The $825m project bond issued by Abu Dhabi’s Shuweihat S2 Independent Water and Power project (IWPP) has demonstrated that there is a strengthening investor interest in Gulf risk.

Speaking at MEED’s Project and Infrastructure Finance conference, Ryan Wong, treasurer at Abu Dhabi National Energy Company (Taqa), said the deal, which closed in July 2013, will help make future project bond issuance in the region even more successful.

It was the first bond issuance made by an IWPP company in the UAE.

“We learned that there is strong appetite for GCC credit fundamentals. We were worried that investors would be scared [due to wider issues in the Middle East] but they understood the UAE story well,” he said.

The bond was issued by the Ruwais Power Company, which is 54 per cent owned by Taqa. It was raised to partially refinance approximately $2bn of debt from lenders raised in 2009 to finance the construction of the IWPP. The refinancing also featured a new commercial bank loan and a new loan facility from the Japan Bank for International Cooperation (JBIC).

Wong said the bond issuance proved particularly popular with Asian and US-based investors, whereas European investors were more cautious about investing in a long-term issuance with a tenor of 21 years.

He added that the interest from Asian investors was “unprecedented”, with 23 per cent of the order book made up of Asian orders. US orders made up 70 per cent of the book.

Such was the demand, the coupon pricing on the bond was narrowed from the original 6.25 per cent to 6 per cent.

The use of project bonds in the Middle East is relatively limited compared to other markets, but is increasingly seen as an important source of additional financing to fund the region’s infrastructure plans.

Typically project bonds will be used to refinance existing project debt rather than issued to fund projects yet to be constructed.