Saudi Tabreed and the local Acwa have approached banks to finance an equity bridge loan for the Dhahran district cooling project and are expected to sign facility agreements shortly.

The two companies are joint sponsors on a project in Dhahran, which comprises 11 cooling plants with a total base capacity of 27,000 tonnes of refrigeration (TR) and 5,000TR of additional capacity. The SR524m ($140m) plant is the first project financed district cooling plant in the region. It secured SR355.59m in project debt.

The sponsors originally intended to provide SR168.41m in equity. However, the sponsors have since decided to seek an equity bridge loan to cover half of their equity participations. Industry sources have indicated that Tabreed’s strained financial position and Acwa’s aggressive development strategy in other sectors led to the decision.

Speaking to MEED at the Middle East District Cooling 2010 conference in Abu Dhabi, Banque Saudi Fransi (BSF) project finance and syndications deputy head Khurram Butt stated that the sponsors have received some commitments and are set to sign the equity bridge loan soon.

According to Butt, Banque Saudi Fransi and the other lenders on the transaction are happy for the sponsors to substitute the equity bridge loan in place of the company’s equity as the banks are unlikely to be affected by the change.

The project has been financed in a combination of Istina and al-Ijara al Fawsafah fi al-Dhimnah. Construction is expected to take 20 months and repayment of the debt is to occur in 37 semi-annual instalments. The debt is expected to be fully paid off within eight and a half years. The debt service cover ratio (DSCR) is 1.2 and 70 per cent of the debt is hedged.

Oil major Saudi Aramco is the offtaker for the project. Both Richard Parris, partner at UK law firm Clifford Chance, which advised on the deal and Khurram Butt commented at the conference on the advantage of having such a strong offtaker when financing the project.