Saudi power and water developer Acwa Power has secured a SR1.8bn ($475m) five-year revolving fully sharia-compliant corporate financing from a group of Saudi banks.
Acwa Power is intending to use the money to finance acquisitions and a pipeline of greenfield projects, as well as to pave the way towards a planned sukuk (Islamic bond) issue next year.
The commodity murahaba financing is the first time the company has raised a Saudi riyal-denominated corporate facility. It comes two and a half years since Acwa Power raised its first corporate facility in June 2011, when it signed a $290m facility via a group of international banks.
The firm decided to raise a riyal-denominated facility to establish better relations with local top-tier banks. It is a move aimed to help Acwa Power when it looks to launch its sukuk programme next year.
We wanted to diversify our bank group and establish tier 1 relationships within our home market in Saudi Arabia, says a source close to the deal. Our inaugural bond is likely to be a riyal-denominated sukuk, so it made sense to raise Saudi riyal funding.
Four local banks participated in the facility: Banque Saudi Fransi, National Commercial Bank, Saudi British Bank and Samba Financial Group, with all four participating on a take-and-hold basis with ticket sizes of SR300m-550m each.
The financing is structured as a revolving facility, meaning the borrower can draw down funding as and when needed. It was priced at 125 basis points, which is lower than the 200 basis points charged on the companys 2011 facility.
The original facility was structured as an amortising loan with scheduled regular repayments, which is typically a cheaper option for banks to offer when compared with revolvers.
A revolver, however, offers greater flexibility to the borrower, and the pricing achieved on Acwa Powers new corporate facility is seen as a very good endorsement of how the companys credit stance has improved, according to a source.
Acwa Power has a strong pipeline of forthcoming greenfield schemes it needs to finance and is also eyeing acquisition opportunities in the region.
As leader of a consortium, Acwa Power signed a power purchase agreement (PPA) for the 2,060MW Rabigh II independent power project (IPP) with Saudi Electricity Company (SEC) in late November.
Acwa Power is also part of the winning consortium for Moroccos Noor 1 scheme, a concentrated solar power (CSP) independent power plant. The contract was awarded in 2012, with construction starting earlier this year.
The Saudi company is developing the Bokpoort power plant in South Africa, and is on the verge of signing a corporate loan of about $55m this month via the South African bank market to support its African operations.
Acwa Powers aim is to increase its power generation capacity from 15.7GW to 39GW and its water production from 2.4 million cubic metres a day (cm/d) to 5 million cm/d by 2018.