GDF Suez and ADWEA Secure $1.1 Billion Loan to Replace $900 Million Bridge Loan for Shuweihat 2 IWPP

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Researched by Industrial Info Resources (Sugar Land, Texas)--The stakeholders in Abu Dhabi's Shuweihat 2 independent water and power project (IWPP) have secured a $1.1 billion loan to replace the initial bridge loan that was due to expire this September. The amount will be sourced from 12 banks and financial institutions, including four Japanese firms, each of which has committed funds of about $100 million.

GDF Suez Energy International (EPA:GSZ) (Brussels, Belgium) and partner firm Abu Dhabi Water and Electricity Authority (ADWEA) (Abu Dhabi, United Arab Emirates) were unable to raise the required funds for the project earlier. A $2 billion loan, repayable over a period of 23 to 25 years, had been envisaged, according to the original funding plans.

However, due to the credit crunch that was prevalent late last year, the financiers for the venture, including Bayersiche Landesbank (BayernLB) (Munich, Germany), Calyon (La Défense, France), Natixis (EPA:KN) (Paris, France), KfW IPEX-Bank (Frankfurt, Germany), Standard Chartered plc (LSE:STAN) (London, England) and National Bank of Abu Dhabi (ABD:NBAD) (NBAD) (Abu Dhabi), were not ready for a deal of this magnitude. Instead, they offered a 10-month, $900 million bridge loan to commence initial operations.

The interim loan was required to be replaced with long-term project financing to avoid the risk of the venture being nationalized. With a view to draw potential investors, ADWEA and GDF Suez extended the 20-year water and power purchase agreement by an additional five years. GDF Suez, which owned a 40% stake in this venture, also offloaded half its holdings to Marubeni Corporation (TYO:8002) (Chiyoda-Ku, Japan), automatically qualifying for financial assistance from Japan Bank for International Cooperation (JBIC).

JBIC has committed another $1.1 billion, 22-year loan for the venture, in addition to the $1.1 billion loan facility coming from BayernLB, KfW, NBAD and SCB, who provided the earlier interim loan, and new lenders such as Bank of Tokyo-Mitsubishi UFJ (Tokyo, Japan), Mizuho Financial Group Incorporated (TYO:8411) (Tokyo), The Sumitomo Trust and Banking Company Limited (TYO:8403) (Osaka-Shi, Japan), Sumitomo Mitsui Banking Corporation (SMBC) (Tokyo), Societe Generale SA (OTC:SCGLY) (Paris, France), Samba Financial Group (SAU:1090) (Riyadh, Saudi Arabia), HSBC Holdings plc (NYSE:HBC) (London), and BNP Paribas (EPA:BNP) (Paris).

The Shuweihat 2 IWPP, comprising a 1,500-megawatt natural gas-based power generation plant and a desalination unit with a capacity of 454,610 cubic meters per day, is scheduled to be completed in 2011. The plant is near the Al Taweelah IWPP, in which GDF Suez holds a 20% stake. Engineering, procurement and construction activities for the venture are being handled by Siemens AG (NYSE:SI) (Munich, Germany), Doosan Heavy Engineering and Construction Company Limited (SEO:034020) (Gyeongsahngnam-Do, South Korea) and Samsung C&T (SEO:000830) (Seoul, South Korea). Abu Dhabi Water & Electricity Company (ADWEC) is the only firm to offtake power and water from the project. HSBC is playing the role of financial advisor.

The cost of the Shuweihat 2 project has escalated to $3.2 billion, with the margin increasing from 225 to 260 basis points, and fees rising from 300 to 325 basis points.

For related news item, see January 20, 2009, article - GDF Suez Secures $900 Millionm Bridge Loan for Abu Dhabi's Shuweihat 2 Power and Water Project.

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