Bank of the Year – Standard Chartered
Standard Chartered had a standout year in the region – taking major underwritings at the bid stage on deals, small but important roles in others and taking part many in most of the other deals in the region.
The bank backed Marubeni in its winning bid for the 900,000tpa Abu Dhabi waste-to-energy scheme with a sole underwriting on the US$600m project with US$500m of soft mini-perm debt. The deal will be sold to the liquid local bank market.
The bank backed ACWA and EIG in its winning bid for the 180migd US$920m Hassyan 2 independent water project (IWP) with a joint underwriting with MUFG. The deal has been sold down to institutions including Apicorp, Emirates NBD and Saudi Exim. Both deals are closing shortly.
At the other end of the scale the bank took a small position in the US$530m Aramco Jafurah cogeneration deal for Kepco in Saudi Arabia. Kexim provided US$270m of the debt and Riyad US$165m, with Standard Chartered taking a small piece and acting as Kexim and offshore bank agent.
It was a busy year in the Gulf and the bank was involved in many of the deals that reached financial close.
The bank was one of the main lenders on the two mega ACWA Power solar deals in Saudi Arabia, which won a PFI Global Award this year. The deals were well-backed by the local liquid Saudi banks but Standard Chartered was one of the main international banks involved in both.
The 2.6GW Shuaibah 1 and 2 deal was the smaller of the two but more complex. It combines the 600MW Al Faisaliah scheme, won in the REPDO round two bidding programme at a world record low tariff of US$0.0104/kWh, and the 2GW Shuaibah 2 scheme next door, which was bilaterally negotiated with the Public Investment Fund (PIF). Then the bank was involved in the financing of the 4.5GW PIF3 deal bilaterally negotiated between ACWA Power and PIF.
The bank backed the ACWA Power/Haji Abdullah Alireza & Co/Al Moayyed Contracting Group team on the US$678m Rabigh 4 independent water project (IWP) in Saudi Arabia. It took a role in the Ras Laffan petrochemical financing. And it was the bank in the Engie/EDF team on the US$80m street lighting PPP deal for the Abu Dhabi Investment Office (ADIO) and Department of Municipal & Transport (DMT), the second PPP to close in Abu Dhabi.
Deal of the Year – Infinity
Infinity Power Holdings’ acquisition of pan-African independent power producer Lekela marked Masdar’s definitive entry into the African renewables space and set a precedent for structuring of debt and equity for large acquisitions in emerging markets. Masdar owns 49% of Infinity Power as key shareholder, with the rest owned in smaller shares by Infinity Egypt, the Africa Finance Corp, and the European Bank for Reconstruction and Development. Lekela Power was acquired from co-founders Actis and Mainstream by Infinity Power’s Dutch-registered holdco Infinity Renewable Energy with a bid of US$1.5bn all-in.
The loan facility accounted for less than 50% of the full purchase price for Lekela Power and the loan value was above US$100m, although the exact amount remains confidential. The acquisition finance was structured into a US dollar loan tranche backing the purchase of Lekela’s assets in Senegal and Egypt, and a rand portion allocated for the assets in South Africa. The US dollar facility was structured as a holdco/portfolio financing. The loans have a five-year tenor with a notional tenor of 10–15 years.
With no real comparable loan transactions done previously in the African market that could have provided a framework or reference to leverage on, joint MLAs Mauritius Commercial Bank and Absa Bank of South Africa, in collaboration with the borrower and their respective advisers, came up with a series of notable features in the structuring of the deal.
Salient challenges and features included management of a cross-jurisdictional portfolio; implementation of a structurally subordinated holdco finance structure with respect to the existing project finance loans of the underlying assets within Lekela’s portfolio; incorporation of liquidity buffers into the facility to mitigate potential liquidity crunches; a MIGA equity cover and negotiated covenants that apply to the holdco borrower for Infinity but not to individual projects; and limited cross-default features on project finance loans at the asset level.
The acquisition of Lekela Power’s 1GW operational and 800MW under-development wind pipeline across South Africa, Egypt and Senegal brought Infinity to the forefront of African renewables, with a pipeline of projects at different stages of development now topping 13GW.
