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28| pfi | Middle East Report 2010 B3/S2


The uncovered international tranche benefits from a cash sweep through years 10 to 15.


which two essential holiday periods were taking place in Oman, ie Ramadan and Eid, and this added a further chal- lenge to the project team.


The second key success factor is also linked with the number two: two export credit agencies, namely Euler- Hermes and Kexim, representing circa 75% of the senior debt. This allowed the bringing together of the necessary liquidity to close the transaction in a context that remains challenging.


It is important to note that the Barka 3 and Sohar 2 transaction marks the first collaboration across the world between the GDF Suez group and Kexim. Having two export credit agencies could have been challenging since each of them has specific requirements and a spe- cific timeline in terms of board approval, but the export credit agencies proved extremely flexible and co-ordi- nated their efforts to the maximum extent possible. Eight initial mandated lead arrangers are participating in this deal and they are all participating in both projects: KfW-IPEX, Credit Agricole, Natixis, Bayerische Landes- bank, Standard Chartered, HSBC, Credit Industriel et Commercial - CIC, and Europe Arab Bank.


The financing structure The involvement of the export credit agencies was a key success factor for this transaction. The agencies’ tranch- es represent 75% of the total senior debt, with the Her- mes guaranteed tranche at circa 50% for an amount of US$315m for Barka 3 and US$308m for Sohar 2. The Kexim tranches are split into a US$139m direct tranche and a US$73m guaranteed tranche for Barka 3 and a US$117m direct tranche and a US$55m guarantee tranche for Sohar 2. All export credit agency facilities are structured as amor- tising 14-year debt. The uncovered international tranche benefits from a cash sweep through years 10 to 15, which effectively shortens the tenor to 14 years as well.


Margins


The uncovered international tranche margin starts at 220bp pre-completion, stepping up to 340bp towards the end of the tenor. The US$315m and US$308m Euler-Her-


mes-covered tranche has a margin starting at 140bp pre-completion, and stepping up to 180bp towards the end of the tenor. Interest-rate swaps were bid out among the bank club on a competitive basis.


Conclusion


Despite the attractiveness and proven success of the Omani IPP programme, the financing of the Barka 3 and Sohar 2 was launched in a context where prevailing liq- uidity conditions remained challenging. Instrumental, therefore, to complete the transaction was the coming on board of two prominent export credit agencies, Euler- Hermes and Kexim, representing 75% of the senior debt. Another key success factor was the sponsors’ effort to


draw on all similarities between both projects and this enabled the sponsors to close the transaction in a record time of 15 weeks taking into account the exceptional impact of the essential holiday periods and the first col- laboration between GDF Suez Group and Kexim.


Barka 3 and Sohar 2 IPPs Status:Financial close September 16 2010 Description: US$1.3bn senior debt financing involving export credit agencies Euler-Hermes and Kexim for two IPPs in the Sultanate of Oman with a total investment cost of US$1.7bn Sponsors:GDF Suez 46%; Bahwan Engineering Group 22%; Shikoku Electric Power Company (Yonden) 11%; Sojitz Corporation 11%; Public Authority for Social Insurance (PASI) 10%


Original mandated lead arrangers:KfW-IPEX, Credit Agri- cole, Natixis, Bayerische Landesbank, Standard Char- tered, HSBC, Credit Industriel et Commercial - CIC, Europe Arab Bank ECAs:Euler-Hermes, Kexim Sponsors’ legal adviser:Chadbourne & Parke Lenders’ legal adviser:Milbank Tweed Technical adviser:Mott McDonald Insurance: JLT Model audit:PKF EPC:Consortium of GS Engineering and Siemens AG Equipment suppliers:Siemens AG


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