Special Report: Power and water - Banks turn to utility schemes

12 May 2010

Over the past 10 years, privately funded power and water projects have played an increasingly important role in helping utilities in the GCC keep pace with rising demand.

In that period, some 30 greenfield projects have been executed in partnership with international developers in Abu Dhabi, Bahrain, Oman, Qatar and Saudi Arabia. But other markets in the region have been reluctant to try out the model, continuing instead to favour traditional lump-sum procurement methods. Until now that is.

The global financial crisis has seen the cost of debt rising, making finance more difficult and expensive to secure. As a result, several states are now planning their first independent power and water projects, among them Dubai, Syria, Kuwait and Iraq. But the timing could not be worse.

Banks have become risk averse in the wake of the financial crisis, and even though they are keen to support project finance deals for infrastructure schemes, it is for projects that have government-level guarantees in states with stable economies and a proven track-record of private-sector cooperation.

Iraq with its security problems, Dubai with its much-written-about debt crisis, and Kuwait with its history of failing to see projects through to the end could deter some finance houses from lending to the schemes. But as the success of independent power projects in the Kurdistan region of Iraq shows, with the right advisory team on board a change for the better is possible.

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