The Infinity Power team was led by senior project finance manager Shashank Gupta. MCB was led by senior relationship manager NK Naginlal Modi while the Absa team was led by senior banker for resource and project finance Colin King. The arrangers’ legal adviser was Norton Rose Fulbright with a team led by partner James Collis. The lenders were advised by London-based law firm Bracewell featuring a team led by partners Tom Jamieson and Gordon Stewart.
Central Asian Deal of the Year – Syrdarya 2
The US$1bn Syrdarya 2 gas-fired power project financing mixed a range of development finance institutional (DFI) and commercial bank lenders, with the IFC and JBIC joining forces with NEXI launching its new product to provide swap cover as well as political and commercial risk cover.
The sponsors group is international – France’s EDF, Nebras Power from Qatar plus Sojitz and Kyuden International from Japan.
The US$805m 20-year debt package has been provided by the IFC, which is providing a US$150m A loan and interest rate hedging cover of up to US$200m on the A loan and on an export credit agency (ECA) tranche. Japan Bank for International Cooperation (JBIC) has provided a US$393m loan and NEXI will provide ECA cover on the rest of the deal to Mizuho, SMBC and Societe Generale. JP Morgan was the pre-hedge provider. The debt/equity split on the deal is 77/23.
This is the second financing on which IFC and JBIC have worked together following the Amunet onshore wind farm financing in Egypt for AMEA Power last year, which won a PFI Global award. In June 2020, the two signed a memorandum of understanding (MoU) and now have a structure to deal with preferred creditor status issues. In addition, NEXI has introduced a new product to provide swap cover as well as political and commercial risk cover.
Syrdarya 2 is the first project in the country for the Japanese ECAs. The IFC has been involved in Uzbekistan and joined this deal in the second half of last year to help get it over the line. The JBIC financing is linked to the Japanese equity financing in the scheme, although Mitsubishi is supplying its M701 gas turbines to the project. Chinese company Haibin is the EPC contractor. Construction will take three years.
The EDF team was awarded the project following a tender on which the IFC advised the government. The sponsors have signed a 25-year power purchase agreement (PPA) with state-owned JSC National Electric Grid of Uzbekistan (NEGU). Gas will be procured from state-owned JSC Uztransgaz under a tolling mechanism. The plant will be located 150km from Tashkent. Synergy Consulting and Norton Rose Fulbright advised the sponsors and Ashurst, the lenders.
The project will be developed by project company Enersok, in which EDF and Nebras hold 33% each, with Sojitz and Kyuden International sharing the other 33%. Each of the sponsors has put its own equity bridge loans (EBL) in place.
Sustainable Deal of the Year – Wave
The US$2.2bn first part of the Wave seawater treatment and water transport project at Mirfa reached financial close this year, a unique deal with plenty of new and integrated construction risks. The scheme will supplying sustainable water for ADNOC’s Bab and Bu Hasa onshore oil fields operations. It will be connected to the grid and will receive power from clean energy sources.
The scheme was funded via a project financing from First Abu Dhabi Bank, GIB, Natixis, Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Commercial Bank of Dubai, Emirates NBD, Emirates Development Bank and Warba Bank through a combination of commercial and Islamic finance facilities. The hard mini-perm project finance tenor is 6-1/2 years, with ADNOC standing behind the refinancing risk, and pricing is said to be around 125bp. The equity bridge loans (EBLs) were provided by FAB and GIB.
Orascom and Metito, which was bought by Alpha Dhabi Holding, a unit of Abu Dhabi’s International Holding Company, are the project sponsors and will own 49% of the project company. They are providing the joint EPC services on the scheme apart from one specialised unit that is being provided by Petrojet. The fact that Alpha Dhabi Holding bought Metito made the credit analysis easier for the banks on what is essentially a construction financing.
ADNOC and Taqa will own 51% of the project company. ADNOC was said to have taken a very detailed interest in every aspect of the project. The operating concession will run for 30 years. It was of utmost importance that financial close was reached quickly during the summer as any delay would eat into the construction timetable. Given ADNOC’s ambitious decarbonisation targets and onshore drilling requirements, extending the scheduled completion date for construction of the project was not an option.
