A significant political divide has been crossed by the Islamic financing of a power project in the Middle East.
It is believed to be the first financing of its kind in the region's history. The involvement of three Islamic banks in the £1.6bn financing of the Shuweihat power generation and water desalination plant in Abu Dhabi represents a new dawn of funding for power developments. The Islamic banks - Abu Dhabi Islamic Bank, Dubai Islamic Bank and Kuwait Finance House - became involved to provide the funding and were advised by Allen & Overy banking partner Michael Duncan. Trowers & Hamlins was lead counsel on the deal, working for both of the joint developers, CMS Energy and International Power. Abu Dhabi resident partner Adrian Creed led the team. The firm advised on English, Abu Dhabi and United Arab Emirates law. Martin Amison, head of international at Trowers, said: "This deal is seen as the deal of the year in the Gulf, not only because of the scale of the project, but because it is a tremendous vote of confidence in the region." Simmons & Simmons together with White & Case advised the government on local law issues. Shearman & Sterling advised seven Western banks, including the Royal Bank of Scotland, Barclays Capital and Citibank in their bulk financing of the deal, which closed on 1 December. Shearman's partner on the deal, Nick Buckworth, said that this is a significant step forward, particularly as having Islamic investment in a deal provides "political comfort". The deal is also expected to open the floodgates for Islamic cash in future Middle East financing deals. Traditionally, cooperation between Middle Eastern and Western financiers has been fraught with difficulties, as Islamic banks have to comply with the law of Islam Shari'ah. Its structures for financing deals differ from international structures. Shari'ah prescribes the way transactions are entered into, and requires that Islamic law scholars check agreements to ensure they comply. But despite these difficulties, the Islamic banks managed to harmonise their financing structures with those of the Western banks in just one month to enable the deal to go forward.