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Best project finance deal: Rabigh Refining and Petrochemical Company

Pushing beyond the boundaries

The project finance deal for the Rabigh Refining and Petrochemical Company was a landmark transaction in almost every sense. At a final cost of $9.9 billion it was the largest transaction of its type to emerge from the Middle East and in its structure it also illustrated the growing integration of conventional and Islamic finance. The funds raised will help develop and upgrade an integrated refinery and petrochemicals complex in Saudi Arabia, a joint venture between Saudi Aramco and Japan’s Sumitomo Chemical. Both partners contributed equity, with the balance financed through a mix of export credit agency, conventional and Islamic finance.

Saad Rahman, director of the global Islamic banking department at Calyon in Bahrain, which acted as one of the mandated lead arrangers of the transaction, says: “The $600 million Islamic tranche was a significant milestone as over 40% of the funding was from pure Islamic institutions, not an easy achievement in Islamic finance.” He adds that a key factor behind the strong participation in the Islamic tranche was the involvement of the triple-A rated Islamic Development Bank. Rahman says that in Saudi Arabia alone there is a project finance pipeline of $800 billion to $1 trillion, which will require a similar mix of conventional and Islamic finance.

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