Abu Dhabi National Energy Company (TAQA) and French multinational utility company ENGIE reached a financial close for the AED2.3 billion (US$626.08 million) low-carbon Mirfa 2 Reverse Osmosis Desalination project on the 31st May 2023. The majority of the project was financed through debt, which includes an Islamic financing tranche.
The Mirfa 2 Reverse Osmosis Desalination project is expected to be operational by the last quarter of 2025 and is co-owned by TAQA and ENGIE, with each holding 60% and 40% stakes respectively.
Upon completion of the plant, Emirates Water and Electricity Company (EWEC), which signed a water purchase agreement with the project owners in February this year, will procure the water supplied from the plant for 30 years.
The facility is EWEC’s fifth low-carbon intensive desalination project to date and is set to be the third largest reverse osmosis plant in the UAE once it is fully operational. The plant is expected to produce a daily output of 120 million imperial gallons of water.
“As is typical for financing of IWP [independent water plant] projects in the region, the project was financed through a combination of equity capital and non-recourse bank loans, with a gearing ratio of 78:22.
“The procurer typically requires financing through debt and equity; all project documents are structured to ensure bankability,” Parag Narsingkar, the head of acquisitions, investments and financial advisory of Middle East, Africa and India at ENGIE, told ISFI.
The debt financing portion of the project comprises a US dollar-denominated syndicated bank financing at an aggregated principal amount of AED1.8 billion (US$489.98 million), which includes an Islamic Istisna Ijarah-based tranche.
The debt financing was obtained from a syndication of both local and international banks, including Abu Dhabi Islamic Bank, BNP Paribas Fortis, Sumitomo Mitsui Banking Corporation, the Norinchukin Bank, BNP Paribas and KfW IPEX-Bank.
For the Islamic tranche of the debt financing, the Istisna contract will be applied to the construction phase of the project while the Ijarah contract will be effective for the operations phase, Parag explained.
According to Parag, the challenges that the project owners faced during the financial close of the project include the ongoing turbulent geopolitical scenario in Europe, the high inflation and increased interest rates environment globally as well as the financial markets still recovering from the effects of the COVID-19 pandemic.
Both TAQA and ENGIE are seasoned players in the Islamic finance space. In April this year, TAQA launched a green financing framework allowing it to issue green Sukuk and invest equity in green projects, among others.
ENGIE has also recently been involved in three financings with Islamic tranches in Saudi Arabia. The Islamic financings were for the Yanbu Reverse Osmosis project, the Jubail 3B Reverse Osmosis project and the refinancing of Dhuruma Electricity Company which operates the Riyadh PP11 Power Plant.
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Mirfa 2 Reverse Osmosis Desalination Project Financing AED1.8 billion (US$489.98 million)  31st May 2023 |
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| Summary of terms and conditions | |
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Aggregate principal amount |
AED1.8 billion (US$489.98 million) |
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Type of facility |
US dollar-denominated conventional and Islamic facilities |
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Structure |
Non-recourse project finance with a soft mini-perm structure |
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Use of proceeds |
To finance the project costs for the development of the 120 MIGD [million imperial gallons per day] MIRFA 2 reverse osmosis desalination plant |
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Tenor |
Undisclosed |
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Profit rate/ yield |
Undisclosed |
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Repayment |
Fully amortizing repayment structure |
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Frequency of payment |
Undisclosed |
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Legal advisor |
Herbert Smith Freehills acting on behalf of the lender |