The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Yong Hwan Kim, “Korea Eximbank”) announced on December 11 that it is providing USD 150 million in project financing* for Turkey’s Kirikkale Project in which Samsung C&T Co. is participating jointly with ACWA**.

* While traditional corporate loans are secured by the creditworthiness of the project sponsor, project finance loans are secured by project assets only and repaid mostly from cash flows generated by the project (sponsors are thus shielded from the risk of project failure).

** ACWA Power International (ACWA): company established in 2004 through equity investment by Saudi Arabian companies to obtain independent power producer (IPP) contracts, in line with the Saudi government’s policy to privatize the power sector; Turkey’s project is the first overseas venture for ACWA.

The project is an investment-development project for the installation of an 805 MW combined-cycle gas power plant in Kirikkale near Ankara, Turkey, in which Samsung C&T is participating as a sponsor and sole EPC* contractor.

* Contractor responsible for the engineering, procurement of equipment and materials, and construction of the plant

This project is the first joint venture between a Korean firm and a leading Middle Eastern power developer (ACWA) in a third country, combining the proven capability of Korean EPC players with strong funding from the Middle East.

Notably, Standard Chartered Bank and Saudi’s Al-Rajhi Bank contributed USD 60 million and USD 150 million each to the project as a result of Korea Eximbank’s active arrangement effort, in a country whose power sector had difficulty attracting funding from international commercial banks.

Korea Eximbank also succeeded in getting the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) to co-finance the Kirikkale project, establishing a model of cooperation with international financial institutions.

A Korea Eximbank official noted, “The significance of this project is that we are funding it in the form of project financing, based on a careful assessment of its economic feasibility and profitability, in a market where on-balance sheet corporate financing is the norm. This will open the door to yet more large-scale joint ventures between Korean and Middle Eastern entities in third countries.“