Last year saw ACWA Power grow from a domestic-focused player into an international developer, signing deals in Eastern Europe and Africa, as well as within its local GCC market. The Saudi Arabia-based sponsor also demonstrated its commitment to new technologies by winning two huge concentrated solar power (CSP) projects. In 2012, ACWA’s strategy for international growth and diversification very much mirrored that in its home country.

ACWA was established in 2004 and subsequently won the first independent water & power project (IWPP) to be tendered in Saudi Arabia, Shoaiba, as part of a consortium with Malakoff. The company now operates 19 water and power assets in eight countries, with a gross capacity of 13,000MW of power generation and 2.37 million cubic meters per day of desalinated water production. Outside of the Gulf region, the developer’s primary focus is to target investments in Morocco, Egypt and the southern corner of Africa.

In May ACWA won a build, own and operate concession to develop the Bokpoort CSP project, as part of the second bidding window of South Africa’s renewable energy IPP programme. Bokpoort was the company’s first win in Africa and its first ever solar deal. The plant will have a capacity of 50MW and, along with the 19 other projects selected by the South African government, will connect straight to the national grid owned by state utility Eskom. Financial close is scheduled for March 2013, with operations expected to begin at the site in the third quarter of 2015.

Its second solar investment came in July, when a consortium it led completed its acquisition of a 42% stake in the 60MW Karadzhalovo photovoltaic plant in Bulgaria. The equity group consisted of ACWA, First Reserve Energy Infrastructure Fund and a fund managed by Crescent Capital. SunEdison constructed the plant and has been operating it since March 2012. As part of the deal, ACWA subsidiary NOMAC established a 50:50 operating company with SunEdison to manage the facility. The IFC, OPIC and UniCredit provided debt in support of the acquisition.

Within four months of the Bokpoort award ACWA had won its second CSP tender, the 160MW Ouarzazate project in Morocco. Ouarzazate will be the largest CSP development in the world once construction is complete in 2014, and is just the first stage of a planned 500MW solar complex on the site 200km south of Marrakesh. The consortium developing the plant comprises ACWA, as well as TSK, Acciona and Sener. The ACWA group’s bid was 28.8% lower than the one offered by the second-placed consortium.

The sponsors had hoped that Ouarzazate would reach financial close before the end of 2012, because they signed the power purchase agreement with state utility Masen just two months after the tender, but the financing is now expected to be signed by the end of February. The World Bank, KfW, African Development Bank, and Agence Francaise de Developpment are to provide the debt for the $1 billion project, with a 25-year loan priced at 350bp over Libor. This debt will cover 75% of project costs, with equity covering the rest.

ACWA was close to finalising another international deal before the end of the year. The 800MW Kirikkale combined-cycle gas turbine plant in Turkey is now expected to reach financial close during the first quarter of 2013. The EBRD ($200 million), IFC ($125 million), Kexim ($130 million), Standard Chartered ($60 million) and Al Rajhi ($140 million) are providing that debt, and equity is meeting the rest of the project costs. Pricing on the 15- to 16-year debt is expected to be in the region of 450bp. The $800 million joint venture with Eser Holdings is located 50km east of Ankara.

These ambitious ventures into new markets show how ACWA has set about establishing a global profile over the last year. Rajit Nanda, chief financial officer of ACWA, explains: “We are now establishing ourselves not just as a Saudi company, but as a truly successful international developer. We have grown our expertise this year and have become stronger. As a young company it has been important for us to keep demonstrating progress, and we feel obligated to demonstrate that we are competing with the best.”

Consolidating its position as a leading sponsor in the GCC region also remained a priority for the business in 2012. In October ACWA bought Sogex Oman out of its 35% share in operating company NOMAC, becoming its sole owner. ACWA also closed a significant domestic deal during the year, when it completed the financing for the expansion of its Barka IWPP in November.

The $233 million Barka refinancing is Project Finance’s Middle Eastern Power Deal of the Year 2012 (see following page). Although not big in terms of debt size, the refinancing incorporated merchant tail risk while avoiding strict covenant tests and retaining a project finance structure. Bank Muscat, National Bank of Oman, and ABC were the lead arrangers of that deal.

ACWA’s ambitions to consolidate and exploit new markets match those of Saudi Arabia, which has bold plans to diversify its economy. Their interests became further aligned in early 2013 when public institutions the Saudi Public Investment Fund and the Saudi Public Pension agency acquired 13.72% and 5.71% respective stakes in the business. “Getting the institutional support from the Saudi Government was a vote of confidence in what AWCA Power has accomplished,” Nanda says. “It helps us because it demonstrates our position as a key growth driver for other countries’ key strategic assets. It is important to show our customers and clients that the Saudi government sees us as a national champion.”