The Qatar Electricity and Water Company (QEWC) has signed a $450 million USD financing agreement with a consortium of four local banks for the $500 million USD Ras Abu Fontas Desalination Plant.
QEWC Business Development Manager Khalid Jolo said the agreement represented “a significant milestone in Qatar’s history of project financing” since “for the first time, a local developer, a local off-taker and four local banks are joining forces to make this strategic project happen without any financing support from foreign banks.”
The banks include QNB Group, Barwa Bank, Masraf Al Rayan and Qatar Islamic Bank.
As lead arranger of the financing, QNB will provide a $162 million loan and an $18 million USD conventional standby facility. It will also provide conventional interest rate hedging and will cover the cost of various transactions.
Barwa Bank, Masraf Al Rayan and Qatar Islamic Bank will each provide $90 million USD under an Islamic facility.
HSBC Bank and Norton Rose Fulbright LLP are acting as financial and legal advisers, respectively.
The Ras Abu Fontas desalination plant is expected to start operations in June 2015, according to company officials. The 164,000-cubic-meter-per-day facility will produce 10 percent of Qatar’s water.
QEWC General Manager Fahad Al Mohannadi called it “a strategic project to support sustainable growth for the Qatari economy.”
QEWC has already signed a contract with a consortium comprising Mitsubishi Corporation of Japan and Toyo Thai Engineering Company to build the plant. Power and water supplier Kahramaa will purchase the entire production under a 25-year agreement that starts in 2015.
Qatar currently has a surplus of around 20 to 30 percent of its water production. However, water consumption is growing at a rate of more than 10 percent per year.
The small oil-rich Gulf country is producing around 325 million gallons of drinking water a day and consuming 240 million gallons per day, according to official statistics. Almost all of the water produced comes from desalination.
Qatar is expected to allocate around $20 billion USD for drinking water projects through 2020, according to officials.
This story is brought to readers free in association with Singapore International Water Week.