ACWA Power has raised a SR1.77 billion Islamic loan from four local banks to help finance investments including acquisitions and act as a bridge to a sukuk issue next year, the Saudi-based water and power project developer announced.

Banque Saudi Fransi, National Commercial Bank, Saudi British Bank and Samba Financial Group funded the five-year Shariah-compliant revolving corporate facility, ACWA said in a statement.

The banks have substantial take and hold levels ranging between SR300-550 million each. 

ACWA Power chose its home market of Saudi Arabia to launch its maiden revolver facility, besides being the first riyal-denominated club or syndicated facility at ACWA Power level. This reinforces market’s strong confidence in ACWA Power’s management,  strategy and growth prospects.

“The revolver will fund our upcoming investments — both greenfield as well as acquisitions. With its availability period matching the facility tenor, it may also be viewed as a ‘war chest’ to enable ACWA Power to swiftly respond to acquisition opportunities,” the company statement said.

According to the press release, Paddy Padmanathan, president and CEO of ACWA Power, said: “The timely closing of this facility will supplement our growth plans of doubling our power generation capacity from 15.7 GW to 30 GW besides expanding the water production from 2.4 million m3/day to 5 million m3/day by 2018. This year, we witnessed a quantum leap toward this target with the signing of the power purchase agreement for the 2,060 MW Rabigh 2 IPP in November/2013 on the footsteps of successfully closing Noor 1 (Morocco) and Bokpoort (South Africa) renewable power projects.” 

The revolver also establishes a solid precedent in terms of pricing, structure and documentation forACWA Power’s future transactions, especially as the company is expanding into new markets. The facility’s pricing compares favorably not just with our regional peers but with recent issuances by Saudi and regional government related entities (GREs). 

Rajit Nanda, chief investment officer of ACWA Power, said the facility serves as a bridge to a sukuk program, which the group is planning to launch in 2014.

The take out strategy vis-a-vis sukuk is in itself a trendsetter for the Saudi market, he said.

“It is remarkable to note that given the facility size and nature, the banks turned around the approvals and thereafter agreed on the documentation in relatively short time frame,” Nanda said.

“We are grateful to our house banks for reaffirming their confidence in ACWA Power by extending the SR1.77 billion revolver,” he said.

According to the release, the closing of this facility is described as an achievement of yet another milestone for ACWA Power.

This is the second funded facility raised at ACWA Power level post 2011 MUSD corporate murabaha facility that was raised solely from International Banks, namely, Standard Chartered Bank, Citibank NA, J. P. Morgan Ltd., Bank of America Merrill Lynch, Mizuho Corporate Bank Nederland NV and MayBank Berhad.