Al Kamil, Barka: An Omani double
The Omani power market received a long anticipated and
indispensable boost recently with the successful finalization of
two of its power deals ? AES' Barka and International Power's Al
Kamil. Put together and tied up swiftly with uncovered
international debt, both deals have set record loan tenors for the
country.
Sub-underwriting phase of syndication of the $348.6 million project financing for the Barka independent water and power project (IWPP), the first of its kind in the Sultante, was successfully wrapped up recently by lead arrangers ANZ Investment Bank and ABC.
Eight banks were invited to support the deal at this stage as sub-underwriters with $50 million tickets or with take-and-holds of $25 million apiece. It is understood that most banks opted for the sub-underwriting position.
The 16-year deal is structured between a $332 million term loan and a $16.6 million standby facility. The deal is priced at 115bp over Libor pre-completion. Post-completion, this drops to 112.5bp for years three to eight, before moving up to 125bp for years nine to 11, 135bp for years 12 to 14 before rising to a final high of 155bp for years 15 and 16.
This is the longest dated project financing to be attempted in Oman. The previous benchmark was set at 12 years, although this did not involve international sponsors. With a cash sweep mechanism kicking in at year 11, the deal is likely to be refinanced by year 12.
The previous deal was for the $410 million project loan for Oman Gas Company SAOC mandated to ABC International Bank (regional bookrunner), BNP Paribas (international bookrunner) and IBJ (documentation, facility agent, intercreditor agent and security trustee).
The Barka project is sponsored by AES and the local Bahwan group through Multitech, a special purpose company. The engineering, procurement and construction (EPC) contract is being carried out by AA- rated Enel and Hitachi Zosen.
Syndication of the deal also received encouragement from Oman's recent sovereign rating upgrade, from BBB- to BBB. General syndication is expected to be launched within the next month, and should then take a further six weeks to complete.
The debt will part finance the construction of the 427MW/20MIGD power and desalination plant located at Barka, close to Muscat. Offtake and supply is categorised as sovereign risk
High liquidity among regional banks, and a growing interest in IWPP financings following the success of the $1,015 million facility for neighboring Abu Dhabi's Taweelah A1 IWPP last year, is likely to attract much attention to the Barka deal.
One of Barka's major advantages is the fact that it is one of the first major deals in the region to come to market this year ? and appetite is particularly strong. The deal also stands out as a highly strategic financing, and the enthusiasm for this type of project is likely to be reflected in its pricing.
But all is far from over for Barka's development. Proposals for Phase 2, 3, and 4 expansions are expected over the next few years. Commenting on its significance, the Ministry of National Economy explains that ?it is an extremely project in size, scope and structure, as a baseload project, particularly given its water component.? He adds, ?It was difficult, partly because there are only a few developers familiar with combined power and desalination projects.?
International Power's subsequent announcement of Al Kamil's financial closure, less than 12 months after seven international developers bid for the scheme, has fired up the Omani market even further.
General syndication for a $100 million non-recourse loan is on the verge of launching. It is expected that between 5 and 10 banks will participate in syndication, and that the balance will tilt in favor of regional institutions. The loan is a straight amortizing financing with a step up in pricing to encourage refinancing, rather than cash sweep lock ups. The joint lead arrangers are Societe Generale with the local Bank Muscat. Debt financing will cover 75% of project costs, with IPower making a$33 million equity contribution.
IPower was awarded Al-Kamil, the first project within the government's fast-track power privatization program, in July. The 280-MW plant, to be situated some 25 km north of Al-Kamil in the Eastern province, is due to come on stream in the second quarter of 2002. Construction is being carried out in association with AIC. GE Power Systems is supplying Frame-9E gas turbines.
The local business environment was one of the factors contributing to the speed of the project's closure. Explains one familiar source, ?there is no doubt now that this new initiative has put Oman squarely on the map. The new IPPs, and the privatizations, have fit into an outstanding package offered by the government which is, above all, very transparent.?
The third and final Omani deal to be signed recently (though yet to be funded) is PSEG's Salalah IPP, situated in the southwestern region of the country. The project calls for the generation, transmission and distribution of services to the isolated town of Salalah, and is part privatization, part BOT. Under the terms, the project company is to rebuild the generation capacity with a new 200MW plant.
The financing requirement for this project is $270 million, with at least $210 million to come from the commercial bank market. BNP Paribas is advising, though it is as yet unclear whether they will also assume the lead arranger title. Banks competing for this role include ANZ, Barclays Capital and WestLB. Indian contractor Larsen & Turbo acts as EPC contractor.
