Allen & Overy advises on debt financing of water and power project in Kuwait

Allen & Overy has advised Nippon Export and Investment Insurance (NEXI) and a syndicate of commercial banks (the Bank of Tokyo-Mitsubishi, National Bank of Kuwait, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation) on the $1.43bn (£870m) debt financing of the Az Zour North IWPP, the first independent water and power project in Kuwait.

The Az-Zour North IWPP is the first project to be awarded under Kuwait’s privatisation programme established in 2008.

Stakeholders of the project company include private sector sponsors GDF Suez, Sumitomo Corporation and Abdullah Hamad Al Sagar and Brothers Company, as well as the Kuwaiti public stake holders Partnership Technical Bureau, Kuwait Investment Authority and the Public Institution for Social Security.

The debt financing will be utilised for the construction of a gas-fired combined-cycle power plant of at least 1,500MW and an associated water desalination plant with a capacity of 102–107MIGD (464,000–486,000m3 per day). All of the plant’s output will be purchased by the Kuwait Ministry of Electricity and Water under a 40-year long-term energy conversion and water purchase agreement.

Following completion of the construction, it is envisaged that the shares in the project company held by Partnership Technical Bureau (50 per cent) will be transferred to Kuwaiti citizens through an initial public offering.

The transaction was run out of Allen & Overy’s Paris and Abu Dhabi offices. The finance team was led by partner Tim Scales of the Paris office, assisted by associates Hitomi Komachi, Jessica Cairns and Daniel Foong. Partner David Miles and associate Juliana Farrell from the Paris and Abu Dhabi office advised on the lenders’ security package. Partner Werner Runge and associate Kathelijn Noordzij from the Amsterdam office advised on the lenders’ Dutch security package. Senior associate Yusuf Battiwala from the Dubai office advised on the hedging aspects of the financing.

The projects team was led by partners Jaspal Gillar and Nicholas Stuart of the Abu Dhabi office, assisted by associate Lauren Curtayne. Partner Frederic Moreau from the Paris office and partner Henri Wagner and senior associate Francois Guillaume De Liedekerke from the Luxembourg office advised all lenders (including NEXI and JBIC) on the corporate structure of the operations and maintenance contractor.