The UK’s export credit agency has issued a buyer credit facility to the government of Iraq for the first time in 20 years.
UKEF and JP Morgan have signed a US$210.8mn financing facility to support a project that will see GE upgrade and repair existing gas turbines at 10 sites across Iraq.
The financing consists of a US$105.4mn UKEF direct loan for the government of Iraq. The remaining US$105.4mn is being lent by JP Morgan by means of a UKEF-guaranteed tranche, which is being reinsured by the Swiss export credit agency Serv.
Power outages are commonplace in Iraq, caused by unstable power supply that has failed to keep up with growing demand due to a shortage of power generation and transmission facilities. GE’s project aims to deliver improved and more secure power sources in Iraq. It will sustain 6.5GW of generating capacity, powering millions of homes in the Baghdad, Karbala, Kadisiyah, Babil, Najaf and Basrah regions.
GE will deploy Advanced Gas Path (AGP) solutions and controls software, a technology that will improve gas turbine performance and enable power plants to operate more dynamically.
According to a statement from Baroness Fairhead, the UK’s minister of state for trade and export promotion, the facility is “laying the groundwork for future UK-Iraq trade”. It is UKEF’s second project agreed under a memorandum of understanding signed in April 2017 between the UK and Iraq governments, in which UKEF committed to support UK companies working on infrastructure development projects in Iraq.
In the first project, UKEF provided a US$117mn guarantee to support the government of Iraq in a contract with an Enka-GE consortium to deliver two 750MW gas-fired power plants at Dhi Qar and Samawa in southern Iraq.
UKEF has also stepped up its activity elsewhere in the war-torn region. In late 2016, the export credit agency provided a US$34.8mn direct loan to the Kurdistan regional government in Iraq to finance a contract with UK water engineering company Biwater to deliver water and wastewater treatment solutions for the cities of Erbil and Sulaimani. JP Morgan was the mandated lead arranger. The facility, which will finance the preliminary scoping phase of the project, was awarded as a GTR Best Deal of 2016.