- Region: The Middle East
- Overseas Investment Loans
- Project Finance
October 20, 2009
- The Japan Bank for International Cooperation (JBIC; President & CEO: Hiroshi Watanabe)*1 signed on October 19 a project finance*2 loan agreement totaling up to 1.111 million US dollars with Ruwais Power Company P.J.S.C. (RPC) in the United Arab Emirates (UAE) to finance the Shuweihat S2 Natural Gas-Fired Combined Thermal Power and Water Desalination Project. The loan was cofinanced with financial institutions including Sumitomo Mitsui Banking Corporation, Bank of Tokyo-Mitsubishi UFJ, Mizuho Corporate Bank, and the Sumitomo Trust and Banking Company. This is the first loan to finance a project in the Middle East under JBIC's LIFE Initiative*3.
- In this Project, RPC, a company jointly established by Marubeni, Suez-Tractebel S.A., a subsidiary of France's GDF SUEZ, and the Abu Dhabi Water and Electricity Authority will construct a natural gas-fired combined thermal power plant (capacity: 1,507 MW) and a seawater desalination plant (capacity: 100 million imperial gallons per day) in Shuweihat, 250 km southwest of Abu Dhabi, the capital city of the UAE. The Project is based on a BOO scheme*4, in which the electricity and water generated by the project will be sold to Abu Dhabi Water and Electricity Company for 25 years.
- Against the backdrop of fast economic growth in the Emirate of Abu Dhabi, which accounts for 60% of economic activity and more than 30% of the population of the UAE, its demand for electric power and water is projected to grow significantly. The project, which will generate about 16% of the total power supply and 12% of water supply in the Emirate of Abu Dhabi in 2011, is expected to play a significant role as a supply source of power and water in the Emirate.
- Given the prospect of globally tight natural resource supplies over the medium and long run, it is increasingly important for Japan to strengthen ties with natural resource-endowed countries. This loan will support urgently needed infrastructure development in the UAE, on which Japan relies about 23% of its total crude oil imports. At the same time, by supporting a Japanese firm's IWPP*5 projects, it will contribute to building up multilayered economic relations that go beyond those based on natural resource trade.
- JBIC will continue to help develop closer economic relations between Japan and the UAE while, as an official financial institution, supporting Japanese industries' overseas business development in the environmental sector, including the water sector, by performing its functions including project structuring and utilization of risk taking facilities.
- *1 JBIC is the international wing of the Japan Finance Corporation (JFC; Governor: Shosaku Yasui).
- *2 Project finance is a financing scheme that relies mainly on cash flows generated by the project as the security for repayment. This is the third project finance loan extended to an infrastructure project in the UAE, following the Taweelah B Power and Desalination Project (loan agreement signed in April 2005) and the Fujairah F2 Power and Desalination Project (loan agreement signed in December 2007).
- *3 This is an environmental investment project where an energy efficient combined-cycle power facility is used and fueled by natural gas that produces less carbon dioxide emissions than oil and coal, and where the heat produced in power generation is effectively used for the desalination of seawater.
- *4 BOO is a scheme in which a private company builds, operates and owns the project facility such as a power plant during the contract period.
- *5 An independent water and power producer (IWPP) builds and operates power generation and water desalination plants on its own and sells the electricity and water produced by them.