The $2.2 billion Al Dur independent water and power project (IWPP) in Bahrain is expected to reach financial close at the end of March after a delay caused by tight international credit market conditions.

Calyon, Mashreqbank and Standard Chartered Bank announced in a statement on Friday that they have launched syndication of the financing for the plant, confirming a report earlier this month by Reuters Loan Pricing Corporation.

Financial close was delayed from December 2008 as a result of the financial turmoil in the last months of 2008 but has launched with revised terms and conditions reflecting the current state of the market, the banks said.

The three initial mandated lead arrangers are each to commit $100 million to the $1.2 billion international tranche of the $2.2 billion financing, which is the first significant project finance deal in the Middle East in 2009.

The financing is structured as an eight-year, non-recourse term loan with a full cash sweep starting 2.5 years after the end of construction and the balloon repayment at maturity is expected to be approximately 80 per cent.

A portion of the debt will be covered by Korean export credit agency Korea Export Insurance Corporation (KEIC).

In addition to the international tranche, there will be an Islamic tranche, a tranche for domestic lenders and a US Exim Bank facility, ranking pari passu with the international tranche.

The financing is structured as a club deal with invited MLAs making commitments of $50-100 million. Credit approved commitments are expected by mid-February.

The project is equally owned by a consortium of GDF Suez and Gulf Investment Corporation (GIC) and benefits from a 20-year power and water purchase agreement with the Electricity and Water Authority of Bahrain (EWA). The EPC contractor is Hyundai Heavy Industries.

The construction schedule was adapted to the new timetable, but Hyundai Heavy Industries has already started work on the site and works are currently being funded by the sponsors. Financial close is now expected to take place by the end of March 2009.

The Al Dur plant will be located in the south of Bahrain, about 40 kilometres from Al Ezzel, another power generation plant in which GDF Suez has a 45 per cent stake.-Reuters