France’s Engie replicated the structure of Mirfa independent power & water project (IWPP) in Abu Dhabi to refinance the $1.2bn of debt remaining on PP11 IPP.

Mirfa IWPP reached a financial close in October 2014 with pricing of between 100 and 150 basis points over the London interbank rate (Libor).

Engie received a mandate to refinance PP11 by the end of 2014, and secured significantly lower interest rates compared to the 2010 deal.

“Mirfa was competitive on the pricing and we used that as a benchmark for PP11,” says Jean-Baptiste Roux, financial advisor at Engie. “We refinanced in the middle of the change in pricing so it is slightly below Mirfa. It was a quality deal because PP11 is one of the best plants in Saudi Arabia.”

Low pricing was also facilitated by the soft mini-perm structure. This involves an 85 per cent cash sweep after seven years, then an increase in pricing.

The project company Dhuruma Electricity Company refinanced two Islamic finance facilities worth SR2.4bn ($632m) and a $505m US dollar commercial tranche, with a slight releveraging.

The loan from the Export Import Bank of the United States (US Exim) was not refinanced, although the export credit agency signed off on the refinancing.

Dhuruma is 50 per owned by utility Saudi Electricity Company, 20 per cent by Engie, 15 per cent by Japan’s Sojitz Group and 15 per cent by local Aljomaih Holding.

The lenders were advised by US-based White & Case LLP, Lummus Consultants, Holland’s KPMG and the UK’s Jardine Lloyd Thompson on insurance.

Dhuruma was advised by Clifford Chance and Engie’s in-house financial advisory.

Engie does not expect to get the same low pricing on upcoming refinancings, such as the Sohar 2 and Barka 3 IPPs.

“The margins are increasing,” says Roux. “They were at historical lows and now they are going back to something more sound.”

There has been a lag in pricing increases, due to the length of time that structured finance deals take to close and the difficulty of changing the terms mid-deal. Deals coming to the market now will notice a change in banking sector appetite.