Ras Abu: Length matters
The $160 million loan for Qatar's Ras Abu Fontas B phase one
expansion project signed on 15 August, ushering in yet another
successful deal in this year's most active Gulf project market.
Eight banks joined the club deal, which, at 17 years, flaunts the
longest tenor in Qatar's history.
Leading the team are BNP Paribas (documentation and facility agent) and HSBC (security trustee), with Bank of Tokyo-Mitsubishi, Credit Lyonnais, Sumitomo Bank, Qatar National Bank, Apicorp, and GIB also included. Each will take $20 million commitments. RBS acts as financial adviser to the sponsor, Qatar Electricity and Water Company (QEWC). Debt/equity split is 75/25.
The loan has a step-up pricing mechanism: 85 bp pre-completion, rising to 90 bp in years 2-7, 110 bp in years 8-11, 125 bp in years 12-14, and 135 bp in years 15-17. Such pricing is considered tight, particularly in light of the tenor's length.
Says Michael Crossland, senior director at RBS Structured Finance, ?the pricing is excellent and stacks up exceedingly well against other, similar and equally notable Gulf power deals of the last year.?
But equally significant is the tenor. The Gulf power and utility finance market has witnessed a sharp and dramatic stretching of deal tenors over the last two years, in the wake of benchmark transactions like UAE's Al Taweelah deals. Qatar, it seems, is no exception.
?It's interesting to note just how quickly the market responds to this kind of tenor. Some banks were happy to go for an even longer tenor,? explains a banker close to the deal.
In this case, the deal carries what Crossland calls ?the flavour of a genuine 17 year tenor,? to the extent that, unlike other ostensibly long term Gulf deals, there is no cash sweep mechanism in place. ?There's a general market recognition that these utility type projects really benefit from longer tenors ? and they're safe bets,? says Crossland.
Given the club deal structure, no general syndication will take place ? a move which clears the way for other, larger Qatari financings to come to the market. ?The actual number of banks was opportunity driven, but the club deal structure was pragmatic in intent,? says Crossland. Upcoming transactions include the $600 million loan for the Ras Laffan independent water and power project (IWPP) and the $700 million loan for RasGas II.
Majority privately-owned QEWC, Qatar's sole water and power generation company, will use the funds to expand capacity at its Ras Abu Fontas B complex to 1,000 MW from 610 MW and to 65 million g/d of water from 35 million g/d ? this will done in two phases. Alstom is the EPC contractor for phase one, construction on which started last year, funded by QEWC equity. It is slated to be fully on stream by August 2002. Phase II is to be completed by Summer 2003.
The deal marks QEWC's debut financing, as the company looks to establish itself as a major regional power sponsor. As such, lender enthusiasm can also be attributed to a desire to establish relationships with a company that is likely to loom large on the Gulf utility scene in coming years.
Indeed, QEWC is understood to be mulling future capital spending plans, including a possible acquisition of Ras Abu Fontas A from Kahramma, the government's electricity and water corporation. The company also retains a 25% stake in the Ras Laffan IWPP, the deal for which is forthcoming.
A traditional, Western style power purchase agreement (PPA) is also locked in place with Qatar Petroleum and the Kahramma respectively, for a minimum duration of 20 years, and thereafter extendable by 5 years. Indeed, a 17-year tenor makes sense in light of this PPA. In coming years, Kahramma is likely to become Qatar's grid operator, in addition to being offtaker.
The regional lender involvement in the deal is also of bearing. Though not unique, regional bank participation is ever more prominent in many Gulf project finance deals coming to the market ? a fact which would have flown in the face of received wisdom a few years ago. ?The regional banks are really up there now in terms of their exposure and expertise,? says Crossland.
Qatar, which is moving to privatize the generation and distribution of utilities, in June named AES as its partner in the Ras Laffan IWPP.
Arrangers for the Ras Laffan IWPP were also recently appointed by sponsor AES. They are ABC (joint regional bookrunner), ANZ (documentation, facility and modelling), Barclays Capical (joint international bookrunner), Bank of Tokyo Mitsubishi, BNP Paribas, GIB (joint regional bookrunner), HSBC (security trustee), IBJ (global coordinator, joint international bookrunner), QNB and SG (technical).
BNP Paribas was added to the initial group of nine banks. The deal will use as its template Oman's $332 million Barka transaction, successfully arranged by ABC and ANZ. In a move to inspire refinancing, the Ras Laffan loan will sport a cash sweep at year 12. It pulls a tenor of 18 years, reflecting a 25-year PPA. The debt/equity split is 80/20, with an equity bridge being arranged separately.
