Reuters – Rabigh Electricity Company, partly owned by Saudi Electricity Co. (SEC), is in talks with banks to raise a loan worth up to $2 billion, two sources with knowledge of the deal said.
The cash raised from banks will be used to replace the capital the consortium invested to build the Rabigh 1 power plant, for which funding was originally put in place in 2009.
Rabigh Electricity, a special purpose vehicle, did not immediately respond to a request for comment.
The deal comes at a time when Gulf economies are cutting budgets and increasing borrowing to cope with a slump in oil prices.
This has squeezed liquidity at a time when companies are also scrambling to agree new financing ahead of possible US interest rate hikes in the coming months.
Rabigh Electricity Company is seeking a loan with a long-term tenure and expects to close the financing in the first quarter of 2016, the sources said.
“The loan will be in the order of 20 years,” one of the sources said, adding that the pricing should be cheaper as the plant is now fully operational.
The original project funding of $1.9 billion was raised in 2009 with a 20-year life span, according to Thomson Reuters data, just after the collapse of Lehman Brothers in 2008 which triggered a seizure of the world’s financial system.
The Rabigh plant was the first in the kingdom where the contract to build and operate the project was awarded in an open tender process by SEC, which promised to purchase all power produced by the plant for a period of 20 years.
Located on the western coast of Saudi Arabia, the plant generates 1,200 megawatts of power per day and has been put into full commercial operation since 2013.
A consortium of ACWA Power International and the Korea Electric Power Company were awarded the project and they hold 80 percent of the shares, while SEC owns 20 percent.

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