Talks resume on Taweelah refinancing

The refinancing of Abu Dhabi's first independent water and power project (IWPP), the Taweelah A2 - which was put on the back burner - is now back on board. Negotiations with bankers have commenced, officials confirmed.

It is thus tipped to be the first refinancing for a power project in the UAE, perhaps even in the Gulf.

The debt-equity ratio is likely to undergo a change although the refinancing groundwork will start early January with details to be ready in one or two months.

The Abu Dhabi Water and Electricity Authority (Adwea) has also approved the refinancing option after it had temporarily turned down the proposal of the Emirates CMS Power Co., the special purpose project company formed for the Taweelah A2 project.

"The refinancing for the Taweelah A2 is again on hand and Adwea has agreed to the proposal. We are looking at doing the refinancing some time around February or March, 2003," a senior official involved closely with the project told Gulf News.

"Right now we are in discussions with banks," he said, declining to go into details. However, he said the debt-equity ratio would change after refinancing, with the debt part likely to go up to 80:20. Taweelah A2 was financed on a 75:25 debt-equity ratio. The $539 million debt was arranged through a syndicated loan, led by Barclays Capital in 1999.

An Adwea official confirmed that the refinancing for Taweelah A2 project will go ahead.

The refinancing option first came to the fore in April this year but was put on hold. Subsequently, after CMS Energy affirmed its commitment to Adwea, the option is going forward now.

"Since Taweelah A2 was the first power project financing in the UAE, there were many conditions which did not exist for the subsequent projects that followed," said a senior banker involved with the financing.

The project was built on time, on budget and its commercial operation is proven. With the construction risk now gone, the timing is right for refinancing which effectively means a better deal can be secured from banks, he said. "The timing is right, interest rates are lower and there is appetite from lenders," he added.