Saudi Electricity Company (SEC) and ACWA Power have announced that the Rabigh 1 independent power project (IPP), pictured above, has completed refinancing of its senior facilities. The IPP is housed under the project company Rabigh Electricity Company (RABEC) owned by ACWA Power, Korea Electric Power Corporation (KEPCO) and Saudi Electricity Company.

Originally, the project achieved financial close in September 2009, which enabled it to successfully fund the construction and commissioning of the 1204 MW fuel oil fired power plant, on the western coast of Saudi Arabia.

The project, with a total cost of over US$ 2.5 billion, “had many firsts to its credit”, says ACWA Power. It was the first IPP project in the Kingdom of Saudi Arabia to be procured without a sovereign guarantee. The project introduced for the first time a Chinese EPC contracting consortium and major power plant equipment of Chinese manufacture into the GCC region. It was also, incidentally, the first major project finance transaction in the region in the aftermath of the global financial crisis of 2008/9.

The project reached commercial operation in April 2013 and has been fulfilling its contract dispatch obligations since then.

Given that the construction risk and the early operation risk had been successfully eliminated, RABEC decided to refinance its long-term non-recourse facilities and mandated ACWA Power to implement the refinancing. The successful closing of the refinancing is an endorsement of the IPP model in the Kingdom of Saudi Arabia and reflects well on the plant’s construction and operating performance.

SEC has also played a key role in the refinancing process and helped in securing maximum savings for the stakeholders.

The refinancing facilities of over US$1.825 billion equivalent in aggregate were provided on a combined conventional and Islamic basis. The two classes of financing parties will share the transaction security package.

The uncovered conventional debt consisting of the dollar-denominated international tranche of in excess of US$300 million was provided by a group of Korean Insurance Companies (including Samsung Life and Dongbu Insurance/ Hyundai Asset Management) and international commercial banks (Natixis, MUGF, CA-CIB and Standard Chartered Bank). The Korean Insurance Companies will participate through a long-term fixed-rate financing arrangement. This structure, while widely implemented for infrastructure projects in the developed world, is the first of its kind in Middle Eastern IPP project finance. The tranche was jointly arranged with Natixis. This pioneering financing arrangement represents a new pocket of liquidity for future financings in the region.

The Saudi-riyal-denominated Wakal Ijara tranche of in excess of SAR3.2 billion was provided by Alinma Bank and Al Rajhi Bank.

The Saudi-riyal-denominated procurement tranche of in excess of SAR2.4 billion was provided by National Commercial Bank, Banque Saudi Fransi, Arab National Bank, Samba Financial Group and Saudi British Bank (SABB).

Commenting at the announcement, Thamer Al Sharhan, Chairman of RABEC, stated: “It is heartening to see the Rabigh 1 IPP project, which was the first IPP project in Kingdom of Saudi Arabia under the new framework, to go from original financial close, construction, three years of smooth operation and now successful refinancing. This demonstrates the success of the IPP model in the Kingdom and shows how proactive financial management can improve the economics for all parties concerned.”

For Saudi Electricity Company the refinancing results in direct savings of around SAR 1 billion over the life of the power purchase agreement, ie, until March 2033.

Rajit Nanda, Director of RABEC, and Chief Investment Officer of ACWA Power added: “This re-leveraging of the existing financing demonstrates the success of ACWA Power’s business model of continuously creating value along the life cycle of its investments.”