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
Project Cost ($m) Debt tenor (years)
Taweelah A1 750 20
Taweelah A2 1,470 20
Shuweihat 1 1,600 20
Umm al-Nar 2,100 23
Taweelah B 3,000 20
Fujairah 1 1,550 22
Fujairah 2 2,800 20
Shuweihat 2 2,600 22
Shuweihat 3 1,500 23
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.