ACWA Power, which is partially owned by Saudi sovereign wealth fund Public Investment Fund (PIF), has signed financing agreements for the NEOM Green Hydrogen Project (NGHP) with a total investment cost of US$8.5 billion.
The syndicated financing facility includes an Islamic tranche, Aamir Syedain, the vice-president of corporate finance at Riyad Bank, told ISFI, without disclosing the size of the tranche.
The NGHP is a joint venture between ACWA Power, which has a 33.3% equity stake in the project, Air Products and the NEOM Company. The project will be commissioned in 2026 and is targeted to produce 6,000 tons of clean hydrogen per day and 1.2 million tons of green ammonia annually.
The green hydrogen project is part of Saudi Arabia’s NEOM mega project, a planned green smart city in the Tabuk province. Wholly owned by PIF, NEOM is in line with Saudi Vision 2030 which aims to, among others, increase the domestic generation capacity from renewable energy to 50% by 2023.
The financing for the NGHP comprises long-term debt and equity funding with debt facilities worth US$6.33 billion, consisting of a US$5.85 billion senior debt facility and a US$475 million mezzanine debt facility.
The National Development Fund and the Saudi Industrial Development Fund financed US$2.75 billion of the debt facility.
The remaining US$3.58 billion-worth of debt facilities were financed by a consortium of 21 financiers, some of whom are fully-fledged Islamic banks including Alinma Bank and Riyad Bank.
In February this year, following ACWA Power’s SAR1.8 billion (US$479.33 million) Sukuk issuance, ISFI reached out to the power plant operator for comment regarding its sustainable project financing plans.
“It is anticipated that most of our financings for renewable energy projects going forward will embed ‘green loan/financing principles’ and be certified as green and will potentially involve the range of financing options including green Sukuk,” a spokesperson from ACWA Power previously told ISFI.
Also as part of PIF’s green hydrogen efforts, it signed an MoU on the 1st March 2023 with Tokyo-headquartered Marubeni Corporation (Marubeni) to set out a framework for the development of clean hydrogen projects in the Kingdom.
“Under the framework of this MoU, Marubeni and PIF will initially conduct a feasibility study for producing clean hydrogen in Saudi Arabia, with the aim to supply clean hydrogen to both domestic and international markets,” the Japanese firm said in a statement.