Shuweihat S3 reaches financial close

17 May 2011

Financing for Abu Dhabi’s first independent power project is completed

Abu Dhabi has signed financing agreements for its first independent power project (IPP). A signing ceremony was held on 16 May in the emirate. Final conditions precedent will be signed over the next two days to officially close the deal.

A Japanese/South Korean consortium of Sumitomo and Korea Electric Power Company (Kepco) was selected by Abu Dhabi Water & Electricity Authority (Adwea) to build the project in October 2010.

Debt funding for the project will be split between a $370m Japan Bank for International Cooperation (JBIC) loan; $370m from Export-Import Bank of Korea through a direct loan and loan insurance; and a $360m commercial bank tranche.

When the Sumitomo consortium was selected to build the project, the bid had financial backing from France’s BNP Paribas and Japan’s Mizuho. The following banks joined the original backers and are lenders as part of the commercial tranche:

  • HSBC (UK)
  • National Bank of Abu Dhabi (UAE)
  • Bank of Tokyo-Mitsubishi (Japan)
  • Sumitomo Bank (Japan)
  • Samba (Saudi Arabia)

Pricing stands at 175-250bp for the commercial bank tranche, 156bp for the JBIC loan and 200bp for the Export-Import Bank of Korea loan. Tenor on all three tranches is 22 years.

The debt-equity ratio is set at a maximum of 80 per cent in debt. The financial model is such that the sponsors benefit from early generation revenues. The winning consortium bid a tariff of Dh0.12865 per kWh. When the plant is operating at 67 per cent capacity, the tariff will drop to Dh0.10 per kWh.

Shuweihat S3 will be a 1,600MW project and is due to come online in mid-2013. A 25-year power purchase agreement for the project was signed in February. The plant will not have a desalination component, unlike Adwea’s previous projects.

Germany’s Siemens and South Korea’s Daewoo Engineering & Construction Company are due to start construction on the combined cycle plant this month, with commercial operations estimated to commence from March 2014.

BNP Paribas, UK-based Herbert Smith and Trowers & Hamlins, also of the UK, are advising the sponsors. HSBC, White & Case, and Germany’s Fichtner are advising Adwea. UK-based Ashurst is advising the lenders.

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