Saudi Arabia's ACWA plans $800m sukuk by year-end

Updated 02 November 2013
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Saudi Arabia's ACWA plans $800m sukuk by year-end

JEDDAH: Saudi water and power project developer ACWA Power plans to sell an $800 million debut Islamic bond this year and list on the Saudi stock exchange around the end of 2014 as it ramps up production capacity, its chief executive said.
ACWA, which aims to have a gross production capacity of 38,000 MW of power by 2017 from its current 15,850 MWs, has said previously that securing a credit rating would be a step on the road to launching an Islamic bond, or sukuk.
However, chief executive Paddy Padmanathan indicated the firm might come to market without a rating.
"That was one of the things that kept us back for a while, and there was a decision (internally) around 'do we need to be rated' as ratings are a one-way street - once you rate, you are stuck with the story forever," he told reporters on the sidelines of a renewables event in Dubai.
International debt sales from Saudi entities are rare, meaning there is much investor interest in paper from the kingdom - bluechip Saudi Basic Industries Corp 2010.SE printed its first deal in three years last week and received bids worth more than five times the $1 billion bond size.
Most borrowers seek a rating because investors often have restrictions which limit them to investing in paper of a certain grade, although some Gulf borrowers have completed deals without one, including the government of Dubai and Emirates airline.
Padmanathan said ACWA had just finished a study with consulting firm KPMG about its readiness for an initial public offering (IPO) and that it was targeting a listing for the end of 2014.
He wouldn't be drawn on how much it might raise from the IPO, although he said the company's current valuation was "a few billion dollars."
No banks had been mandated to arrange either the sukuk or the public share sale, Padmanathan said.
ACWA is also negotiating a 5 percent capital increase with the International Finance Corporation (IFC), a unit of the World Bank, Padmanathan said.
He declined to comment on how much the IFC might pay for the holding.
In January, two Saudi government-owned funds bought a 19.4 percent stake in ACWA.
No price was disclosed.
ACWA was currently bidding for renewables projects worth $3 billion in the Middle East and North Africa region, including what would be Saudi Arabia's first utility-scale solar power plant - a 100 MW plant in Makkah, Padmanathan said.
The Saudi firm was bidding against a consortium led by Electricite de France, with a decision expected on the $250 million scheme by the end of the year.
A power purchase agreement for the 1,800 MW Rabigh 2 power plant, commissioned by Saudi Electricity Co (SEC), would likely be signed by the end of the month, with financial close on the $1.2 billion project financing soon after, he said.
The project was thrown into confusion earlier this year after SEC changed the fuel for the plant to gas from oil - with speculation that the ACWA-led consortium, which included Samsung C&T and MENA Fund, would have to reapply to build the scheme as a result.
Rabigh 2 is now due to cost $1.6 billion, Padmanathan said.
That would be a significant reduction from the $2.5 billion expected total when it was a fuel oil project.


Southwest challenged engine maker over speed of safety checks

Updated 20 April 2018
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Southwest challenged engine maker over speed of safety checks

  • The proposed inspections would have cost $170 per engine for two hours of labor
  • Southwest Airlines Chairman and CEO Gary Kelly explained the airline’s maintenance procedures in a 59-second video posted to Twitter

WASHINGTON/PARIS: Southwest Airlines clashed with engine-maker CFM over the timing and cost of proposed inspections after a 2016 engine accident, months before the explosion this week of a similar engine on a Southwest jet that led to the death of a passenger, public documents showed.
The proposed inspections would have cost $170 per engine for two hours of labor, for a total bill to US carriers of $37,400, the US Federal Aviation Administration said in its August 2017 proposal, citing the engine manufacturer.
The documents reveal that airlines including Southwest thought the FAA had “vastly understated” the number of engines that would need to be inspected — and therefore the cost.
The documents are part of the public record on the FAA’s initial proposal for inspections and the response from airlines made in October, within the designated comment period.
The FAA and CFM International made the inspection recommendations after a Southwest flight in August 2016 made a safe emergency landing in Florida after a fan blade separated from the same type of engine. Debris ripped a foot-long hole above the left wing. Investigators found signs of metal fatigue.
On Tuesday, a broken fan blade touched off an engine explosion on Southwest Airlines flight 1380, shattering a window of the Boeing 737 jet and killing a passenger. It was the first death in US airline service since 2009.
The FAA is not bound by any specified time periods in deciding whether to order inspections and must assess the urgency of each situation.
Southwest and other airlines in their responses in October objected to a call by CFM to complete all inspections within 12 months. The FAA proposed up to 18 months, backed by Southwest and most carriers. Southwest also told the FAA that only certain fan blades should be inspected, not all 24 in each engine.
“SWA does NOT support the CFM comment on reducing compliance time to 12 months,” Southwest wrote in an October submission.
CFM is a joint venture of General Electric Co. and France’s Safran.
Southwest said in its submission that the FAA’s proposal would force the carrier to inspect some 732 engines in one of two categories under review — much higher than the FAA’s total estimate of 220 engines across the whole US fleet.
“The affected engine count for the fleet in costs of compliance ... appears to be vastly understated,” it said.
Southwest spokeswoman Brandy King said on Thursday that the comments “were to add further clarification on items included in the proposed AD (airworthiness directive).”
She said the company had satisfied CFM’s recommendations, but she did not immediately answer questions about how many engines had been inspected and whether the failed engine had been inspected.
Late on Thursday, Southwest Airlines Chairman and CEO Gary Kelly explained the airline’s maintenance procedures in a 59-second video posted to Twitter. He said the airline hires GE to do heavy overhaul or maintenance work on all of its engines.
“So GE provides the guidelines for maintenance inspections and repairs over the life of the engines,” he said.


The airline on Tuesday evening said it would conduct accelerated ultrasonic inspections of the fan blades on CFM56 engines within the next 30 days.
“In addition to our accelerated inspections we are meeting with GE and Boeing on a daily basis regarding the progress of the inspections and we will continue to work with them throughout the rest of the investigation,” Kelly said in the video.
The FAA said on Wednesday it would finalize the airworthiness directive it had proposed in August within two weeks. It will require inspections of some CFM56-7B engines. FAA officials acknowledged that the total number of engines affected could be higher than first estimated.
The FAA, which has issued more than 100 airworthiness directives just since the beginning of this year, has said that the time it takes to finalize directives depends on the complexity of the issue and the agency’s risk assessment based on the likelihood of occurrence and the severity of the outcome.
The National Transportation Safety Board said on Thursday that investigators would be on the scene into the weekend but declined any new comment on the investigation.
Investigators said one of the fan blades on Tuesday’s Southwest flight broke and fatigue cracks were found.