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Project Financing for Az-Zour North Power and Desalination Project in Kuwait
Supporting Kuwait's First PPP Power and Desalination Infrastructure Project under Multi-Layered Relations with Resource-Endowed Country

  • Region: The Middle East
  • Infrastructures
  • Project Finance
NR/2013-122
December 13, 2013
  1. The Japan Bank for International Cooperation (JBIC; Governor: Hiroshi Okuda) signed on December 12 (London time) a loan agreement totaling up to about 645 million U.S. dollars (JBIC portion) with SHAMAL AZ-ZOUR AL-OULA FOR THE BUILDING, EXECUTION, OPERATION, MANAGEMENT AND MAINTENANCE OF THE FIRST PHASE OF AZ-ZOUR POWER PLANT K.S.C. (AZN1),*1  incorporated by Sumitomo Corporation and other companies in Kuwait, for the Az-Zour North 1 IWPP*2 Project. The loan, provided in project financing,*3 is cofinanced with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU), Sumitomo Mitsui Banking Corporation (SMBC), Standard Chartered Bank (Tokyo branch), National Bank of Kuwait S.A.K., and other financial institutions. Nippon Export and Investment Insurance (NEXI) will provide Overseas Investment Insurance a part of the portion cofinanced by Japanese private financial institutions. The cofinancing amounts to about 1,430 million U.S. dollars. This is the first project financing loan JBIC provides to a project in Kuwait.
     
  2. In this Project, AZN1 will build a combined cycle natural gas-fired power plant with the capacity of approximately 1,500 MW and a seawater desalination plant with the capacity of approximately 480 thousand cubic meters per day at Az-Zour North, located approximately 100 km south of Kuwait City, and sell the power and freshwater generated to the Ministry of Electricity and Water for 40 years on the BOOT basis.*4 The demand for electricity in Kuwait is expected to increase rapidly at a rate of about 7.6 per cent per annum until 2020 against the backdrop of fast economic growth. Under these circumstances, the country laid down the policy of promoting infrastructure development, including for power, by introducing the vitality of the private sector. This Project will be implemented under such policy of the country, and there are high expectations for it as the country's first public private partnership (PPP) power and seawater desalination project.
     
  3. As global tight supply of natural resources is foreseen over the medium and long term, it has become increasingly important for Japan to strengthen relations with resource-endowed countries. Japan and Kuwait declared the expansion of cooperation on infrastructure development including IWPP in Kuwait, upon Prime Minister Shinzo Abe's visit to Kuwait this August. This loan supports an IWPP project by the Japanese company in Kuwait, on which Japan depends about 7 percent of its total oil imports. Supporting the infrastructure projects in Kuwait will help strengthen more comprehensive and multilayered relations between the two countries.
     
  4. As a public financial institution, JBIC will contribute to deepening and developing economic relations between Japan and Kuwait, thereby, JBIC will continue to support overseas infrastructure business deployment of Japanese companies by drawing on its various financial facilities and schemes for structuring projects and performing its risk-assuming function.
Note
  1. *1 AZN1 is a joint venture Sumitomo Corporation has established with Belgian company Electrabel S.A. which is a subsidiary of French company GDF SUEZ, Kuwaiti company Abdullah Hamad Al Sagar & Brothers, Kuwait Investment Authority, The Public Institution for Social Security, and Partnerships Technical Bureau in Kuwait.
  2. *2 IWPP (Independent Water and Power Producer) is an independent company that builds and operates a power and water desalination plant on its own and sells the power and desalinated water it produces.
  3. *3  Project finance is a financing scheme in which repayments are made from cash flows generated by the project and secured primarily on the project assets.
    *4  BOOT (Build, Own, Operate and Transfer) is a form of financing in which a private sector company builds and owns a plant, such as a power station, and transfers its ownership to the public sector after the contract period.

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