar scheme with a bid of US$0.0145/kWh (SR5.623423). Jinko Power has been made preferred bidder on the Saad 300MW scheme with a bid of US$0.0144. In the smaller category A schemes Total/Tamasuk is preferred bidder on the Wadi Ad Dawasir 120MW scheme at US$0.018/kWh. ACWA is cheapest on Layla 80MW at US$0.029/kWh.

Central Asian Deal of the Year – Sirdarya 1

Uzbekistan has been making a major push to upgrade its inefficient power generation stock, much of which dates from the old Soviet days. The 1,500MW Sirdarya 1 gas combined cycle gas fired power project was a first big step towards achieving this aim. The Uzbeks adopted the Abu Dhabi independent power project (IPP) procurement model via White & Case in order to ensure the tender and financing went smoothly.

ACWA Power won the deal and put in place a MIGA-backed 18-year project financing, one of the first involving the World Bank institution’s four-point guarantee on the debt. The cover provides comfort to lenders – political but not commercial risk cover, cover against the risks of transfer restriction, expropriation, war and civil disturbance and breach of contract. The guarantee therefore does not give the banks involved the same zero risk weighting as on export credit agency (ECA) deals.

ACWA Power is funding the equity backed by an equity bridge loan (EBL) from First Abu Dhabi Bank (FAB). Johannesburg based Pele Green Energy is a fellow shareholder in the scheme plus Central Energy Fund and the Humansrus Community Trust.

The debt is split into a US$300m tranche from the development finance institutions (DFIs) and a US$450m tranche from commercial banks backed by the MIGA cover. The EBRD is putting US$200m into the DFI tranche with Germany's DEG supplying US$45m and OPEC Fund for International Development (OFID) US$55m. The commercial banks are Asian Infrastructure Investment Bank (AIIB), Standard Chartered, Natixis, Societe Generale, Bank of China and China Construction Bank. The project is the first of its kind to secure approval from JP Morgan as an orphan hedge provider to provide an interest rate swap with MIGA political risk insurance.

The project will use the latest Mitsubishi Hitachi Power Systems (MHPS) J class turbines. The EPC contractor is Energy China Group via its subsidiary China Gezhouba Group. First power from the plant is due in 24 months and completion in 36 months. Upon completion, the plant is expected to meet 15% of power demand in Uzbekistan and comprise 8% of all installed power capacity. Covington and Dentons advised ACWA Power on the deal and Norton Rose Fulbright advised the lenders.

Middle East Gas Deal of the Year – BGC

The Basrah Gas Company (BGC) financing was an important financial landmark for Iraq as it seeks to re-emerge in the international community. There is clearly plenty to do in the country, with a host of renewable and energy deals being signed this year by energy majors such as TotalEnergies and renewable players such as ACWA Power and Masdar. Financing these schemes will be a key building block and BGC is an important stepping stone.

In addition, BGC has important environmental benefits wrapped in with commercial logic. BGC gathers, treats and processes associated gas that would otherwise be flared at oil fields of West Qurna 1, Zubair and Rumaila in southern Iraq. The expansion project funded by the financing consists of two natural gas liquids trains, each of 200m cubic feet per day capacity. The capture and processing of associated gas from the upstream oil fields is currently limited by the capacity of BGC’s existing natural-gas-liquids plants and export infrastructure. Construction of the new Basrah natural gas liquids facility will expand gas processing by introducing additional NGL separation gas treatment.

The US$360m loan to back its US$1bn expansion project is structured as a five-year pre-export financing. IFC led the deal and invested US$137.76m. It bought eight international banks – Bank of China, Citigroup, Deutsche, ICBC, Natixis, SMBC, Societe Generale and Standard Chartered – into a US$180m syndicated loan and raised a US$42.24m loan through its Managed Co-Lending Portfolio Program, a platform that allows institutional investors to participate in IFC’s loan portfolio. Pricing is around 5%. Norton Rose Fulbright acted on the deal.

The deal is non-recourse to the sponsor. That said, the company is valued at about US$3bn. Royal Dutch Shell owns 44% of BGC, Mitsubishi has 5% and the government 51%. It has been operating since 2013 and can process 1bn cubic feet of raw gas per day. The US$1bn expansion will increase its capacity to 1.4bcf per day by 2024.

