Saudi Electricity Company (SEC) is working on a $700m loan to help it finance the final stages of the development of a power plant being built in Shuaiba.

The deal is being arranged by the UK’s HSBC and is structured as an export credit agency loan (ECA), with guarantees by France’s Coface and funding from commercial banks. SEC and HSBC are planning to complete the deal, which will have a tenor of 12 years, by mid-September.

A banker close to the loan says HSBC has almost completed preliminary talks with banks about what sort of terms would be required for them to finance the loan. The source adds, “I don’t know if they will be able to get this done by mid-September, that seems a bit optimistic with Ramadan also finishing around the same time.”

The deal will be dollar denominated and financed by four or five international banks. The US’ Citigroup, France’s BNP Paribas and Credit Agricole, and Germany’s Deutsche Bank are understood to already be in talks about funding the deal.

The plant being developed at Shuaiba, south of Jeddah on the Red Sea coast, will provide 1,200MW and a $3bn turnkey contract to develop the plant was awarded to France’s Alstom in July 2008. The plant is being developed next to existing power production facilities (MEED 3:07:08).

Bankers say the additional funding has been under consideration for some time, but was held up while waiting for approvals from Coface. “This is partly retroactive financing because SEC had hoped to finance this deal much earlier, but has been held up,” says a source close to the deal.

Part of the hold ups are understood to relate to Coface coming on board to finance the scheme after construction had already commenced and then requesting that an environmental consultant review the project. Typically, ECAs begin working on lending to a project around the same time that a contract is signed with a developer.