As the cost of borrowing ticked upwards at the end of 2007 because of the credit crunch, many project sponsors believed that if they held on long enough, the uncertainty would pass and normality would return to the banking market.
An unfortunate consequence of this is that the project finance market in the Gulf has stagnated for much of the year. Few new deals have been done, and those that have gone through have relied on a large club of banks rather than going to a general syndication. The very thought of this, understandably, still makes most banks nervous.
Nearly one year on, many sponsors are still waiting for the much talked about recovery. Others, however, are starting to accept the new pricing environment and get on with the business of developing new projects. Predominately, these are in the power sector, and are driven by the rapid population growth in the region.
Saudi Arabia, Bahrain and the UAE all have large power projects that will require financing in the next few months. These will drive the project finance market. Much will now depend on the banks leading this process.
Each successful deal will help increase market confidence and, conversely, any wayward deals will have a negative impact on the next deal to go through the market.
Careful planning and management will be needed to successfully raise more than $20bn in the next few months, along with drawing on as many different pools of liquidity as possible. Export credit agencies, Islamic banks and multi-currency facilities will be used to a greater extent than previously in an effort to kick-start the first few deals through the market.
But the most important factor will be lining up these deals to avoid them all competing with each other in the market at the same time.