Hajr Electricity Production Company signed the documentation on its US$2.81 billion Qurayyah IPP in Saudi Arabia in December 2011. The project is the world’s largest IPP and also the largest greenfield power project to date.

The project is backed by a 20-year power purchase agreement with Saudi Electricity Company, which is also an equity investor.

The sponsor is a consortium of the Saudi Electric Company with a 50 per cent stake, Saudi state-owned ACWA Power (17.5 per cent), Samsung (17.5 per cent) and the MENA Infrastructure Fund (15 per cent).

The project is the third such IPP being developed by SEC to address increasing power demand in the country.

The project was originally intended to be procured as two separate IPPs, each of around 2,000MW. The sponsor came in with a combined offer which had not only a lower tariff bid than its competitors but also incorporated the second phase of the project.   

According to Hajr’s Yousef Al Ouhali the tariff bid of R0.07073 (US$0.188) per kW/hour was 21 per cent lower than the nearest bidder Marubeni.

Al Ouhali also notes that the project’s thermal performance is more than 52 per cent efficiency, or 14 per cent more efficient than the traditional steam power plants in Saudi. ACWA calculates that the project’s thermal efficiency will save around 160 million cubic feet of natural gas per day equivalent.

Saudi Arabia has an active and wide-ranging power market which has attracted international developers and project financiers in part due to its rich natural resources in its large oil reserves and natural gas deposits. Saudi Arabia's population is expected to increase from 28 to 40 million within ten years; its power requirements are estimated to rise eight per cent per year in that period. Despite the abundant natural resources, its power generation capacity has to double within a ten-year period to meet the demand.

Project financing
The project was financed with a US$730 million Murabaha, Sharia-compliant equity bridge, and a US$2.08 billion term loan arranged by commercial lenders and export credit agencies (ECAs).

The financing was divided between dollar-denominated and Riyal debt to hedge out currency risk both ways; some lenders were more comfortable with dollar tranches, though the project’s revenues will be in Riyal. About US$1 billion of the term loan was funded in Riyal.

The term loan has a maturity of construction plus 20 years, except the Ex-Im and Hermes tranches, which have a shorter tenor of 14 years post construction. The debt is said to have priced at between 150bps and 200bps over Libor.

The lenders on the equity bridge are:

• Arab National Bank
• Banque Saudi Fransi
• The National Commercial Bank
• Samba Capital
• Saudi British Bank
• Saudi Hollandi Bank

The term loan lenders are:

• Arab National Bank
• Banque Saudi Fransi
• HSBC
• Korea Export Import Bank
• KfW
• The National Commercial Bank
• Samba Capital
• Saudi British Bank
• Standard Chartered Bank
• SMBC
• US Export-Import Bank (US Ex-Im)

US Ex-Im provided US$638 million of the financing, part of which was arranged as a direct loan to the project. The US Ex-Im ticket carries the lowest margin of the tranches, though is contingent on US turbine supply to the project, for which US-based Siemens Energy has the contract.

The term loan featured covered and uncovered tranches. The uncovered tranches were arranged for the most part by the locally-domiciled lenders.

Korea’s Export-Import bank, Kexim, wrapped a US$75 million portion of the financing from a number of the lenders. KfW took a ticket of around US$130 million wrapped by Hermes.  

Project scope
The project is located at Qurayyah, on the eastern coast of Saudi Arabia adjacent to existing SEC facilities.

The project involves design, construction, commissioning, ownership, financing, operation and maintenance of the 3,927MW combined cycle gas-fired power plant under a build, own and operate contract. The project is due to begin operations in June 2014, from when the PPA also begins.

According to the sponsor, the PPA is structured on an energy conversion basis. The offtaker, SEC, will provide fuel feedstock free of charge as part of its sponsorship arrangement, and will then pay an energy conversion fee based on available capacity and actual output from the plant.

The project comprises six identical equipment clusters, each with a capacity of 654.5MW. Each of the six clusters includes two gas turbines, two heat recovery steam generators and one steam turbine, the Siemens SGT 5000F‐5. Siemens Energy is providing all of the equipment and also holds the maintenance contract for its equipment. NOMAC is the general O&M contractor. Samsung is EPC contractor.

Allen & Overy was legal counsel to the lenders. Chadbourne & Parke advised the sponsor. Black & Veatch is technical adviser on the project.