Shuweihat S1 ties up funds in mega deal

Abu Dhabi's third independent water and power project (IWPP), the Shuweihat Power and Desalination Plant (Shuweihat S1), achieved financial closure yesterday with the signing of a landmark $1.285 billion loan between joint developers CMS Energy and International Power, and a consortium of 25 financial institutions.

The signing ceremony in Abu Dhabi yesterday saw the presence of local, regional and international bankers as also advisors, legal consultants and officials of the Abu Dhabi Water & Electricity Authority (Adwea).

The entire financing has been underwritten and hence the deal will not go to general syndication.
The complex financial structure is a combination of conventional banking and Islamic financing.

Significantly, there will be an equity bridge loan of about $351 million, in addition to the $1.285 billion loan, representing the equity portion of the project which is estimated to cost some $1.6 billion.

"It is the largest project financing in the region and demonstrates not only the significance of the capital raised but the confidence in the region," said Abdulla Saif Al Neaimi, Shuweihat S1 project director, and chairman, privatisation department, Adwea.

"Abu Dhabi remains committed to privatisation, as bidding for another project, the Umm Al Nar complex, will begin in 2002," he said. "We are pleased with the progress of Taweelah A2 and A1, and the private sector's participation in these projects demonstrates that we can reduce tariffs."

The $1.285 billion deal includes a $250 million Islamic tranche. The conventional facility was lead arranged by Barclays Capital and Citibank.

Other arrangers in the consortium included Abu Dhabi Investment Co (Adic), National Bank of Abu Dhabi (NBAD), Bank of Tokyo-Mitsubishi, Kreditanstalt fuer Wiederaufbau, and the Royal Bank of Scotland. A host of other banks are part of the consortium.

While Abu Dhabi Islamic Bank, lead arranger of the Islamic tranche, has underwritten $100 million, along with Dubai Islamic Bank ($100 million), Kuwait Finance House has underwritten $50 million.

"The Islamic tranche of $250 million was put together within one month," said a banker.

The loan with an 18-year tenor has a step-up pricing structure which starts at 110 basis points over Libor until project completion, dropping to 100 bp by the seventh year. From the eighth to the 10th year it is priced at 110 bp, rising in steps thereafter to 160 bp from the 16th year to maturity.

Dr Ranald Spiers, regional director, International Power, described the deal as "heroic" and complicated. "We worked together closely in persuading the banks and it was an arduous process, most complicated. We look forward to more projects."

Albert Brantley, executive managing director of the newly formed Shuweihat CMS International Power Co, said Shuweihat S1 was another first in the region not only because of its large financing but because of the size of the project and its location.

The new company is a 60:40 joint venture between Adwea, and CMS and International Power (20 per cent each).

Work on the cogeneration plant with 1,500 MW of electrical generating capacity and 100 million gallons per day of water and associated infrastructure is expected to start immediately. Completion of the $1.6 billion project is set for mid-2004.