Saudi presence, Chinese competition lead MENA project financing in 2018: report

Renewable ambitions, Chinese competition, Saudi dominance, and export credit agency popularity are leading trends for project finance in 2018 across the Middle East and North Africa (MENA), according to Project Finance Outlook 2018 by Debtwire CEEMEA.

The report stated that 2017 ended on a high with MENA countries reviving old plans and finalizing financing for long-awaited projects, while floating tenders for new developments, giving the prospect of a solid deal flow for 2018.

“The revival of previously stalled deals in the MENA project finance sphere signified that market practitioners are getting used to the new reality,” the report said. “Oil prices, which drive investments in energy projects, started their descent in July 2014, forcing oil-exporting countries from the MENA region to face a set of unprecedented challenges.”

Regional lenders were “bitten” by their exposure, which drove up their funding cost, both on the domestic and international markets, the report added.

Also in 2018, the decline in commercial liquidity of regional and some European banks made way for the rise of the ECA. The report said: “ECA funding allows project companies to access a larger pool of liquidity at a reduced cost, with more stringent covenants, particularly in relation to socio-environmental matters.”

The report mentioned that the use of ECA-backed funding is expected to mitigate risk and ensure that an increased number of projects reach the construction stage in 2018.

In addition, MENA petroleum-exporting countries are moving towards renewable energy to meet rising domestic demand for energy and to free up more oil for export. “From wind farms in Turkey to solar plants in Morocco, MENA countries are rushing to ride the renewable train; made easier by the Middle East’s setting in the global sun-belt,” stated the report.