Abu Dhabi sewerage scheme nears financial close

03 October 2008
Consortiums to secure two financing packages totalling $550m for Abu Dhabi water treatment plants.

Financing worth AED2bn ($550m) to build four sewage treatment plants in Abu Dhabi emirate is close to being finalised by the two construction groups working on the projects, according to sources close to the deal.

If the deals are agreed it will mark an unusual success in the region, where project finance has all but disappeared in the wake of the financial turmoil affecting markets around the world (see Agenda page 26).

However, industry sources caution that the deals do not represent a turnaround for the sector. Instead, the sources view the financings as a sign that some banks are still willing to fund projects in the Gulf, if the financing required is relatively small.

“It is still possible to get small financings with strong sponsors done, even in the current market,” says a banker close to the projects. “The real problem is big deals.”

Total financing required for water treatment plants in Abu Dhabi$550m
Value of financing arranged by Abu Dhabi Commercial Bank$200m
Value of financing arranged by French bank Calyon$350m

One of the two packages is worth about $200m and is being arranged for a consortium of the UK’s Biwater Group, Kuwait’s Mohamed Abdulmohsin Kharafi & Sons and the local Al-Qudra Holding.

It is being arranged by Abu Dhabi Commercial Bank, with some syndication expected to occur before the end of the year.

The other deal of $350m is being led by Calyon, and involves four other banks. This is being arranged for a consortium of France’s Veolia and Belgium’s Besix.

The two funding packages will be used to build four plants. Two at Al-Wathba will serve Abu Dhabi city with a capacity of 300,000 cubic metres a day (cm/d) each.

Two further plants will be built at Al- Saad, which will treat 65,000 cm/d each and serve Al-Ain (MEED 13:8:08).

Each consortium will develop a sewage plant in each location, under 25-year build-own-operate-transfer contracts. The groups were awarded the deals in early January (MEED 11:1:08).

The projects are being sponsored by Abu Dhabi Sewerage Services Company (ADSSC), and are part of the plans to address the rising volume of waste being generated as the emirate grows. ADSSC tendered the first two plants in 2007, but later decided to accelerate plans for additional plants to deal with the increasing volume of sewage.

Biwater was the low bidder for the original tender, at AED1.52 ($0.41) a cubic metre, followed by Veolia/Besix, with AED1.62 a cubic metre (MEED 21:9:07).

Abu Dhabi Water & Electricity Authority (Adwea) will ultimately retain a 60 per cent stake in the projects. The consortiums will hold the remaining 40 per cent.

BNP Paribas is acting as financial adviser to Adwea. Australia’s Cardno is technical adviser and US law firm Dewey Ballantine is advising on the legal aspects.

As part of its efforts to upgrade the emirate’s wastewater network, ADSSC recently invited contractors to prequalify for a AED2bn deep-tunnel sewer.

The tunnel will run for 42 kilometres from a pumping station on Abu Dhabi island (MEED 29:8:08).

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