Barqa 2 IWPP Reaches Financial Close, Raises $800Mn From 16 Banks
Suez Energy and consortium partners Mubadala Development Company and Oman’s National Trading Company reached financial close on 26 February on loans for the Barqa 2 independent water and power project (IWPP) and associated purchase of the Al-Rusayl Power Company from the Omani government. The partners raised around $800mn from 16 banks which comprised mandated lead arrangers HSBC and Sumitomo Mitsui Banking Corporation, joined by KBC, Calyon, Natixis (formerly Natexis Banques Populaires), BNP Paribas, Mashreqbank, Arab Bank, Gulf International Bank, Bank Muscat, National Bank of Abu Dhabi, KFW-Ipex, Bayern LB, West LB, Standard Chartered Bank and Mizuho.
The transaction comprises a $595mn loan with a 17 year tenor for construction of the new Barqa 2 facility, a $113mn loan with a 15 year tenor for the Rusayl purchase (which was completed on 31 January), a $9mn stand-by tranche for Barqa 2, a $77.5mn equity bridge and a $1mn stand-by equity bridge, MEES understands. The debt/equity ratio was 87.5:12.5 at financial close. The Rusayl margins are 75 bps during the construction phase for Barqa 2, 70 bps during the next five years, stepping up to 90 bps during the next four years and then to 110 bps thereafter. The Barqa 2 margins are 75 bps during construction, stepping up through 70 bps, 90 bps, 110 bps, 125 bps and then 160 bps.
There is a balloon payment of 12.5% after the nineteenth payment date. A balloon payment, which is not commonly used for power projects, effectively reduces debt service and thus the customer tariff for this deal, which has a relatively short tenor compared to the 20-plus years seen in many other power deals across the Gulf. Oman has not embraced long power and water purchase agreements (PWPAs) because it is understood to want to retain the option to develop an electricity market at a later date. The margins are relatively lean for a Gulf power deal and reflect the strong sponsor, although they are higher than the recent Taweelah A1/A10 IWPP which secured 50-100 bps across a 22.5 year tenor. The Taweelah A1/A10 margins represent a new low in Gulf power project financing costs, although there is some debate on whether they constitute a benchmark (MEES, 19 February and 22 January).
The consortium, which has formed the SMN Barka Power Company to manage the Barqa 2 and Rusayl assets, signed a 15 year PWPA with Oman’s Power and Water Procurement Office on 10 December last year. Power production will be ramped up in stages, with 363mw planned to come on-line in May 2008 and full commercial operation of 678mw by May 2009. Sea water desalination is based on reverse osmosis technology supplied by Degrémont, with full output scheduled to reach 120,000 cu ms/d. The Rusayl gas-fired plant produces 668mw of power and its sale was the first in Oman of a 100% stake in a power asset to a private entity (MEES, 9 October 2006). Barqa 2 is Oman’s sixth IWPP.
