Three groups of banks to bid for Ghazlan financing

22 March 1996

Three groups of Gulf and international banks will bid to arrange a $1,500 million.

11-and-a-half year loan facility for the expansion of Sceco-East's Ghazlan power station, according to banking sources (Saudi Arabia;

MEED 15:3:96) The first group includes Chase Manhattan Bank, Gulf International Bank, National Commercial Bank, Saudi-British Bank and Al Bank Al Saudi AI-Fransi. The second includes Arab Banking Corporation. Arab National Bank, Citibank, National Bank of Bahrain, Industrial Bank of Japan and Saudi American Bank. The third comprises Fuji Bank Riyad Bank and Saudi Cairo Bank. Al-Rajhi Banking and Investment Corporation is expected to offer an Islamic finance proposal. Sceco-East's financial adviser is Gulf Investment Corporation.

The expansion, expected to cost a total of $1,500 million, involves adding an extra 2,400 MW capacity at Ghazlan. The closing date for submissions is 18 March. put forward from 2 March because of Eid-related delays. Evaluation of the bids is likely to take several weeks.

Banks can opt to arrange a facility with a 10year maturity period and unequal repayments the latter would be weighted towards the end of the loan period according to one banking source. '(The option) is for psychological reasons,' the source said. 'Some institutions will feel more comfortable with 10 years. It doesn't make much difference.' Like the other Scecos, Sceco-East is techni cally insolvent. Banking sources said banks are bidding for the commercial loan package an unprecedented method of financing projects in the kingdom - for political reasons and because the presence of Saudi Aramco and industrial giant Saudi Basic Industries Corporation (SABIC) among ScecoEast's customers is seen as a repayments guarantee.

'Sceco-East is different because of its customers. The other Scecos don't have any major buyers,' the source said, adding that for this reason the success of the Ghazlan package would not take the pressure off the rest of the electricity industry to improve its financial viability. 'They have to restructure,' he said.

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