- Region: The Middle East
- Overseas Investment Loans
- Project Finance
July 26, 2013
- The Japan Bank for International Cooperation (JBIC, Governor: Hiroshi Okuda) signed on July 25 a loan agreement totaling up to about 105 million U.S. dollars (JBIC portion) with Muscat City Desalination Company S.A.O.C. (MCDC) incorporated in Oman for the Al Ghubrah IWP*1 Project (Project). MCDC was jointly established by Sumitomo Corporation, Malakoff Corporation Berhad in Malaysia and Cadagua, S.A. in Spain to implement this Project. The loan, provided in project financing,*2 is cofinanced with Sumitomo Mitsui Banking Corporation (SMBC) and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU). This is the first project-financing for a seawater desalination project without including power generation.
- In this Project, MCDC will build a new seawater desalination plant using the reverse osmosis method with the capacity of about 191,000 cubic meters per day at Al Ghubrah in Muscat, the capital city of Oman, and sell desalinated water to Oman Power and Water Procurement Company S.A.O.C., a state-owned company, for 20 years on the BOO basis.*3 In Oman, as its population and economy grow in the years to come, demand for water in its northern part, including Muscat, is projected to increase at an annual average of five percent from 2013 through 2019. It is planned to be supplied desalinated water to be used in households to about 800,000 people in this Project. It is thus expected to play a significant role as a source water supply in this country.
- Given prospect of globally tight supply-demand balance of natural resources over the medium and long term, it has become a much more important issue for Japan to strengthen ties with resource-endowed countries. During the visit of Prime Minister Shinzo Abe to the Middle East this past May, he expressed he would drastically strengthen "Comprehensive Partnership toward Stability and Prosperity," and he indicated the policy of forging a link that goes beyond the framework focusing on energy resources based on the perspective that high economic potential in the Middle East is directly linked to Japan's growth. This loan will support development of desalinated water production infrastructure urgently needed by Oman from which Japan depends largely on its import of crude oil and liquefied natural gas (LNG).
- As a public financial institution, JBIC will, in its capacity of an official financial institution, continue to support overseas infrastructure business activities of Japanese companies by drawing on its various financial facilities and schemes for structuring projects, and performing its risk-assuming function.
- *1 IWP (Independent Water Producer) is an independent company that builds and operates a water desalination plant on its own and sells the desalinated water it produces.
- *2 Project finance is a financing scheme whereby the repayment of a loan extended to a project relies on cash flows generated by the operation of the project, with collateral limited to project goods and other assets.
- *3 BOO (Build, Own, and Operate) is a form of financing whereby a private sector company build, own and operate a plant, such as a seawater desalination plant, throughout the contract period.