The scheme will replace the current high-salinity, deep aquifer water injection systems at the fields and is expected to reduce water injection-related energy consumption by up to 30%. The project is due to receive its power from clean energy sources via the grid but given the amount of electricity involved and the 24-hour operation, not all can come from renewables.
The Wave scheme has two standalone greenfield seawater nanofiltration plants, with the second being at Nouf. The scheme was due to be delivered as one project but given its size was split into two, with the Mirfa part going ahead now. It is assumed that procurement for the Nouf scheme will now proceed.
Alderbrook, SMBC, Ashurst and ILF advised ADNOC on Wave. Tribe Infrastructure and Covington Burling advised Orascom/Metito. Norton Rose Fulbright advised the lenders.
PPP Deal of the Year – Al Wakrah
The US$730m Al Wakrah and Al Wukair project in the Al Wakrah region is the first waste-water project in Qatar procured under the Public-Private Partnership (PPP) framework. The project is designed to treat an average capacity of 150,000 cubic metres per day of sewage flows expected from 2026.
The banks on the US$540m soft mini-perm project financing are original arrangers Apicorp, Natixis and Siemens, plus SBI Shinsei, Norinchukin and Saudi National Bank, which took the biggest ticket at US$200m. Al Attiya Motors & Trading, Gulf Investment Corporation and Metito are the sponsors.
PwC, Mott Macdonald and Eversheds advised the public sector client Ashghal, Synergy Consulting and Norton Rose Fulbright advised the consortium and Pinsent Masons advised the lenders.
Construction of the sewerage treatment plant (STP) will take four years and then the concessionaire will run the assets for 25 years. The EPC contractors are Metito, Calik Enerji and Eleganica.
The average initial capacity will be 150,000 cubic metres per day but the plant can be expanded to 600,000 cubic metres per day by 2045. The basic infrastructure will be put in place now to accommodate the full 600,000 cubic metres. If and when the plant is expanded, the equipment at the site will be funded under a new contract for the STP equipment.
The expansion timetable will depend on population growth in the area, new residential developments and the retirement of old STP plants. The main tunnelling works to serve the site are already being built under a separate traditional contract. The project company developing the STP is responsible for tunnelling works near the site.
The initial plant will serve more than 306,000 people in southern Qatar. Treated water will be re-used for agriculture and irrigation, thereby reducing the reliance on desalinated water and protecting the groundwater reserves. The sludge by-product produced by the plant can be utilised as a source of organic fertiliser.
Petrochemical Deal of the Year – Ras Laffan
For Qatar Energy and Chevron Phillips Chemicals, Ras Laffan was actually their second major international petrochemical project financing in two years, the first being the US$3.8bn deal for the Golden Triangle Polymers plant in Texas last year.
The Ras Laffan US$4.4bn financing was well-received in the banking market with a diverse range of 24 banks joining the deal. The deal has a back-to-the-future feel with the response being similar to the days when Qatar was a frequent issuer of project finance debt. And the structure was similar to the Q Chem deals from the mid-2000s.
The product offtaker will be Qatar state-owned company Muntajat and the feedstock supplier will be QatarEnergy. The project will not be tolled, with banks being exposed to price but not volume risk, allowing for some deferral of debt repayments if petrochemical prices tank. There is a completion guarantee on construction from the sponsors, with construction due to finish in 2026 and full commissioning due in 2027.
The financing is split into a US$1.9bn uncovered loan, a US$960m uncovered Islamic tranche, a US$500m SACE covered tranche and a US$1bn direct loan from Kexim. The debt-to-equity split is 60:40. The commercial tranches run for 15 years all-in and the ECA tranche for 17 years.
Local bank liquidity accounted for half the deal but the project still attracted 14 international banks and there was no need to use the Qatari bank market.
The banks on the uncovered Qatari loan are Abu Dhabi Commercial Bank, Agricultural Bank of China, Apicorp, Bank of China, China Construction Bank, Citigroup, Credit Agricole, HSBC, ICBC, Kexim Global, KDB, Mizuho, MUFG, NBK, Societe Generale, Standard Chartered and SMBC. The banks in the Islamic facility are Boubyan Bank, Kuwait Finance House and Islamic Development Bank. The banks on the SACE tranche are Bank of China, CaixaBank, Credit Agricole, Credit Suisse, HSBC, ICBC, JP Morgan and Santander.
