Citi, Crédit Agricole CIB, Deutsche Bank, and HSBC closed a US$1.3bn multi-export credit agency (ECA) supported financing for Dubai Electricity and Water Authority (Dewa) in May 2009. The transaction was the largest ECA-supported financing raised for any entity in the GCC (Gulf Cooperation Council) since the beginning of the financial crisis.

“The ECA-supported financing was the first ever multi-ECA financing undertaken by Dewa in a challenging environment, given the liquidity crunch globally.

“This ECA-supported financing allowed Dewa to raise funding for very long tenors and at very competitive rates compared to anything that was available in the local or international bank market at that time,” comments Yusef Khan, head of structured trade finance for Sub-Saharan Africa, at Citi.

Not only that, it has the longest tenor (13 years door-to-door) provided by any ECA for a Dubai-based entity. Indeed, other foreign currency financings in the UAE had not gone beyond 10 years in recent times.

Considering the tenor, Dewa was able to raise the financing at pricing levels considerably below CDS benchmarks for much shorter tenors.

It is also the first major ECA financing for a sovereign based in the United Arab Emirates (UAE), although the borrower was able to raise the funding in its own name without explicit guarantees from Dubai’s department of finance.

The purpose of the facility was to finance the expansion of Dewa’s electricity generation and water desalinisation capacity between 2008 and 2010. The company’s plans are ambitious, with it aiming to triple its capacity during this timeframe.

The deal consists of a US$150mn tranche covered by the Italian ECA Sace; a €133mn portion covered by French ECA Coface; and a €516mn tranche backed by Euler Hermes.

Under the terms of the facility, the banks were refinancing payments made by Dewa to German, Italian and French suppliers of power and water-related capital equipment.

The ECAs approved a total of US$650mn for refinancing, and a remaining balance of US$350mn was approved for new Capex financing.

In total, seven separate ECA loans have been signed under the loan facility, covering over a dozen supply contracts. There were around 20 European, Asian and Middle Eastern suppliers involved in the deal, including Fisia, Siemens and Areva.

Indeed, there were further deal intricacies within the ECA framework agreement, as Simon Lee, director, project and export finance, Middle East and North Africa, at HSBC explains: “Not only are there separate Sace, Hermes and Coface facilities under a single ECA framework agreement but there are multiple tranches for the Sace facility together with multiple Hermes facilities and multiple Coface facilities.

“These are all in support of separate contracts already signed, effective and with work underway. Support was therefore given by Sace, Hermes and Coface on a refinancing basis, recognising the substantial potential for future contracts to be awarded by Dewa for new power generation and desalination capacity. In addition, one tranche of the Sace facility has been structured with reinsurance from various other ECAs.”

Sace also unusually provided 100% cover for the US$150mn tranche, with an option for a further tranche of up to US$300mn that could also benefit from 100% cover.

The deal was significant for the export finance market as a whole as it demonstrated the benefits and strengths of ECA financing, particularly in a time of economic malaise. Piers Constable, director of structured trade and export finance for the Middle East and Africa, at Deutsche Bank, comments: “The 13-year repayment terms were significantly in excess of the alternatives available in the UAE capital and loan markets. Coming as it did at a time of particular financial stress in Dubai, it demonstrated how the longer term outlook taken by the ECAs can result in truly competitive credit terms for good quality borrowers in the GCC region.”

Dewa is a wholly-owned entity of the government of Dubai and is exclusively responsible for electricity generation, transmission and distribution. It is a key entity in realising and maintaining Dubai’s ambition of being a region hub for trade, tourism and financial services.

The company had never previously accessed the ECA markets.

Deal information

Borrower: Dubai Electricity & Water Authority (Dewa)
Amount: US$1.3bn
Mandated lead arrangers: Crédit Agricole CIB, Citi, Deutsche Bank, HSBC
ECAs: Coface, Euler Hermes, Sace
Law firm: Norton Rose
Tenor: 13 years
Date signed: May 2009