Saudi Arabia’s ministry of finance has signed an export credit agency (ECA)-backed loan with Euler Hermes, HSBC and Crédit Agricole CIB worth US$258mn for the procurement of buses from Germany.

HSBC acted as a mandated lead arranger (MLA), the agent bank and a lender of the facility, alongside Crédit Agricole CIB as structuring bank, MLA and lender. The loan is backed by German ECA Euler Hermes  and will cover the purchase of 842 German-made buses destined for Riyadh’s public transport system.

HSBC says that the facility is Saudi Arabia’s first ECA-supported green loan because of the use of the proceeds and because its reporting features make it compliant with the Green Loan Principles, outlined by the Loan Market Association in 2018.

“The loan documentation confirms a commitment to report on positive environmental impacts of the underlying project – the buses supplied will help reduce the greenhouse gas emissions and air pollution as well as alleviate traffic congestion in the metropolitan Riyadh area through a shift towards public transportation,” a spokesperson for the bank tells GTR. However, they did not comment on the type of buses, or who would be making them.

The deal forms part of the Saudi finance ministry’s strategy to support the completion of major developmental projects in the kingdom with increased contributions from the private sector. It is encouraging project owners in the public and private sector to adopt similar sources of finance, it says in a statement.

Fahad Al-Saif, president of the National Debt Management Center (NDMC), which represented the ministry in this deal, says that NDMC strives to “empower” strategic government projects in all sectors through securing the necessary funding in a manner that serves the kingdom’s Vision 2030.

Saudi Vision 2030 is a comprehensive programme to reduce Saudi Arabia’s dependence on oil, diversify its economy, and develop public service sectors, including that of transport.

As part of the kingdom’s plans, Saudi Arabia has launched its own export credit agency (ECA), the Saudi Export-Import Bank (Saudi Exim). The bank’s mandate is to help the country diversify away from oil, while supporting and financing the export activities of Saudi businesses.

Having had regulatory approval granted earlier this year by the Saudi government, the bank has now become operational, with its executive committee approving seven loans worth SR310mn (US$82mn) in April, in addition to rescheduling three loans valued at SR216mn (US$57mn).