- Region: The Middle East
- Overseas Investment Loans
- Project Finance
May 16, 2011
- The Japan Bank for International Cooperation (JBIC; President & CEO: Hiroshi Watanabe)*1 signed today a project finance*2 loan agreement totaling up to 400 million US dollars with Shuweihat Asia Power Company P.J.S.C. (SAPCO) incorporated in the United Arab Emirates (UAE) to finance the Shuweihat S3 Natural Gas-Fired Combined Thermal Power Generation Project. The loan was co-financed with financial institutions, including Mizuho Corporate Bank, Ltd., Sumitomo Mitsui Banking Corporation, the Bank of Tokyo-Mitsubishi UFJ, Ltd. and Export-Import Bank of Korea (KEXIM). This is the fourth project finance loan for an infrastructure project in the UAE.*3
- In this Project, SAPCO, a company jointly established by Sumitomo Corporation, Korea Electric Power Corporation (KEPCO) and the Abu Dhabi Water and Electricity Authority, will construct a natural gas-fired combined thermal power plant (capacity: 1,600 MW) in Shuweihat, 250 km southwest of Abu Dhabi, the capital city of the UAE. This is based on a BOO scheme*4 with SAPCO selling electricity 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 30% of the population of the UAE, its demand for electric power is projected to grow by more than 16% every year until 2015. The project, which will generate about 12% of the total power supply in the Emirate of Abu Dhabi upon its completion in 2014, is expected to fulfill a significant role as a supply source of power in the Emirate.
- Given the prospect of continued tight natural resource supplies over the medium and long term, it is increasingly important for Japan to strengthen ties with resource-endowed countries. This loan will support urgently needed infrastructure development in the UAE, which accounts for 21% of Japan’s total crude oil imports. At the same time, by supporting a Japanese firm’s IPP project,*5 it will increase Japan’s presence in this country and contribute to strengthening multilayered economic relations that go beyond those bound by 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 by performing its functions including project structuring and performing a risk-taking function.
- *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 for repayment.
- *3 To date, JBIC has extended loans in project financing to the Taweelah B Power and Desalination Project (the loan agreement signed in April 2005), the Fujairah F2 Power and Desalination Project (the loan agreement signed in December 2007) and the Shuweihat S2 Natural Gas-Fired Combined Thermal Power and Water Desalination Project (the loan agreement signed in October 2009).
- *4 BOO is a scheme in which a private company builds, operates and owns a project facility such as a power plant during the contract period.
- *5 An independent power producer (IPP) builds and operates a power generation facility on its own and sells the electricity generated from it.