Market Talk: ABK deepens project finance capability

25 November 2019
Bank sees its launch of a DIFC branch as a springboard for expanding its role as a large infrastructure and syndicated finance arranger in the region

Q&A with Tom Lind, senior executive officer, DIFC branch, and head of regional corporate finance, ABK

Project FinanceQ: How has ABK’s role in regional project finance developed in recent years?

What we have done is position ourselves as the solution provider for sponsors doing business with infrastructure projects in Kuwait. 

Our recent success, and where we have found our niche in really making a difference in the country, has mostly been with the larger sponsors of infrastructure projects. We have closely followed the Kuwait Authority for Partnership Projects (KAPP), maintained good contact with the authority and ultimately become the go-to project finance bank for it. 

When public tenders have taken place, we have approached the various sponsors, shown our capabilities and willingness to cooperate with them and, as a result, been fortunate to follow the winning partners for three bids, including the Umm al-Hayman waste-water project and the Kabd waste-to-energy project.

Q: Where is the current focus for ABK when it comes to business development and growth?

We have three core markets: Kuwait, the UAE and Egypt. That is where we have our base and where we have the greatest familiarity with the various infrastructure requirements. 

ABKIn Kuwait, the clients that we have are the larger sponsors that are teaming up with international sponsors, so there we are the local bank for the foreign sponsors whilst contributing  value for the local sponsors. 

The UAE is a well-developed project finance market that is fine-priced for banks, so it usually entails a discussion of whether a deal makes economic sense for ABK. 

Egypt is a developing market and the whole infrastructure programme is geared towards getting financing from offshore banks, so we are closely following developments there in order to position ourselves with our colleagues in Egypt for infrastructure projects.

Q: Why is the Umm al-Hayman wastewater project so important for Kuwait?

Umm al-Hayman is extremely important for not only the country, but for the image of all the parties involved. When it is done, it will give a big boost to the system and convey the fact that these deals can be executed. 

There are a lot of legal issues to deal with and conditions to be met with such deals, and the foreign banks and foreign sponsors have to adapt to that, step by step. But the moment you are there, you have a blueprint for how we can do deals in the future. 

I think everybody is aware that this is the way forward for large infrastructure, also with the aim to get wealth distribution going, because don’t forget, 50 per cent of the shares are going to be sold in an initial public offering, so in that sense the public will benefit from the efforts of what the sponsors are delivering to the table. 

Al-Zour 1 independent water and power plant (IWPP) in Kuwait – just like the whole Saudi IWPP programme – has shown that public-private partnership (PPP) is more efficient than what governments did before. The first PPP is always the most difficult, but we are there now.

Q: How has ABK’s launch in Dubai International Financial Centre (DIFC) supported the bank’s role in regional project and syndicated finance? 

Our launch in DIFC has been very successful and positive from the start. It opened with a bang in May 2018. 

At that time, we also launched the $800m financing arrangement with Dubai Aerospace Enterprise, for which we coordinated a group of 10 banks through an innovative structure that has subsequently been replicated by a few other banks, but we were the first. 

ABKThat was a good start, and since then we have grown our DIFC business quite rapidly to have a loan book of about $1bn. We have quickly built a reputation in the market due to the number of transactions we are leading. 

The ABK Bank DIFC branch is regulated by the Dubai Financial Services Authority, which has got an excellent financial and legal infrastructure. As a bank, we wanted to benefit from that, but before we did so, we had to make sure there was a business proposition for it, and we have delivered on that.

The model has been a smart one, whereby we have the commercial guys in the branch, but the back office is being outsourced to the existing resources that we have, so cost-wise it is a very efficient setup. 

We are one of the oldest foreign banks in the country – we have been here for about 50 years – but it was still a big decision to establish a dollar-based business within DIFC’s offshore jurisdiction. Now that we are committed, the whole board is focused on ensuring that this is a success. 

Our purchase of premises at Emirates Financial Towers also shows the commitment of the bank to say we are here for real. So far, we are very pleased with the progress there, but

of course we are trying to grow it even further.

Q: How has ABK been expanding its presence and activity in Egypt? 

Egypt is the way forward for us to become a serious contender for the larger infrastructure deals and the larger borrowers that want to come to the market. We are ready to be the solutions bank for them. 

Our Egypt operation has witnessed tremendous success since acquisition in 2015. ABK Egypt is one of the real success stories within ABK, and with its growing presence in the market, we hope to be able to get really big project and syndication transactions in the future.

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