Pricing on the deal will work as follows: 105bp pre-completion to 115bp post completion, notching up to 125bp, 135bp then 150bp. The loan is set for signing on September 15, to clear the market for the next hefty Qatari transaction ? RasGas II.
Leading the team are BNP Paribas (documentation and facility agent) and HSBC (security trustee), with Bank of Tokyo-Mitsubishi, Credit Lyonnais, Sumitomo Bank, Qatar National Bank, Apicorp, and GIB also included. Each will take $20 million commitments. RBS acts as financial adviser to the sponsor, Qatar Electricity and Water Company (QEWC). Debt/equity split is 75/25.
The loan has a step-up pricing mechanism: 85 bp pre-completion, rising to 90 bp in years 2-7, 110 bp in years 8-11, 125 bp in years 12-14, and 135 bp in years 15-17. Such pricing is considered tight, particularly in light of the tenor's length.
Says Michael Crossland, senior director at RBS Structured Finance, ?the pricing is excellent and stacks up exceedingly well against other, similar and equally notable Gulf power deals of the last year.?
But equally significant is the tenor. The Gulf power and utility finance market has witnessed a sharp and dramatic stretching of deal tenors over the last two years, in the wake of benchmark transactions like UAE's Al Taweelah deals. Qatar, it seems, is no exception.
?It's interesting to note just how quickly the market responds to this kind of tenor. Some banks were happy to go for an even longer tenor,? explains a banker close to the deal.
In this case, the deal carries what Crossland calls ?the flavour of a genuine 17 year tenor,? to the extent that, unlike other ostensibly long term Gulf deals, there is no cash sweep mechanism in place. ?There's a general market recognition that these utility type projects really benefit from longer tenors ? and they're safe bets,? says Crossland.
Given the club deal structure, no general syndication will take place ? a move which clears the way for other, larger Qatari financings to come to the market. ?The actual number of banks was opportunity driven, but the club deal structure was pragmatic in intent,? says Crossland. Upcoming transactions include the $600 million loan for the Ras Laffan independent water and power project (IWPP) and the $700 million loan for RasGas II.
Majority privately-owned QEWC, Qatar's sole water and power generation company, will use the funds to expand capacity at its Ras Abu Fontas B complex to 1,000 MW from 610 MW and to 65 million g/d of water from 35 million g/d ? this will done in two phases. Alstom is the EPC contractor for phase one, construction on which started last year, funded by QEWC equity. It is slated to be fully on stream by August 2002. Phase II is to be completed by Summer 2003.
The deal marks QEWC's debut financing, as the company looks to establish itself as a major regional power sponsor. As such, lender enthusiasm can also be attributed to a desire to establish relationships with a company that is likely to loom large on the Gulf utility scene in coming years.
Indeed, QEWC is understood to be mulling future capital spending plans, including a possible acquisition of Ras Abu Fontas A from Kahramma, the government's electricity and water corporation. The company also retains a 25% stake in the Ras Laffan IWPP, the deal for which is forthcoming.
A traditional, Western style power purchase agreement (PPA) is also locked in place with Qatar Petroleum and the Kahramma respectively, for a minimum duration of 20 years, and thereafter extendable by 5 years. Indeed, a 17-year tenor makes sense in light of this PPA. In coming years, Kahramma is likely to become Qatar's grid operator, in addition to being offtaker.
The regional lender involvement in the deal is also of bearing. Though not unique, regional bank participation is ever more prominent in many Gulf project finance deals coming to the market ? a fact which would have flown in the face of received wisdom a few years ago. ?The regional banks are really up there now in terms of their exposure and expertise,? says Crossland.
Qatar, which is moving to privatize the generation and distribution of utilities, in June named AES as its partner in the Ras Laffan IWPP.
Arrangers for the Ras Laffan IWPP were also recently appointed by sponsor AES. They are ABC (joint regional bookrunner), ANZ (documentation, facility and modelling), Barclays Capical (joint international bookrunner), Bank of Tokyo Mitsubishi, BNP Paribas, GIB (joint regional bookrunner), HSBC (security trustee), IBJ (global coordinator, joint international bookrunner), QNB and SG (technical).
BNP Paribas was added to the initial group of nine banks. The deal will use as its template Oman's $332 million Barka transaction, successfully arranged by ABC and ANZ. In a move to inspire refinancing, the Ras Laffan loan will sport a cash sweep at year 12. It pulls a tenor of 18 years, reflecting a 25-year PPA. The debt/equity split is 80/20, with an equity bridge being arranged separately.
Pricing on the deal will work as follows: 105bp pre-completion to 115bp post completion, notching up to 125bp, 135bp then 150bp. The loan is set for signing on September 15, to clear the market for the next hefty Qatari transaction ? RasGas II.
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