Acwa Power prepays murabaha facility

17 June 2014

Power firm now able to raise money at better rates  

Saudi Arabia’s power and water developer Acwa Power has prepaid a $300m Islamic finance facility it raised three years ago.

The company has said the early payment of the sharia-compliant murabaha facility has been made due to Acwa’s improved cash position and unutilised bank facilities.

Borrowing conditions for the power company have also improved since 2011 when the facility was first signed.

Pricing on the original facility was 2 per cent over the London Interbank offered rate (Libor), with a step up to 4 per cent now it is being repaid earlier than planned.

Acwa Power is now in a position to raise bank financing at more favourable rates of about 1 per cent over Libor, a source tells MEED.

The financing was originally a five-year facility intended to be paid off in June 2016. It was the first time Acwa had borrowed at corporate level, rather than for specific projects. The facility has direct recourse to Acwa’s own balance sheet.

The 2011 deal was closed after a period of uncertainty in the Saudi market following the default on debt obligations by Saudi firms Saad Group and Ahmad Hamad al-Ghosaibi Brothers in 2009, as well as the impact of the wider global financial crisis.

Lending to the private sector, particularly when the funding was not tied to specific projects and provided to a firm at holding company level, had dried up in the kingdom in the months preceding the deal.

UK’s Standard Chartered (bookrunner), US’ Citibank (bookrunner), US-based Bank of America Merril Lynch and Japan’s Mizuho Bank were the original lenders on the 2011 deal.

The facility was later increased from $210m to $300m with the addition of US’ JP Morgan and Malaysia’s MayBank.

Acwa raised its second corporate facility to date at the end of last year. This time the SR1.8bn ($475m) five-year revolving sharia-compliant corporate financing was raised in Saudi riyals.

The company is planning an initial public offering (IPO) on the Saudi exchange, to be launched towards the end of 2014.

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