A consortium of the UK’s International Power, Belgium’s Suez Energy and Saudi Oger has secured strong support from banks to finance its bid to develop the $2.5bn Rabigh independent power project (IPP), sources close to the deal tell MEED.

The consortium has financial backing from international banks Standard Chartered and Calyon, along with the local National Commercial Bank and Banque Saudi Fransi. HSBC has also been approached to join the consortium but has yet to join the group.

The international banks are not thought to have made firm underwriting commitments at this stage and have been brought in as relationship banks to the three members of the consortium.

It comes at a turbulent time in the region’s project financing market, with many deals struggling to raise the necessary funding. Only one other bid for the project is expected to be submitted, from the local Acwa Power. It has financial backing from two local banks, Samba and Al-Rajhi, an Islamic bank. Both banks are understood to be committing to underwrite the project.

The tender is being run by the Saudi Electricity Company (SEC) with Citigroup acting as financial adviser. The winning bidder will develop a 1,200MW oil fired power plant and hold an 80 per cent stake in the project, with the remainder held by SEC.

Both consortiums are understood to be keen to secure large-scale support from export credit agencies (ECAs) to help reduce the size of the commercial bank tranche. “The banking market can only take about $700m to $1bn of debt in long-term finance at the moment,” says one banker working on the project. “So it will be very important to access ECA funding to reduce the amount the banks have to raise.”

The deadline for bids is now 1 December, after being pushed back from the original date of
1 November at the request of bidders (MEED 24:10:08).

Banks are already beginning to turn their attention to the next power project in the kingdom, the $3bn independent water and power project (IWPP) at Yanbu. Only two bidders are expected to come forward for the project, Acwa Power and International Power. In March, 12 prequalified companies were invited to bid for the project to build a 1,700MW oil fired power and desalination plant (MEED 12:3:08).

Standard Chartered is already working with International Power to provide financing. Further talks between the two bidders and other banks are ongoing.