CDB contributes $175 million to syndicated loan for 447.8MW Salalah Independent Water and Power Plant Project

On March 23, 2010, Sembcorp Salalah Power and Water Company — a project company and special purpose vehicle owned by Singapore’s Sembcorp Utilities (40% equity stake), Oman Investment Corporation (13% equity stake), and other shareholders (47% equity stake) — signed a $737 million syndicated buyer’s credit loan facility agreement with Standard Chartered Bank, Bank of China, China Development Bank, BankMuscat, KfW-IPEX Bank, Sumitomo Mitsui Banking Corporation, National Bank of Oman, and Bank Sohar for the 447.8MW Salalah Independent Water and Power Plant (IWPP) Project. China Development Bank contributed $175 million (captured in Project ID#66247) and Bank of China contributed $175 million (captured in Project ID#85255) to the loan syndicate. The borrowing terms were as follows: a 17 year maturity and an annual interest rate of 6-month LIBOR (0.411 % in March 2010) plus a 3% margin (300 basis points). Sinosure provided buyer’s credit insurance to the borrower worth $561 million (covering the principal and interest of the loan over 17 years). The loan was secured by a mortgage over the Sembcorp Salalah Power and Water Company’s property, plant and equipment and current assets, including a lien on the balances in the sales collection accounts of the company. Additionally, on November 23, 2009, Sembcorp Salalah Power and Water Company signed a Power and Water Purchase Agreement (PWPA) with Oman Power & Water Procurement Company SAOC (OPWP) for a period of fifteen years commencing from the date of the water and power plant’s commercial operations to procure the power and water produced by the Sembcorp Salalah Power and Water Company. On the same day, Sembcorp Salalah Power and Water Company and Oman’s Ministry of Finance signed a Government Guarantee Agreement. The agreement stipulates that Oman’s Ministry of Finance is prepared to guarantee the payment by the OPWP of its financial obligations to the Sembcorp Salalah Power and Water Company’s Senior Lenders under the PWPA. The proceeds of the syndicated loan were to be used by the borrower to finance a $716 million engineering, procurement and construction (EPC) contract that Sembcorp Salalah Power and Water Company signed with Shandong Electric Power Third Construction Co., Ltd. (SEPCOIII) on August 20, 2009. Under the terms of this EPC contract, SEPCOIII agreed to undertake, on a turnkey basis, the construction of the 447.8MW Salalah IWPP. EPC supervision and commissioning of the desalination plant was subcontracted to Hyflux. The $981 million Salalah IWPP was implemented as an independent power project (IPP) and financed according to debt:equity ratio of 75:25. The owners of Sembcorp Salalah Power and Water Company made their equity contributions via share capital and shareholder loans. The project involved the construction of 447.8MW gas-fired power plant and a seawater desalination plant in the state of Dhofar that employs reverse osmosis technology to produce 15 million gallons per day of water. A project commencement ceremony took place on February 10, 2010. The project was implemented in two phases. Phase 1 was completed on July 16, 2011. Phase 2 was completed on March 12, 2012. The plant reached its commercial operations date (COD) on May 25, 2012. In 2018, the plant was handed over to investors and it remained in its warranty period until January 2019. The Salalah Independent Water and Power Plant is now operated and maintained by a joint venture company, Sembcorp Salalah O&M Services Company, which is 70% owned by Sembcorp Utilities and 30% owned by Oman Investment Corporation.

Additional details

1. This project is also known as Salalah IWPP Project. The Chinese project title is 阿曼萨拉拉期项目 or 阿曼萨拉拉电站和海水淡化项目. 2. This CDB loan is not included in the Overseas Development Finance Dataset published by Boston University’s Global Development Policy Center in December 2020.

Number of official sources

25

Number of total sources

26