The sponsors behind a new wastewater treatment facility in Bahrain have finally reached financial close on the funding for the scheme after months of delays caused by anti-government protests in the country.

Financial close had originally been targeted for the first quarter of the year, but was delayed as protests in Bahrain led to downgrades in the government’s sovereign credit rating and forced work on the Muharraq project to halt temporarily.

It is Bahrain’s first wastewater project to be built on a public-private partnership (PPP) basis and the first completely project-financed wastewater deal in the region outside of Abu Dhabi. When complete, the facility will process 100,000 cubic metres a day (cm/d) of wastewater. The project also includes new wastewater connection networks to a 16-kilometre-long deep-gravity sewer.

“At a time of political turbulence across the region, the successful financial closing of the Muharraq wastewater project will be seen by the market as a positive bellwether for core infrastructure projects in MENA, and as such reinforces the importance of project finance in the infrastructure sector,” says Matthew Nathan, director project finance and head of infrastructure and PPPs for HSBC MENA.

In February, the Public Works Ministry selected a UK/South Korean partnership of United Utilities and Samsung Engineering to build the wastewater treatment plant.

Samsung Engineering committed 45 per cent of the equity for the project, while Abu Dhabi’s Invest AD has supplied 35 per cent and United Utilities has put forward 20 per cent.

Export credit agency Export-Import Bank of Korea (Kexim) is lending $137m for the project over 22 years, along with a $90m Kexim-guaranteed tranche. Pricing for the Kexim-covered tranche is 1.80-2.20 per cent. Four banks have committed $50m in a commercial bank tranche. The banks are France’s Credit Agricole and Natixis, and Japan’s Sumitomo Mitsui Banking Corporation. Pricing of this tranche has been agreed at 2.25-2.75 per cent.

The facility is scheduled to be completed within 30 months. The concession period was originally set at 27 years, but this was later extended to 29 years. The project documents include an option to extend the project by a further 60,000 cm/d capacity at a later date.

The project is vital to Bahrain’s efforts to address its sewage crisis and prevent further damage to the environment. While the project is not as large as other regional wastewater projects, it will nevertheless make an important impact. The country currently has a population of about 1.28 million. By 2020, this figure is expected to rise to 1.51 million

The government of Bahrain was advised on the project by Germany’s Fichtner, UK bank HSBC and UK law firm Norton Rose. UK law firm Ashurst was legal adviser to the sponsors, while Australia’s Macquarie was financial adviser. US law firm Shearman & Sterling represented the lenders.

The tender for the project was launched in 2008. Financial bids were opened in May 2010 with prices as follows:

• United Utilities (UK)/Samsung Engineering (South Korea): BD0.550 ($1.459) a cubic metre
• Acciona (Spain)/Kuwait Finance House (Kuwait): BD0.607 a cubic metre
• Saudi Oger (Saudi Arabia)/Korea Water Resources Corporation (South Korea): BD0.6896 a cubic metre
• Metito (UAE)/Berlinwasser (Germany): BD0.7165 a cubic metre
• Degremont (France)/ Sumitomo (Japan): BD0.7426 a cubic metre

Berlinwasser and Metito submitted an alternative bid of BD0.6081 a cubic metre. Degremont and Sumitomo had an alternative bid of BD0.6675 a cubic metre.