Firms seek advice on funding $2bn Saudi project

Project is the first industrial gases project to be financed exclusively by Islamic loans

Industrial gases complex to be the largest in the world.
Industrial gases complex to be the largest in the world.

International law firm King & Spalding said on Sunday it advised Arabian Company for Water and Power Development (ACWA) in Saudi Arabia on the Islamic financing for a new $2bn industrial gases project in the Kingdom.

The project, which is being financed by a $1.7bn debt package from a group of ten banks, is the first industrial gases project to be financed exclusively on an Islamic finance basis, the firm said. 

The money will finance the construction of an air separation unit and the supply of industrial gases to Saudi Aramco.

The supply of gases will be used as feedstock for Aramco's new 400,000-barrels-of-oil-per-day refinery and 4,000 MW integrated gasification combined cycle power plant at the Jazan Economic City, one of a number of high profile economic cities in the Kingdom designed to boost employment and expand the country's industrial basis.

Saudi Aramco outsourced the project to ACWA and Air Products and Chemicals Inc, which were awarded the contract to construct, finance, own and operate the scheme earlier this year.

Once ready, the facility will be the world’s largest industrial gas complex and will supply 75,000 metric tons per day (20,000 oxygen and 55,000 nitrogen) to Aramco's 400,000 barrels per day (bpd) $7bn refinery being built in Jazan, Saudi Arabia.

The complex will be designed and built by Air Products using its proprietary technology, the company said. Once built, the facility will be owned by a JV of Air Products (25%) and Saudi Arabia’s ACWA Holding (75%).

The deal is part of a wider programme to encourage more private sector investment in Saudi Arabia.

A group of ten banks, including Saudi Arabian lenders alongside international banks Mizuho, Bank of Tokyo Mitsubishi, Societe Generale, Sumitomo Mitsui Banking Corporation and First Gulf Bank, provided the debt.

Leroy Levy, partner at King & Spalding, who led the legal team, said: "This is the world's largest industrial gases project and the first to be financed on an Islamic project financing basis.

“This financing and the involvement of international lenders shows just how significant -- and genuinely global -- the Islamic finance market has become.

“The appetite of conventional lenders for Islamic finance and Shari'ah-compliant projects is also growing and this project is a major boost for the finance markets."

"We expect that there will be more industrial-scale energy projects such as this one and our team is grateful for the opportunity to be at the forefront of this industry trend in the region," said Isam Salah, head of King & Spalding's Middle East & Islamic Finance Practice Group.


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