Almost one year after Oman Power & Water Procurement Company first selected Singapore’s Sembcorp as its preferred bidder for the Salalah independent water and power project (IWPP), the developer is finally poised to raise all the debt it needs to build the project.
The Salalah IWPP will become the region’s third utility developed by the private sector to secure funding this year. In fact, all three projects will have raised the debt they need in the space of just five months. Abu Dhabi Water & Electricity Authority’s Shuweihat 2 IWPP financing closed in mid October. Prior to that, the developer of the Rabigh independent power project in Saudi Arabia finished raising its capital in July.
Salalah’s success may be a sign of a recovery in the project finance market. However, it is significant that the majority of the debt will come from Chinese lenders.
The Rabigh and Shuweihat 2 schemes also benefited from large loans from the Far East. In the case of Rabigh, the Chinese stepped in only once the developer picked Shandong 3 Electric Power Construction Corporation as the engineering, procurement and construction contractor.
On Shuweihat 2, Belgium’s Suez Energy International brought in Japan’s Marubeni Corporation to access funding from Japan Bank for International Co-operation. So while progress on the Salalah scheme is a step in the direction of recovery, it is probably not a very large one.