Narrative
Full Description
Project narrative
In 2019, a syndicate of banks — including Shanghai Pudong Development Bank (SPDB) — entered into $550 million USD syndicated soft mini perm project financing facility to PowerChina Guizhou Engineering Co., a subsidiary of Power Construction Organization of China (PowerChina), for the contract bidding and construction of the 800 MW Al Kharsaah Photovoltaic Power Plant in Qatar. SPDB contributed RMB 1.5 billion as part of the loan. The loan was backed by a credit insurance policy from Sinosure. SPD Bank provided a 'package' of credit-based financial services to PowerChina throughout the bidding and construction process, covering the company's expenses by providing bank notes, letters of guarantee, and paying bills, with the intention of providing a constant flow of financial support for PowerChina between the Chinese and Qatari currencies. SPD Bank also assisted PowerChina with the opening communications, contract writing, and negotiations for the engineering, procurement, and construction (EPC) bid, which it won in February 2020. PowerChina began construction in July 2020. The project was originally scheduled to launch in April 2022, but ended up launching on October 18, 2022, likely delayed due to COVID-19 and environmental challenges. The project was built in two phases, each providing an estimated 400 MW. Located 80 kilometers (approximately 50 miles) west of Doha, the capital of Qatar, the project covers 10 square kilometers (approximately 3.8 square miles), includes 2 million photovoltaic solar panels supplied by LONGi, a Chinese solar panel manufacturer, and is expected to provide 10% of Qatar's peak electrical demand at full capacity, equivalent to 1.8 billion kWh or the energy consumption of 300,000 Qatari households per year. Investment into the development of the Al Kharsaah project totaled QAR 1.7 billion ($466 million USD). The project was developed and is now owned and operated by Siraj 1, a special purpose vehicle (SPV) owned 60% by Siraj Energy and 40% by a consortium of Japan’s Marubeni Corporation and France’s Total Solar International. The Japan Bank for International Cooperation ('JBIC') and Mizuho Bank jointly provided a loan of EUR 258 million. Kahramaa has a power purchase agreement (PPA) to purchase electricity from the plant for a period of 25 years, after which ownership of the plant will transfer to Kahramaa under a build, own, operate, and transfer (BOOT) scheme.
Staff comments
1. The Chinese project title is 卡塔尔光伏电站项目 or 阿尔卡萨光伏电站项目 or 阿尔卡萨800MW光伏发电项目. This project is also known as the Siraj-1 Photovoltaic Solar Power Project. 2. Mini perm financing is short-term financing used to finance the construction of a project that must be refinanced with permanent financing (new bank debt or bond issue) shortly after the project is operational (usually two to three years after construction is complete). Soft mini perm financing is a type of mini perm financing that, if not refinanced by the maturity date, the margin on the loans will increase and most, if not all, of the project's available cash flow must be used to pay down the principal amount of the loans. Borrowers and project sponsors prefer this structure over a hard mini perm financing which triggers an event of default if not paid by the maturity date. 3. Mayer Brown served as legal counsel on the transaction, On its website, it refers to ‘a syndicate of PRC and international banks at the pre-bid phase on a US$550 million soft mini perm project financing facility for the development of the 750 MW Al Kharsaah solar project in Qatar.’ 4. Shanghai Pudong Development Bank Co. Ltd (SPDB) is a state-owned joint-stock commercial bank, established in 1993, with its headquarters located in Shanghai. 5. Siraj Energy is a joint venture between Qatar Petroleum (40% ownership stake) and QEWC (Qatar Electricity & Water Company, 60% ownership stake). 6. Qatar Electricity & Water Company (QEWC) is a publicly listed joint stock company that is 43 percent owned by the government. 7. QatarEnergy, formerly Qatar Petroleum, is a state owned petroleum company of Qatar. The company operates all oil and gas activities in Qatar, including exploration, production, refining, transport, and storage. 8. In Chinese, Shanghai Pudong Development Bank (SPD Bank/SPDB) is referred to as '上海浦东发展银行', and PowerChina Guizhou Engineering Co. as '贵州工程公司英文版'. 9. The other lenders on the syndicated loan are unknown. This issue merits further investigation.