Project Finance in the Middle East Continues to Demonstrate Depth, Resilience and Increasing Sophistication
The continued( some might argue, unabated) buoyant growth of non-recourse lending across the GCC reflects a deliberate policy in how governments and sponsors approach infrastructure funding in the region. GCC states have long used project finance to defer capital expenditure, smooth the impact of bringing on line large scale infrastructure projects on their budgets, and benefit from international expertise in the buildout and operation of critical infrastructure assets over the long term. The result is a project finance market that is clearly defined by predictability and repeatability.
Traditional sectors for project finance in the region— particularly power and utilities— remain dominant, but one notable trend is the introduction of new asset classes in recent years( from construction villages for Neom, water reservoir projects, through to healthcare PPPs). In the last 12-18 months we have seen battery storage( BESS) projects in Saudi Arabia and Abu Dhabi emerge as bankable assets not because they are novel and a key component of the energy transition, but because these projects have been structured in ways that lenders already understand, supported by long-term offtake arrangements and a familiar risk allocation. The scale of these projects is undoubtedly increasing, but innovation is being carefully managed within established financing frameworks and techniques. The region’ s pivot back toward gasfired baseload alongside renewables underscores the pragmatism at play.
Another clear trend is the re-balancing between the participation of regional and international banks in the project finance market. After several years in which local and regional lenders played a leading role, international commercial banks are re-entering the market with competitive pricing, supported by improved liquidity and a renewed sense of comfort with GCC project risk. This has intensified competition and tightened margins, particularly in renewables and energy transition-related projects. This competition has created opportunities for sponsors to optimise pricing and terms, but also requires careful syndication strategies to balance relationship banks and long-term liquidity providers such as the Asian ECAs.
Refinancing continues to be a central feature of the market. Soft mini-perm structures remain the preferred approach for project financings, providing flexibility for sponsors while maintaining discipline for lenders. At the same time, diversified financings packages— combining conventional, Islamic and ECA-backed tranches— have become standard rather than exceptional.
Recent Notable Matters
• Saudi Arabian SPPC Round 5 Solar PV— advising the consortium led by Masdar and including Korea Electric Power Corporation and GD Power in relation to the successful bid, development, financing and shareholder arrangements in relation to the approximately $ 1.1 billion 2 GW Al Sadawi solar PV project in the Kingdom of Saudi Arabia
• Saudi Arabian SPPC Round 4 Wind Project— advising the Japan Bank for International Cooperation( JBIC) and the commercial lenders on the successful bid, development and financing arrangement for the 700 MW Yanbu Wind IPP
• Dubai SST— sponsors’ counsel to Vision Invest and Suez International in relation to its bid to the Dubai Strategic Sewers Project( Package 1) worth approximately $ 8 billion in Dubai
• Riyadh to Qassim IWTP 4— sponsors’ counsel to Vision Invest as the successful bidder in relation to this 670 km($ 3.5 billion) water pipeline PPP in the Kingdom of Saudi Arabia
The Year Ahead
Overall, the direction of travel is clear: the Middle East project finance market remains a stable, institutional marketplace capable of supporting the development of multiple“ mega-projects” throughout the region without exhausting liquidity, or appetite, for the development of the region’ s critical infrastructure. Growth is being driven less by experimentation and more by the refinement of proven structures, enabling the region’ s large pipeline of energy and infrastructure projects to be financed efficiently and at scale. bracewell. com