Abu Dhabi changes financing strategy for next power project

18 October 2012

Abu Dhabi gives bidders option to finance Mirfa power with mini-perm structure

Abu Dhabi Water and Electricity Authority (Adwea) has invited bids for its next power project and given potential developers the option to finance the scheme with short-term debt for the first time. The move appears to be in response to lobbying by banks and power developers to find easier ways of funding projects in the region.

According to the request for proposals (RFP) for the Mirfa independent water and power project (IWPP) bidders can propose to finance the scheme either through 23-year debt typical of previous Adwea projects, or opt to use seven-year financing that would be refinanced, a structure known as a mini-perm. The expectation is that once the project is operational it would be refinanced in the bond market.

Each consortium is only allowed to propose one bid, meaning they will have to choose whether to use long-term funding, a mini-perm, or find a way of combining the two. “This is really an attempt to see if we can increase the number of people funding projects in this market,” says one source close to the project.

Abu Dhabi IWPPs
ProjectCost ($m)Debt tenor (years)
Taweelah A175020
Taweelah A21,47020
Shuweihat 11,60020
Umm al-Nar2,10023
Taweelah B3,00020
Fujairah 11,55022
Fujairah 22,80020
Shuweihat 22,60022
Shuweihat 31,50023
IWPP=Independent water and power project. Source: MEED

Over the past few months both power plant developers and banks are understood to have been lobbying Adwea to adopt a mini-perm for the Mirfa project. “It is pretty telling that Adwea wants to change the way it does things to make it easier for banks to do business,” says another project finance banker at an international bank.

If developers do bid to fund the project with a mini-perm structure, it would formalise the process currently under way at Adwea’s Shuweihat 2 power project. The owners of that scheme are currently trying to refinance the debt put in place for that deal in 2009 through a bond issue. “In a few years, every operational project in Abu Dhabi will probably be refinanced through the bond markets,” says another project finance banker.

The bid deadline for the Mirfa project is February 2013.

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