Bank of China contributes $175 million to syndicated loan for 447.8MW Salalah Independent Water and Power Plant Project (Linked to Record ID#66247)

Project narrative

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 (BOC), China Development Bank (CDB), 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. CDB contributed $175 million (captured via Record ID#66247) and BOC contributed $175 million (captured via Record ID#85255) to the loan syndicate. The loan's original borrowing terms included a 17 year maturity, a 2.527 year grace period, and an annual interest rate of 6-month LIBOR (0.411% in March 2010) plus a 3% margin. However, on September 27, 2021, the borrower and its lenders signed an Amendment Agreement in which the loan's interest rate was reset from 6-month LIBOR to Daily Simple SOFR plus a Credit Adjustment Spread and a 3% margin. The borrower was responsible for making 29 consecutive, semi-annual principal payments between September 30, 2012 and March 31, 2026. 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 and debt service reserve account (DSRA) facility were secured, under the security documents as a whole, by the following sources of collateral: (1) a charge on all project assets of Sembcorp Salalah Power and Water Company (including property, plant and equipment) through commercial/legal mortgage; (2) an assignment of the insurance/reinsurance obtained by Sembcorp Salalah Power and Water Company; (3) a security over Sembcorp Salalah Power and Water Company's shares (apart from those held by the public); (4) a charge over all the project accounts (including a lien on the balances in the sales collection accounts); and (5) direct agreements. The borrower was required to maintain a minimum cash balance of approximately $4,142,436.57 (RO 10,759,979) in a debt service reserve account (DSRA). The actual cash balances in the DSRA were RO 16,233,153 as of December 31, 2013, RO 14,320,472 as of December 30, 2020, RO 14,083,435 as of December 31, 2021, RO 14,101,712 as of March 31, 2023 and RO 12,219,107 as of December 31, 2023. 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.