Salalah forges ahead despite finance delay

29 October 2001

Construction work on the Salalah power project is proceeding on schedule despite a delay in concluding syndication of the international tranche of the $225 million debt package. Bankers in mid-October said the local tranche - worth $40 million - was expected to be taken up by three to four Omani banks by the end of the month. A decision will then be made on when to sell down the remainder to international banks (MEED 28:9:01).

The lead arrangers are BNP Paribasand West LB, which have each underwritten $92.5 million. BankMuscatis acting as an arranger and has underwritten $40 million. The client is the Dhofar Power Company(DPC), which has a 20-year concession to own, operate and maintain the Salalah power system, and is committed to building a 192-MW independent power plant (IPP) in the southern port city. PSEG Globalof the US controls 81 per cent of DPC. The remaining shares are held by local investors (MEED 17:8:01, Cover Story).

The first drawdown on the loan took place on 28 September. A day later, the engineering, procurement and construction (EPC) contract, awarded to India's Larsen & Toubro, came into force.

Project sources say that it is unclear when the international tranche, totalling $90 million, will be launched into syndication. However, they stress that any delay will have no impact on the project schedule, which calls for the IPP to be commissioned by March 2003. 'The deal is fully underwritten, it is not particularly large, and it has strong guarantees from the Ministry of Electricity & Water,' says a source close to the deal. 'It is also distinct from other Omani deals in that it has a termination clause.'

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