Middle East Report

Satorp, the joint venture between state-run Saudi Aramco and French supermajor Total, launched the world’s first project sukuk issue in September, completing a complex financing package for the Jubail oil refinery in Saudi Arabia. While the innovation in project financing may inspire imitators, the unique details of the deal mark it out as a hard act to follow. A 14-year Sharia-compliant offering of about SR3.75bn (US$1bn) achieved keen pricing of 95bp over six-month SAIBOR, meeting tight guidance of 95bp–105bp over the benchmark thanks to...

This past July, the Government of Dubai’s Department of Finance together with the Road Transport Authority of Dubai (together, the Government) successfully closed one of the most innovative infrastructure financings in MENA that can serve as a template for flexible structured infrastructure and real estate financings within and outside of the region. Infrastructure monetisations are often unappealing to government entities because of the resulting loss of ownership, control and revenue stream attendant to more traditional models, as well as the...

The term wakala is used in Islamic finance to describe a contract of agency or delegated authority pursuant to which the principal (muwakkil) appoints an agent (wakeel) to carry out a specific task on its behalf. The wakala concept is used frequently in financing transactions, including sale and purchase (where the agent can buy or sell assets on behalf of the principal that appointed it), borrowing and lending of funds and assignment of debt, guarantees and pledges. In this article, the authors explain the use of wakala in Islamic finance,...

The request for proposals (RFP) for the 1,500MW Shuweihat S3 IPP (S3) in Abu Dhabi was issued by ADWEA in March 2010, some five months following the delayed financial close of the Shuweihat S2 IPP in October 2009. The finance bid requirements for the new project were, therefore, always likely to reflect lessons learned from the difficult Shuweihat S2 IWPP (S2) process and prevailing concerns about continued liquidity in the commercial bank market. The RFP for S2 had been published in November 2007, just ahead of the successful financial close...

Hailed not only as a pathfinder deal for PPP in Bahrain but also for the wastewater sector in the Middle East more generally, the Muharraq project has achieved close against the backdrop of the recent unrest in Bahrain and the continuing difficulties in the banking sector. Launched to the market with the full RFP in May 2009, the project involves the construction, ownership, operation and maintenance of a new 100,000m3/day wastewater treatment plant at Muharraq in Bahrain. The project will deliver critical new infrastructure for Bahrain,...

With Egypt in the eye of the storm, it was widely expected that, in the aftermath of the Arab Spring, the already-static Egyptian project finance market would tail off even further. In fact, the private sector’s self-imposed moratorium on investment activity that was expected to ensue has not materialised. Instead, investors’ appetite for project finance deals in Egypt has gone from strength to strength, buoyed by a number of successful financings in the region. This has been made possible, in large part, by the liquidity of Egyptian banks....

Within the Middle East region, the instability caused by the global financial crisis has been compounded by a number of ongoing fundamental political, economic and technical shifts specific to the region that are driving changes in the energy sector in particular. These changes have an impact on the supply of energy, both primary (oil and gas) and secondary (power), and just as importantly, the demand for energy again at both the primary and secondary level. The changes are still being absorbed but the impact that they are having is beginning...

Furthermore, local exchanges, once expected to become the region’s leading financial hubs, are still struggling. From low liquidity to poor performing stock, the Gulf region’s exchanges and Dubai’s in particular are yet to fulfil their once grandiose ambitions. Although common across more developed markets, bookbuilding is still relatively new in the Middle East region. In the Gulf, UAE and Saudi exchanges have resorted to bookbuilt IPOs but the standard practice is to float a company at a fixed price. The price will usually be based on the...

Middle East syndicated loan volumes totalled US$26.2bn for the first nine months of this year, marking a 31% drop from US$38bn for the same period in 2010, according to Thomson Reuters data. “The Middle East is still on a downward trend in terms of volumes versus last year. There hasn’t been a lot of new money across the region at all,” said one emerging markets loans specialist at a European bank. While liquidity remains limited, the loan market is open for certain blue-chip companies that are well known to lenders in the stronger economic...