Mena project finance volumes decline in 2014

19 January 2015

Oil price concerns could affect this year’s deal pipeline

The volume of project finance deals signed in 2014 totalled $40.49bn, a decline from the $64.4bn recorded in 2013, according to data from UK-based data provider Dealogic.

The 2013 figures were significantly bolstered by the signing of the $20bn Sadara Chemical Company project in Saudi Arabia, which closed at the end of June that year.

Apart from the anomaly of 2013, volumes recorded in 2014 were the highest recorded since 2009, with the market reaching a low of $26.2m-worth of deals in 2012. 

A total of $48.19bn-worth of project financings were signed in 2008.

The largest deal signed in 2014 was the $5bn financing for Maaden Waad al-Shamal Phosphate Company in Saudi Arabia, which closed at the end of June. It was the second-largest project finance deal globally to be signed in the first six months.

Other large-scale deals signed last year include the $3.6bn financing raised by Oman Refineries & Petrochemicals Co (Orpic) to support the Sohar refinery expansion.

A total of 21 local, regional and international banks participated in the facility, including a number of export credit agencies (ECAs). It is one of the largest financings signed in Oman to-date.

Oman is expected to be one of the key markets in the region for project finance in 2015. The Oman Power & Water Procurement Company (OPWP) is progressing with the Salalah 2 independent power project, with contractors submitting bids in 2014.

Other Oman projects in the pipeline include the Liwa Plastics project being developed by Orpic. The project is set to be the biggest petrochemicals scheme in Oman.

Last year also saw the financial close of Safi independent power project (IPP) in Morocco, a deal which could set a new trend for how Morocco funds its projects.

The $2.6bn coal-fired IPP was funded via Islamic-compliant funding provided by the Saudi-based Islamic Development Bank. It is the first multi-tranche cross-border Islamic financing to be extended to the country.

2014 also saw the long-awaited financial close of the Mirfa independent power and water project (IWPP) in Abu Dhabi. Approximately $1.2bn-worth of debt was raised by a syndication of local and international banks, including a large number of Japanese banks.

Forecasts for 2015’s project finance market are hard to make given the volatility of oil prices and its impact of government spending and infrastructure plans.

As yet, the region’s governments are not slowing down spending. However, some projects have already been postponed or cancelled due to concerns over oil prices.

Qatar Petroleum and UK/Dutch Shell Group have axed its plans to build its $6.4bn Al-Karaana complex in Qatar, citing commercial unfeasibility as the reason. The project was expected to be taken to the commercial bank market in 2014.

Other projects in the region are moving ahead with banks are negotiating funding packages.

Financial close for the second phase of Dubai’s Mohammed bin Rashid al-Maktoum solar park is expected to be reached by mid-April.

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