Bahrain ‘an example in project funding’

MANAMA: Bahrain has set examples in structuring project funding and increasing the role of the private sector, the chief economist of a regional multilateral development bank has said.

Dr Leila Benali, chief economist and head of strategy, energy economics, and sustainability at Arab Petroleum Investments Corporation (Apicorp), told the GDN in an exclusive interview that “Bahrain provides interesting examples in structuring project funding and increasing the role of the private sector. In last year’s outlook, we featured Bahrain LNG for which the construction was completed earlier this year. The country opted to fund projects on a public-private-partnership (PPP) basis with a 75:25 debt-to-equity ratio.”

Speaking after the release of the bank’s ‘MENA Gas and Petrochemicals Investments Outlook 2020-2024’ yesterday, she said the investment arm of Bahrain’s National Oil and Gas Authority – Nogaholding – developed the project on a build-own-operate-transfer (BOOT) basis and will hold a 30 per cent stake.

“A syndicate of nine international and regional banks participated in a $741 million loan, with K-Sure (South Korea’s Export Credit Agency) providing commercial and political risk cover for 80pc of the financing.

In addition to reducing the burden on the government budget and facilitating adequate financing for a 20 years tenor, this approach enabled the country to draw on the collective expertise of multiple parties across the private sector.”

Featuring key developments in the regional gas and petrochemicals landscape and the dynamics shaping it over the short and medium terms, yesterday’s report notes that 2020 is witnessing one of the biggest gas demand shocks on record, with a year-on-year (YoY) reduction of 4pc globally.

This stands in stark contrast to 2019, which was a record year for liquefied natural gas (LNG) Final Investment Decisions (FIDs).

The 2020 global crisis is expected to reduce the annual growth rate for global gas demand during 2020-24 to 1.5pc compared to the pre-Covid-19 estimate of 1.8pc.

Despite the global demand shock, the Mena region’s committed gas investments held steady compared to last year.

Planned investments meanwhile increased by 29pc to reach $126bn, mainly due to the strong ongoing regional gas drive for cleaner power generation and improved monetisation as a feedstock for the industrial and petrochemicals sectors.

Notably, the petrochemicals sector witnessed a YoY increase of $4bn in planned projects compared to last year’s outlook, while committed projects decreased by $13bn due to the completion of several projects in 2019.

The share of government investments in committed and planned gas projects (92pc) is higher than it is in the petrochemicals sector (72pc).

Given the increasing size of projects, such investments typically rely on a 70:30 or 80:20 debt/equity ratio.

Dr Ahmed Ali Attiga, chief executive of Apicorp, said, “The decrease in gas demand has put fiscal pressures on government and private sectors alike, and we expect a few committed projects to continue facing strong headwinds in terms of payments, supply chain issues and potential project delays.”

“Overcoming these challenges will undoubtedly require strong policy support from governments, as well as enhanced collaboration between the private and public sector,” he added.

Bahrain owns a 3pc stake in Apicorp.



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