Saudi Energy affiliate Al Morjan Two Electricity Company has reached financial close on the Rabigh 2 power expansion after securing SAR9.69 billion of long-term debt financing.The financing, secured on October 1, has a tenor of about 34 years and will fund the development, construction, ownership and operation of a 2,313.5-megawatt combined-cycle gas turbine power plant in Saudi Arabia’s western region, disclosures by project shareholders Saudi Energy and ACWA Power show.
A consortium of local, regional and international banks is providing the debt. The lenders include Alinma Bank, Riyad Bank, Saudi Awwal Bank and Saudi National Bank, alongside Abu Dhabi Commercial Bank, Boubyan Bank, Commercial Bank of Dubai and HSBC Bank Middle East.
The consortium also includes China Minsheng Banking Corporation’s Hong Kong branch, Industrial and Commercial Bank of China, Industrial Bank’s Beijing branch, National Bank of Greece, Standard Chartered Bank and Sumitomo Mitsui Trust Bank’s London branch.
Saudi Energy and ACWA Power each hold an effective 40 per cent stake in Al Morjan Two Electricity Company, the special-purpose project company. Both shareholders said they had provided limited guarantees covering their respective shares of the liquidity reserve and reserve account required under the financing arrangements.
The financial close moves the Rabigh 2 CCGT Independent Power Project expansion beyond its contracting and funding stages, providing the debt needed for implementation of one of the kingdom’s large gas-fired generation projects. The plant is designed to be ready for the future construction of carbon-capture units.
Saudi Energy and ACWA Power signed a power purchase agreement with Saudi Power Procurement Company, the kingdom’s principal buyer, in April. That agreement, valued at SAR11.5 billion, covers development, financing, construction, ownership and operation of the natural-gas-fired plant.
The agreement runs for 31 years from the project’s expected commercial operation date. Its scope also covers financing and construction of an extension to a 380-kilovolt electrical substation, according to the companies’ disclosures to the Saudi Exchange.
Full commercial operations are expected to begin in the second quarter of 2029. Saudi Energy and ACWA Power have said the project’s financial impact is expected to start when the full plant enters commercial operation during that quarter.
The project is located in Makkah province and forms part of Saudi Arabia’s programme of procuring large-scale power capacity through independent power producers. Combined-cycle plants use heat from gas turbines to generate additional electricity through steam turbines, improving efficiency compared with conventional open-cycle generation.
The financing structure gives the project long-dated funding extending well beyond its expected start of operations. The approximately 34-year tenor also spans the term of the power purchase agreement, reflecting the long-duration contractual framework commonly used for independently developed utility projects.
The project’s funding closes the financing requirement disclosed by shareholders when the power purchase agreement was signed. At that stage, both companies said the financial effect would be disclosed once financial close had been achieved.
Al Morjan Two will develop the facility on a build-own-operate basis. Under that model, the project company finances and owns the asset while supplying electricity under the long-term offtake agreement, giving lenders greater revenue visibility over the debt period.
Saudi National Bank is identified as a related party to the transaction, while Saudi Energy and ACWA Power are related parties through their participation in the project company. The companies disclosed those relationships as part of their regulatory announcements.
The April power purchase agreement followed the award of the Rabigh 2 expansion project and established Saudi Power Procurement Company as the offtaker for the plant’s electricity. The project company is responsible for delivering the generating facility under the agreed contractual structure.
Rabigh 2’s 2,313.5MW capacity places it among the larger combined-cycle projects being developed in the kingdom. Its carbon-capture readiness does not mean a capture unit is included in the present financing scope; the disclosures describe the plant as being prepared for such units to be built in the future.
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