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Capital Markets

Qatar builds a project finance powerhouse

Qatar has become a centre of project finance expertise as the government pursues big industrial and infrastructure projects. Skills have spread from foreign banks to local institutions and are being used in the whole region.

THE GOVERNMENT OF Qatar's careful fiscal management is proving to be a driving force for project finance, the big theme for banking in the country. There is no shortage of local, regional and international financial institutions keen to lend the government money for development projects, most of which have been in the energy sector.

Although the government has gone to the international debt capital markets several times since the late 1990s, Andrew Stevens, chief executive of Commercialbank, notes that in the oil and gas sector it has a policy of bringing in reputable international partners, many of which bring their own equity. An illustration of this policy was 2004's landmark three-tier Qatar Liquefied Gas Company II (Qatargas II) syndicated loan.

In the largest commercial facility ever arranged in the Middle East, and the largest ever single energy financing, sponsors Qatar Petroleum and ExxonMobil raised $7.6 billion from a syndicate of 57 international institutions. Some 36 mandated lead arrangers (MLAs) – 28 of them from outside the Gulf Cooperation Council – formed a consortium for the upstream finance component of the deal, underwriting $3.6 billion of 15-year debt.

Each MLA delivered a commitment of $100 million in a step-up structure starting at 50 basis points during the sponsor-guaranteed construction phase.

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