US-based Moody’s Investor Services has rated Saudi Arabia’s Acwa Power’s planned $1bn bond issuance.

It has assigned a provisional long-term rating of Baa3 stable.

Power and water developer Acwa intends to issue international fully amortising senior secured bonds and sukuk maturing in 2039.

It will repay them based on revenues from nine independent power & water projects (IWPPs) in Saudi Arabia.

The rating balances the long-term offtake agreements signed with Saudi government entities, which provides steady cashflow, and the subordination of the bonds to project finance deals. It also takes into account the potential risk of the operations & maintenance companies.

This means Acwa is expected to offer wider spreads, over 300 basis points above midswaps. This will be needed to attract investors who are closing their books for 2016, and are wary of market volatility and US Federal Reserve interest rate hikes, according to Reuters.

The arrangers are US investment bank Jefferies, the US’ Citigroup, China Construction Bank’s Singapore branch, Japan’s Mizuho and the UK’s Standard Chartered, Reuters has reported.

The bond will repay Acwa’s existing bank loans and be used for general corporate purposes. The developer has SR3.5bn ($933m) of revolving credit with Saudi banks, as well as numerous project finance obligations.

Acwa recently reached financial close, with China’s Harbin, on the $3.4bn Hassyan coal IPP. They raised $2.5bn of debt, mainly from Chinese banks. It also reached a financial close this year on Ibri/Sohar IPP with Mitsui in Oman. The size of the debt reached $1.4bn.

Saudi Arabia’s Public Investment fund (PIF) is also considering increasing its stake Acwa to up to 35 per cent.

Acwa is thought to be preparing to acquire existing power generation assets during the carve-out and sale of generation companies from the Saudi Electricity Company.