Sub-underwriting phase of syndication of the $348.6 million project financing for the Barka independent water and power project (IWPP), the first of its kind in the Sultante, was successfully wrapped up recently by lead arrangers ANZ Investment Bank and ABC.
Eight banks were invited to support the deal at this stage as sub-underwriters with $50 million tickets or with take-and-holds of $25 million apiece. It is understood that most banks opted for the sub-underwriting position.
The 16-year deal is structured between a $332 million term loan and a $16.6 million standby facility. The deal is priced at 115bp over Libor pre-completion. Post-completion, this drops to 112.5bp for years three to eight, before moving up to 125bp for years nine to 11, 135bp for years 12 to 14 before rising to a final high of 155bp for years 15 and 16.
This is the longest dated project financing to be attempted in Oman. The previous benchmark was set at 12 years, although this did not involve international sponsors. With a cash sweep mechanism kicking in at year 11, the deal is likely to be refinanced by year 12.
The previous deal was for the $410 million project loan for Oman Gas Company SAOC mandated to ABC International Bank (regional bookrunner), BNP Paribas (international bookrunner) and IBJ (documentation, facility agent, intercreditor agent and security trustee).
The Barka project is sponsored by AES and the local Bahwan group through Multitech, a special purpose company. The engineering, procurement and construction (EPC) contract is being carried out by AA- rated Enel and Hitachi Zosen.
Syndication of the deal also received encouragement from Oman's recent sovereign rating upgrade, from BBB- to BBB. General syndication is expected to be launched within the next month, and should then take a further six weeks to complete.
The debt will part finance the construction of the 427MW/20MIGD power and desalination plant located at Barka, close to Muscat. Offtake and supply is categorised as sovereign risk
High liquidity among regional banks, and a growing interest in IWPP financings following the success of the $1,015 million facility for neighboring Abu Dhabi's Taweelah A1 IWPP last year, is likely to attract much attention to the Barka deal.
One of Barka's major advantages is the fact that it is one of the first major deals in the region to come to market this year ? and appetite is particularly strong. The deal also stands out as a highly strategic financing, and the enthusiasm for this type of project is likely to be reflected in its pricing.
But all is far from over for Barka's development. Proposals for Phase 2, 3, and 4 expansions are expected over the next few years. Commenting on its significance, the Ministry of National Economy explains that ?it is an extremely project in size, scope and structure, as a baseload project, particularly given its water component.? He adds, ?It was difficult, partly because there are only a few developers familiar with combined power and desalination projects.?
International Power's subsequent announcement of Al Kamil's financial closure, less than 12 months after seven international developers bid for the scheme, has fired up the Omani market even further.
General syndication for a $100 million non-recourse loan is on the verge of launching. It is expected that between 5 and 10 banks will participate in syndication, and that the balance will tilt in favor of regional institutions. The loan is a straight amortizing financing with a step up in pricing to encourage refinancing, rather than cash sweep lock ups. The joint lead arrangers are Societe Generale with the local Bank Muscat. Debt financing will cover 75% of project costs, with IPower making a$33 million equity contribution.
IPower was awarded Al-Kamil, the first project within the government's fast-track power privatization program, in July. The 280-MW plant, to be situated some 25 km north of Al-Kamil in the Eastern province, is due to come on stream in the second quarter of 2002. Construction is being carried out in association with AIC. GE Power Systems is supplying Frame-9E gas turbines.
The local business environment was one of the factors contributing to the speed of the project's closure. Explains one familiar source, ?there is no doubt now that this new initiative has put Oman squarely on the map. The new IPPs, and the privatizations, have fit into an outstanding package offered by the government which is, above all, very transparent.?
The third and final Omani deal to be signed recently (though yet to be funded) is PSEG's Salalah IPP, situated in the southwestern region of the country. The project calls for the generation, transmission and distribution of services to the isolated town of Salalah, and is part privatization, part BOT. Under the terms, the project company is to rebuild the generation capacity with a new 200MW plant.
The financing requirement for this project is $270 million, with at least $210 million to come from the commercial bank market. BNP Paribas is advising, though it is as yet unclear whether they will also assume the lead arranger title. Banks competing for this role include ANZ, Barclays Capital and WestLB. Indian contractor Larsen & Turbo acts as EPC contractor.
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