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Citi, HSBC and MUFG lead Abu Dhabi green bond offering
World’s largest single-site solar PV plant secures US$700.8 million for refinancing
Michael Marray 19 Jan 2022

Abu Dhabi National Energy Company (Taqa) and Emirates Water and Electricity Company (EWEC) have priced green bonds amounting to US$700.8 million, the proceeds of which will be used refinance a solar power plant in Abu Dhabi.

Sweihan PV Power Company (SPPC) operates the Noor Abu Dhabi facility, the world’s largest single-site solar photovoltaic plant with 1.2 gigawatts (GW) of direct current power generation capacity. It began commercial operations in 2019. The power is sold to EWEC. Sweihan is 60% owned by Taqa, with Marubeni Corporation and JinkoSolar each holding 20%.

Joint lead managers and bookrunners were Citi, HSBC, MUFG, BNP Paribas, First Abu Dhabi Bank (FAB) and SMBC Nikko. SPPC was advised by White & Case LLP (legal) and Alderbrook Finance (financial). The banks were advised by Norton Rose Fulbright.

The senior secured notes, paying a 3.625% coupon, were 1.8 times oversubscribed with local, regional and international investors placing total orders of US$1.26 billion.

Taqa says the transaction generates significant value for the shareholders of SPPC, and EWEC as procurer, through an extension of the debt maturity by five years on the back of a five-year power purchase agreement (PPA) extension to 2049, which was secured with the support of the Abu Dhabi government.

EWEC chief executive officer Othman Al Ali comments: "Accessing investor markets through the issuance of green bonds is a key step in financing this critical change and supporting the UAE’s sustainability goals."

Moody's Investors Service assigned a Baa1 rating to the bonds. "The Noor Abu Dhabi refinancing marks an important milestone in the financing of renewable energy in the Emirates and broader region," says Christopher Bredholt, Moody's vice-president , senior credit officer, and lead analyst for the issuer. "The strong solar resource, favourable contractual framework and economies of scale support solar PV's role in the government's strategic plans to increase energy security and reduce gas consumption."

Aside from refinancing existing debt, the bond proceeds will be used to fund the debt service reserve account and make a distribution to shareholders.

Stable outlook

In May 2017 Sweihan signed a limited recourse loan financing with eight commercial banks, including Bank of Tokyo-Mitsubishi UFJ, Norinchukin Bank, Mitsubishi UFJ Trust and Banking, and Sumitomo Mitsui Banking.

Following the presentation of its Green Bond Framework, SPPC’s bonds were certified under the International Capital Markets Association standards, ensuring that the project meets the requirements of the Green Bond Principles.

Moody’s outlook for Sweihan is stable, reflecting the relatively straightforward nature of the technology and price certainty provided by the PPA. Moodys says the issuer is positioned at the higher end of comparable solar PV project finance peers, though an upgrade is unlikely over the next 12 to 18 months.

The rating benefits from around one notch of uplift for shareholder support. This uplift reflects Moody's expectation that extraordinary shareholder support for the project would be provided if it became necessary, and takes into account the strength of the project sponsors, the importance of power supply in the region, the role the project plays in meeting government policy targets for the electricity sector, and the extraordinary support previously provided to key entities in Abu Dhabi.

In addition to Noor Abu Dhabi, Taqa also has the Al Dhafra solar PV plant under construction, which will overtake Noor Abu Dhabi to become the world’s largest single-site solar PV facility. 

 In late December Taqa and Abu Dhabi National Oil Company (Adnoc) announced a US$3.6 billion strategic project to significantly decarbonize Adnoc’s offshore production operations.

Net-zero goal

The project will see the development and operation of a high-voltage, direct current (HVDC-VSC) subsea transmission system. It will power Adnoc’s offshore production operations with cleaner and more efficient energy, delivered through the Abu Dhabi onshore power grid, owned and operated by Taqa’s transmission and distribution companies.

The project will be funded through a special purpose vehicle (SPV) owned by Taqa and Adnoc (30% each), and a consortium comprised of Korea Electric Power Corporation (Kepco), Japan’s Kyushu Electric Power Co., and Electricite de France (EDF). Led by Kepco, the consortium will hold a combined 40% stake in the project on a build, own, operate and transfer basis.

The development is expected to reduce the carbon footprint of Adnoc’s offshore operations by more than 30%, replacing existing offshore gas turbine generators with more sustainable power sources available on the Abu Dhabi onshore power network. This will further strengthen Taqa and Adnoc’s position in driving and leading sustainability efforts and supporting the United Arab Emirates's strategic initiative to achieve carbon neutrality by 2050.

The transmission system will have a total installed capacity of 3.2GW and comprise two independent sub-sea HVDC links and converter stations that will connect to Taqa’s onshore electricity grid – operated by its subsidiary, Abu Dhabi Transmission and Despatch Company (Transco). Construction is expected to begin this year, with commercial operation commencing in 2025.

The project also offers the potential for Adnoc to more effectively utilize its rich gas resources – currently used to power the offshore facilities – for higher-value purposes, allowing the company to generate additional revenue.

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