The consortium led by Japan’s Sumitomo Corporation has completed the financing arrangements for its bid for the $5.5bn Ras al-Zour power project, which should now allow the scheme to proceed.

It follows the decision in January by Malaysian developer Malakoff to reduce its equity participation in the deal from 20 per cent to 8 per cent.

Sumitomo and the other consortium member, the local Al-Jomaih, have agreed to provide additional equity to the project.

If the Water & Electricity Company (WEC) has no further concerns with the bid, a power and water purchase agreement will be signed soon, allowing Sumitomo to begin developing the project.

“WEC now either has to accept the bid from Sumitomo and get the agreement signed, or ask for further clarifications,” says one source close to the project. “Sumitomo has pulled together a strong package, considering how the market is.”

The consortium has already managed to secure support from Saudi banks Alinma, Riyadh Bank and National Commercial Bank, for a total of $1.2bn (SR4.5bn), denominated in Saudi riyals.

It has also secured support from five international banks for $100m each, at a margin of 260 basis points over the London interbank offered rate (Libor), falling to 225 basis points over Libor after three years.

The project also has financing from export credit agency Japan Bank for International Co-operation (JBIC) for $2.5bn. The tenor on the debt is 23 years.

All of the commitments are on a take-and-hold basis, meaning there will be no syndication.

Barring any further complications on the deal, it will the first long-term project financing agreed for a power project since the $3.8bn Ras Laffan C financing was completed in August 2008.

Other deals that have been financed over the past year have had to be dramatically restructured to attract bank support.

“Getting a deal of this size done in the current conditions is a significant achievement,” says another source close to the project.

Ras al-Zour finance

  • Funding secured from JBIC: $2.5bn

  • Funding secured from Saudi banks: $1.2bn

  • Funding secured from international banks: $500m