Prefinancing innovation closes in Morocco
In March 2008, mandated lead arranger Société Générale CIB closed a multicurrency €190mn prefinancing facility for leading Spanish engineering group Abengoa and additional €90mn bonding and €65mn confirming lines related to the project.
Abengoa won the tender from the Moroccan public power utility Office Nationale d’Electricité (One) to construct and maintain the 475MW Ain Beni Mathar thermo solar power plant.
The power project uses highly innovative technology combining gas with solar energy. It is the first power plant of this type to be constructed in Africa.
The plant is Abengoa Group’s biggest thermo-solar energy project outside of Spain and its first in Morocco.
It is a typical turn-key contract which includes five years of operation and maintenance, with a 34-month construction period. The contract also includes a series of subcontracted equipment sets such as gas turbines and boilers and is denominated in four currencies: US dollars, euros, Swiss francs and Moroccan dirhams in order to avoid devaluation risk.
The plant is a key project in One’s five-year investment programme aimed at significantly boosting capacity through environmentally-friendly energies.
These long-term investment requirements total €427mn, and are being financed through the World Bank through its Global Environment Facility (GEF) and Banque Africaine de Development (BAD).
GEF finances projects that address six critical threats to the global environment: loss of biodiversity, climate change, degradation of international waters, ozone depletion, land degradation and persistent organic pollutants.
Under the terms of this deal, in order to finance its equipment exports, Abengoa requested the securitisation of contract payments by One, and wanted to obtain prefinancing through the discounting, with limited recourse to the contractor, of its working progress certificates during the execution and operation of the contract.
This innovative financing method was complicated due to regulatory constraints on operating in Moroccan dirhams and on such discount structures on inchoate receivables that requested extensive local legal due-diligence. In order to overcome this challenge, Société Générale acted as the joint arranger and agent, and Calyon acted as joint arranger. Both collaborated with their local Moroccan arms, Credit du Maroc and SGMB, and managed to prefinance facilities in dirhams in accordance with Moroccan guidelines.
Société Générale and Calyon also provided other forms of financing to Abengoa, including syndicated bonding lines, mitigated by Cesce insurance and confirming payment lines to suppliers.
This financing has set a new precedent for providing trade finance in Morocco and may well have opened a potential niche market for off-balance sheet prefinancing for future engineering, procurement and construction (EPC) contracts. The financing structure could enable more foreign companies to break into the Moroccan market.
Borrower: Abengoa Group
Amount: €106mn; US$34mn; CHF80mn; Dh80mn
Mandated lead arranger & Agent: Société Générale Corporate & Investment Banking
Mandated lead arranger: Calyon
Tenor: 3 years
Date signed: March 2008