New regulations key to financing $159 billion worth of MENA contracts

New regulations key to financing $159 billion worth of MENA contracts
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Published January 29th, 2013 - 08:00 GMT via SyndiGate.info

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project owners and contractors must explore other opportunities beyond traditional bank lending to ensure the realisation of the projects
project owners and contractors must explore other opportunities beyond traditional bank lending to ensure the realisation of the projects

WITH $159 billion worth of contracts to be awarded across the Middle East in 2013, project owners and contractors are scrambling for project financing as the banking sector in the region adjusts new regulations, including the Basel III code, and cuts back on long-term lending activity.

“Financing is a critical issue that must be addressed as the project sector continues to recover and grow,” says Edmund O’ Sullivan, chairman, Meed Events, which is organising the Qatar Projects 2013 conference, scheduled on February 17 to 20, 2013 at the Grand Hyatt Hotel in Doha, which will feature a comprehensive review of contract financing opportunities and challenges in Qatar.

With bigger contracts looming as Qatar enters the next critical phase of its preparations to host Fifa World Cup in 2022 and to bid for the Summer Olympics in 2020; project owners and contractors must explore other opportunities beyond traditional bank lending to ensure the realisation of the projects. Before the financial crisis hit the world economy in 2008, government infrastructure projects in the GCC were financed mainly through syndicated loans led for foreign banks. At the height of the crisis, the availability of project finance dried up while at the same time propelling debt costs upwards.

Nowadays, with the Basel III accord and new banking regulations throughout the region, multi-currency loans came in vogue to permit local banks to lend in local currencies, with new and tighter caps introduced in recent years. In addition to major regional banks, the gap in project financing was filled by credit agencies and the bond markets. According to Meed, industrial projects, such as the Emal Aluminium Smelter Complex in the UAE, are proposing bond issues to fund expansion.

Others, such as the Shuweihat independent power and water plant in Abu Dhabi, are considering using bonds to refinance debts. Sukuk (Islamic bond) is also under consideration, with Saudi Arabia’s Sadara Chemical said to be considering a riyal-dominated project sukuk. At Qatar Projects 2013, the premier projects industry international conference supported by Qatar’s Ministry of Business and Trade, Ashghal, Qatar Chamber of Commerce and Qatar Petroleum, key examples of successful contractor financing and the current requirements to support the development of planned and future mega projects will be discussed in a dedicated session.

Providing an important context to these discussions and setting a tone for the entire conference will be the keynote address to be delivered by Abdulla Bin Saoud Al Thani, Governor, Central Bank of Qatar, who will share insights on how government initiatives will drive project developments in the country and broader long-term economic aspirations. GCC countries are expected to pump over $63 billion into electricity projects over next five years Among the hot topics that will be discussed at the conference include how banks will provide huge volumes of contractor finance to fund private-sector government contracts; exploring the role of Islamic finance, local banks and international players in alternative financing; developing frameworks for safeguarding long-term financing deals; adapting project finance structures to secure long-term funding in a tighter lending framework.

Meanwhile, economic advances and developments in Qatar’s financial sector will be the subject of the opening address to be made by Jabra Ghandour, managing director of ibq, which has signed up as platinum sponsors of the event. “We’re pleased to be part of the Meed Qatar Projects conference 2013 as we firmly believe that it is one of the key platforms for business networking, giving participants the opportunity to meet key Qatari businessmen, decision makers, developers, and investors. This is the fifth consecutive year we participate in the conference, and we look forward to fruitful and insightful discussions with peers and future partners during this important gathering,” says Ghandour.

MENA TO INVEST $250 BN INTO POWER PROJECTS

The Middle East and North African (Mena) countries are expected to pump nearly $250 billion into power projects over the next five years to expand generation capacity and meet the growing domestic demand. The projects will be one of the main topics of discussion at the 11th Power-Gen Middle East conference which will be held in Doha, Qatar, early this month. Scores of officials and experts from the Gulf and other countries will attend the annual event. Organisers say nearly 200 power projects are on the agenda of the February 4 to 6 conference which will also discuss new technologies and other power-related issues.

“Significant energy-related projects as part of the 200 planned and announced ventures valued between $100 million and $20 billion will be major points of discussion at Power-Gen in Doha,” says the British PennWell Corporation, which is organising the event. “A total of $250 billion is expected to be pumped into the power sector in the Mena region over the next five years to meet regional electricity demand growth.” The statement gave no breakdown for the investments but according to an official Arab group, the Gulf Cooperation Council (GCC) countries are expected to pump more than $63 billion into electricity projects over the next five years to expand their power generation capacity to meet growing domestic demand. The six countries, which control 40 per cent of the world’s recoverable oil resources, will add nearly half the expected additional power generation capacity in the region, said a study by the Dammam-based Arab Petroleum Investment Corp (Apicorp).

It estimated the total capital in power generation in Mena at $147.5 billion during 2013-2017 to add about 123.9 GW of electricity while the rest could cover water projects. “A regional breakdown shows that about 43 per cent of that expansion in Mena is expected in the GCC, which remains the fastest growing area. This should come as no surprise, taking into account its record rates of urbanisation and the massive requirements for water desalination and air conditioning.” The study put investments in power projects at around $63.1 billion in the GCC, $36.8 billion in Mashreq (east) Arab nations, $21.4 billion in Iran, $14.6 billion in Maghreb Arab countries and nearly $2.3 billion in other Arab nations.

It says that as a result of high population growth, record levels of urbanisation, sustained economic growth and pressing needs for air conditioning and sea water desalination, many countries in the region have been struggling to meet demand. In a separate study, Apicorp says the GCC is projected to record the highest power demand growth of around 8.5 per cent in the region in the medium term. It put growth at 7.6 per cent in Mashreq (Egypt, Iraq, Jordan, Lebanon and Syria), 7.2 per cent in other Arab states, seven per cent in Iran and 6.5 per cent in Maghreb (Algeria, Libya, Mauritania, Morocco and Tunisia). Power-Gen, one of the most important events of its kind in the region, will be held at Qatar National Convention Centre under the patronage of Dr Mohammed bin Saleh Al-Sada, Qatar’s Minister of Energy and Industry.

The event will explore new venture investments, intellectual property, enhanced technology solutions, management skills and innovative new products. More than 60 distinguished delegates from over 20 countries will speak about a variety of issues, including the challenges and opportunities for power project development, maximising today’s grid potential and tomorrow’s alternatives, renewable energy technologies and integration and operation and maintenance. Delegates and visitors will also have the opportunity to view first-hand innovative and cutting-edge products and technologies by over 135 leading regional and international companies including ABB, Ansaldo Energia, Bilfinger Berger Power Service, Doosan Heavy Industries& Construction, Fata EPC Division of Fata, Northern Technical and SPX.

“We expect a very successful event as our esteemed international speakers from the GCC region and around the world present innovative thinking for discussion, debate and deliberation about business, technology and financial challenges required for energy efficient development, investments and partnerships,” says Debbie Stanford-Kristiansen, iInternational events director, PennWell Corporation – Middle East. “We are also delighted to present an unparalleled exhibition that will showcase some of the most innovative technologies and viable, sustainable solutions to meet the region’s growing energy challenges by leading established and growth companies”.

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