BLME supports Qatar infrastructure deal

The Bank of London and The Middle East (BLME) has provided US$20mn of forward lease financing to Qatar Electricity and Water Company (QEWC) for the construction of the Ras Abu Fontas water desalination plant. The plant is to be built in the northern part of Ras Abu Fontas in Qatar.

The total project budget is US$600mn of which US$150mn is Islamic financing being underwritten by Qatar Islamic Bank (QIB).

BLME became involved in the deal after it was introduced to the Islamic tranche via European Finance House, the London-based subsidiary of QIB.

Forward lease financing is often used in Islamic banking, and is usually used in the financing of the construction of plants, equipment and machinery, and often used in project finance transactions.  According to the requirements of Islamic financing, a bank can not rent to a customer a piece of equipment that is still being constructed. Therefore, a forward lease financing would mean that payment is collected as an advance rental. Payment to the builder is typically progressive over time in line with progress made.

The Ras Abu Fontas desalination plant is expected to come into operation from the third quarter of 2009, and it is hoped that the additional capacity it brings it will play an important role in meeting Qatar's rising needs for fresh water.

Humphrey Percy, CEO of BLME, comments on the deal: "To be introduced to such a high profile Islamic finance transaction in a major industrial project in the Middle East is indicative of the recognition we have received in the marketplace for the strength of our business proposition and the quality of our team. 

“We were part of a syndicate that represents best of breed in the Islamic finance industry. This transaction shows that the London-based Islamic banks have established a good working relationship.”