Kahrama moves in on financing

16 August 2002

Seven banks have been sent the preliminary information memorandum (PIM) for the debt package on the country's first independent water and power project (IWPP) to be constructed at Arzew. The owner and developer of the project is Kahrama, an 80:20 venture between the foreign developer Black & Veatch (B&V)and Algerian Energy Company (AEC), an investment company which is itself a joint venture between state energy and power companies Sonatrachand Sonelgaz.

Total project costs for the 314-MW, 88,000-cubic-metre-a-day plant are $400 million, of which some $280 million will be debt financing. The developers hope to have as much of the debt package as possible covered by export credit agencies (ECAs). The sponsors have already approached Export-Import Bank of Japan and France's Coface.

'The number of banks that will be involved in the financing will depend on the final structure,' says a source close to the project. 'Before we close that out we need to wait for the ECAs to set their pricing.' Kahrama is also examining the possibility of securing funds from the Washington-based Overseas Private Investment Corporation (OPIC). Financial close is scheduled for the end of November (MEED 28:6:02). Kahrama's financial adviser is Mizuho Financial Group.

Kahrama is close to concluding negotiations with Sogex Omanfor the operation and maintenance contract and the day-to-day management of the plant. It is not yet known whether Sogex will take an equity stake in the venture, as was initially planned. If it does, the stake will come from B&V's equity participation in the project.

A Japanese consortium of Itochu Corporationand Ishikawajima-Harima Heavy Industrieswas awarded the $260 million engineering, procurement and construction (EPC) contract at the start of the year. GE Power Systemsof the US will provide the turbines (MEED 1:2:02, Power & Water).

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