A group of international and local banks have signed senior debt financing agreements covering 74 per cent of the costs of the Rabigh 2 independent power project (IPP) in Saudi Arabia.

The total project cost is SR5.973bn ($1.6bn) of which approximately SR4.42bn is being funded through senior debt. The remaining funds are being provided by shareholders in the form of equity bridge loans.

International banks providing financing are Standard Chartered, Germany’s KfW Ipex, and Japan’s Mizuho Bank.

Local banks participating in the deal are Bank Saudi Fransi (BSF), Al-Rajhi Bank, National Commercial Bank (NCB) and Samba Financial Group and Al-Inma Bank.

Four of the banks, BSF, NCB, Bank al-Jazira and Bank al-Bilad are also providing the equity bridge loans.

The financing agreements were signed at the same time as a power purchase agreement (PPA) between an Acwa Power International-led consortium, which includes Korea’s Samsung C&T, was reached with Saudi Electricity Company (SEC) covering the development, financing, construction, cooperation and maintenance of the new power project.

A project company, Al-Mourjan For Electricity Production Company, has been set up, in which both the ACWA consortium and SEC have a 50 per cent stake.

The IPP is being developed at Rabigh on the west coast of Saudi Arabia, 130km north of Jeddah. The project is the fourth IPP to be launched by SEC in an effort to improve the provision of electricity to Saudi Arabia’s population.

The project will deliver 2,060MW of electricity to SEC under the purchase agreement for 20 years from the planned date on operation in June 2017.  

Germany’s Siemens is to provide the gas turbine generator unit and steam turbine generator while Samsung is to engineer, procure and construct the development.

The project is the fourth IPP to be launched by SEC.

The signing of the PPA and financing documents marks the end of a drawn-out negotiation period. In April, SEC changed the configuration of the plant from oil to gas and planned to retender the project. SEC subsequently decided against rebidding the PPA.