African Power Deal of the Year – Temane

A Globeleq-led consortium reached financial close in December on its 450MW Temane gas-fired IPP in Mozambique. Final debt totals US$495m over 18 years, representing just over 75% gearing on US$652.3m of capex. IFC provided US$253.5m via A-loans and B-loans from FMO and EAIF. The US DFC provided US$191.5m and Opec Fund for International Development (OFID) provided US$50m. MIGA is providing a US$251.3m political risk guarantee to the private sector equity investors.

Siemens is providing the turbines and the sponsors selected Spain’s TSK to design and construct the plant, which should be operational by 2024. The project company is 85% owned by Mozambique Power Invest (MPI) and 15% by Sasol Africa. MPI is owned by Globeleq (76%), and state-utility EDM (24%), which will be the offtaker under a 25-year power purchase agreement. A previous equity investor, EleQtra, had its 15.2% stake bought out by Globeleq. Sasol will supply gas from the Pande-Temane Inhassoro field it co-owns with national oil company ENH.

Clifford Chance and Pimenta & Associados advised the sponsors on the deal while Shearman & Sterling and Sal & Caldeira advised the lenders. Marsh, JLT and Fides advised the sponsors on insurance, with PwC on accounting. Indecs was the lender’s insurance adviser, with WSP technical adviser and EY the model auditor. Skadden advised the World Bank on the guarantee and Societe Generale, which provided the letter of credit, was advised by Ashurst and Couto Graca & Associados.

Globeleq was selected by Sasol and EDM in March 2018 to be the project’s third-party equity investor. The power plant is the anchor to a new 564km high-voltage transmission line, owned by EDM and financed by the World Bank, AfDB, IsDB, OFID and the Norwegian government. Both the power plant and transmission line are part of the circa US$2bn Temane Regional Energy Project (TREP) for which the World Bank agreed US$420m of International Development Association (IDA) grants and guarantees in June 2019.

African Deal of the Year – OML 17

The US$1.1bn financing backing the acquisition of a 45% stake in OML 17 has helped elevate Tony Elumelu’s Heirs Holdings and Transnational Corporation to become Africa’s largest locally owned oil and gas company. With the big international oil players reducing their onshore and shallow water footprint in Nigeria, local independent companies are coming to the fore. More deals of this nature are expected.

TNOG Oil & Gas, the company owned by Heirs and Transnational, is now one of the largest power producers in Nigeria, with 2GW of installed capacity through the ownership of Transcorp Power Plant and the recent acquisition of the 966MW Afam Power and Afam Three Fast Power plants from the federal government for US$300m. That deal was financed by local banks and equity. One of the aims of the OML 17 acquisition is to provide more gas to its power portfolio.

The largest part of the US$1.1bn deal is the senior tranche, split between a reserve-based lending (RBL) deal for banks and a bullet tranche for investors. There is a junior tranche split into three parts: an offtaker tranche for companies such as Royal Dutch Shell that could be converted into the senior tranche; an oilfield service tranche for companies such as Schlumberger; and a structured notes tranche.

The structured notes, unlike the rest of the deal, are unsecured and provide a fixed return to investors with upside potential. Underneath the senior and junior tranches is sponsor equity. The borrowers can increase the commitments across the entire capital structure from time to time, subject to the satisfaction of certain conditions.

Heirs Holdings was advised by Standard Chartered as global coordinator and United Capital, and backed by a syndicate of institutions including Afreximbank, Absa, Africa Finance Corporation, Union Bank of Nigeria, Hybrid Capital and Amundi. White & Case and Templars advised the borrower while Clifford Chance and Herbert Smith Freehills advised the lenders.

The deal has the trading arm of Shell as an offtaker and Schlumberger as a technical partner. NNPC holds the other 55% of OML17. The asset has a production capacity of 27,000 barrels of oil equivalent per day and estimated reserves of 1.2bn barrels of oil equivalent. TNOG Oil & Gas will take over operation of the field. Shell, Eni and Total sold the stake for US$800m.

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