INTERVIEW Supporting Overseas Business Deployment of Japanese Company in Seawater Desalination Project First Project Financing for Seawater Desalination Project without Power Generation Talking with Daisuke Hamada, Deputy Director, Division 3, Power and Water Finance Department, Infrastructure Finance Group JBIC signed on July 25, 2013, a loan agreement totaling up to about USD105 million (JBIC portion) with Muscat City Desalination Company S.A.O.C. (MCDC) incorporated in Oman for the Al Ghubrah IWP*1 Project (the Project ). MCDC was jointly established by Sumitomo Corporation and Malaysian and Spanish companies to implement this Project. The loan, provided in project financing, is cofinanced with private financial institutions. This is the first project financing for a seawater desalination project without including power generation. Supplying Domestic Water to 800,000 People, Accounting for About 29% of the Total Population Deputy Director Hamada In this Project, MCDC will build a new seawater desalination plant using the reverse osmosis method with the capacity of about 191,000 cubic meters per day at Al Ghubrah in Muscat, the capital city of Oman, and sell desalinated water to Oman Power and Water Procurement Company S.A.O.C. (OPWP), a state-owned company, for 20 years on the BOO*2 basis. In Oman, as its population and economy is anticipated to grow in the years to come, demand for water in its northern region, including Muscat, is projected to increase at an annual average rate of 5 percent from 2013 through 2019. It is planned that desalinated water for households will be supplied to about 800,000 people through this Project. It is thus expected to perform a significant role as a water supply source in this country. In this Project, after a consortium, including Sumitomo Corporation (SC), acquired the concession in November 2012, loan appraisal began in earnest. Since project financing a sole seawater desalination project without power generation is the first case for JBIC to handle, and financial structuring was requested a relatively short period of a little more than a half year, I tried to work efficiently, guided warmly by a number of our senior staff. Hamada confided. Coordinating Interests by Sharing the Importance of the Project AL Ghubrah IWP Project JBIC signed on July 25, 2013, a loan agreement totaling up to about USD105 million (JBIC portion) with Muscat City Desalination Company S.A.O.C. (MCDC) incorporated in Oman. MCDC was jointly established by Sumitomo Corporation, Malakoff Corporation Berhad in Malaysia and Cadagua, S.A. in Spain to implement the Al Ghubrah IWP Project. The loan, provided in project financing, is cofinanced with Sumitomo Mitsui Banking Corporation (SMBC) and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU). MCDC was established not only by SC but also by Malakoff Corporation Berhad in Malaysia, which is broadly engaged in power and water desalination projects, and Cadagua, S.A. in Spain, which has experience in building water desalination plants. While each company has experience and a solid track record of water desalination business, I took time for financing arrangements to enable their understanding on terms and conditions of the loan agreement. As I visited Oman in April 2013 and conducted a series of interviews with OPWP, which is an offtaker, and others related to this Project, I could recognize yet again the importance of this Project for Oman. In negotiating the agreement, the fact that all the stakeholders had common understanding on the importance of this Project enabled me to lead all the parties concerned to the final compromised solution. he stated. Thus the loan agreement was signed with MCDC based on project financing in July 2013. Strengthening Ties with Resource Rich Countries and Expanding Business for Japanese Companies Amid the prospect of globally tight demand-supply situation of resources over the medium- and long-term, it is important for Japan to have strong ties with resource abundant countries like Oman on which Japan depends for its imports of LNG and oil. Supporting development of desalinated water production infrastructure urgently needed by Oman through this loan will help build comprehensive and multilayered relations between the two countries. Hamada said. During his visit to the Middle East in May 2013, Prime Minister Shinzo Abe expressed he would strengthen Comprehensive Partnership toward Stability and Prosperity between Japan and the Middle East, and he indicated the policy of forging a link that goes beyond the framework focusing on energy resources with this region that has high economic potential. In addition, during his visit to Oman in January 2014, he had a summit meeting with His Majesty Qaboos bin Said, Sultan of Oman, and the two leaders issued Joint Communiqué on the Strengthening of the Comprehensive Partnership towards Stability and Prosperity Between Japan and the Sultanate of Oman. This Communiqué stated, Both countries recognized the importance of further cooperation in the development of electricity and water infrastructure through encouraging the private sector to participate and invest in the Independent Power & Water Projects (IPP, IWPP, IWP) and welcomed the developments of AL Ghubrah IWP Project to which Japanese companies contribute. JBIC will continue to support overseas infrastructure business activities of Japanese companies by drawing on its various financial facilities and schemes for structuring projects, and performing its risk-assuming function. *1 IWP (Independent Water Producer) is an independent company that builds and operates a water desalination plant on its own and sells the desalinated water it produces. *2 BOO (Build, Own, and Operate) is a form of financing wherein a private sector company build, own and operate a plant.
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