Societe Generale was financial adviser on both projects. White & Case advised the sponsors on the Qatari deal, Skadden Arps advised the lenders and Allen & Overy and Greengate advised the ECAs.
The project will produce 2.1m tonnes of ethylene per year along with 1.7m tonnes of polyethylene derivatives. QatarEnergy will hold 70% of the project and CP Chem 30%.
Infrastructure Deal of the Year – Mirfa 2
Engie financed its US$620m Mirfa 2 independent water project (IWP) in Abu Dhabi in an efficient manner with a truly international group of lenders. The soft mini-perm deal was very reasonably priced for the borrower at around 100bp and followed on from the refinancing of Engie’s Mirfa independent water and power project (IWPP) the previous year, which came in at 110bp to 120bp on a longer-tenored 20 year deal.
SMBC led the US$504m financing and bought in Abu Dhabi Islamic Bank (ADIB), BNP Paribas, Norinchukin Bank and KfW IPEX. The overall tenor is 22 years with a minimum debt service cover ratio of 1.2. The mini perm ends after operations date plus three years.
The French company won the bid with a competitive tariff of US0.4832/m3 for 120migd project having bid US$0.5635/m3 for the smaller option. The tariff was attractive for the client given that ACWA won the 200migd Taweelah scheme in 2018 with a bid US$0.49/m3. After that, construction prices dropped but have since then risen back up steeply, as have finance costs. Therefore, the result on Mirfa 2 being comparable with Taweelah is a decent one. Engie’s existing role on the Mirfa IWPP next door to Mirfa 2, alongside fellow sponsor Sojitz, presumably helped.
Veolia’s Sidem and local group Al-Nasr are the contractors. The scheme involves delivering early water and the concession runs for 30 years. State utility EWEC is the client. It now has a steady pipeline of deals from solar to waste to energy, water and battery storage. Together with Masdar, Abu Dhabi’s green development arm, it is an active player in the project finance market. The EWEC refinancing guarantee is attractive to sponsors particularly in a rising interest rate environment.
Engie holds 40% of the Mirfa project company with Taqa holding 60%. They were backed by more than US$110m of equity bridge loans. Alderbrook, Fichtner and White & Case advised EWEC on the Mirfa deal. Covington and Al Tamimi & Company advised Engie. Herbert Smith Freehills, Baker & McKenzie and Clyde & Co advised the lenders.
Social Infrastructure Deal of the Year – Neom
Giga city project company Neom has mega ambitions, including building out the world’s biggest utility-scale hydrogen scheme, which won a PFI Award last year. So it is to be expected that the Public Investment Fund (PIF) owned company will require a vast workforce to build out the plans and they will need to be housed. Neom came up with a vast social infrastructure PPP project to solve the problem.
The PPP contractors have been asked to build, finance and run the 10 villages for 95,000 occupants for 10 years and then take them down. Neom said the accommodation will be built as relocatable modular units that can be repurposed when no longer needed.
A further 20,000 beds have recently been added to the project, giving a total investment of US$6.6bn. In total, US$4.95bn of debt will be raised and US$1.65bn of equity.
The US$5.6bn deal is split between four developers across ten sites requiring in effect ten transactions that had to close in parallel. The four developers are Alfanar, Tamasuk, Almutlaq Real Estate Investment and Nesma. The developers acted as their own EPC and operations and maintenance (O&M) contractors. Bank finance was provided by Alinma Bank, Riyad Bank, HSBC Saudi Arabia and Saudi Fransi. Deloitte and Linklaters advised Neom on the deals. Pinsent Masons acted for the lenders. Synergy Consulting and Gowling WLG advised Alfanar, which won five of the projects. Cranmore Partners advised Tamasuk.
The deal was put together quickly, 13 months from request for proposals (RFP) issuance to financial close. It must rank as one of the largest social infrastructure deals and the accommodation to be provided exceeds the IFC’s standards for workforce accommodation, mixing different types of units and facilities. The majority of the deb was denominated in Saudi riyals, requiring a significant volume of SAIBOR interest rate hedging – which had to be managed carefully due to liquidity in the SAIBOR market and in order not to adversely impact rates.
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