ACWA Power and Saudi Electricity Company have reached financial close on the Rabigh 2 combined cycle expansion, securing SAR 9.69 billion of debt with a tenor of roughly thirty four years, both companies told the Saudi Exchange.
The financing was secured three days before the disclosure. The project is a combined cycle gas plant of 2,313.5 megawatts in the west of the kingdom, designed to be carbon capture ready. Each of the two companies holds a forty per cent stake in the project company, Al Morjan Two Electricity Company. Neither filing identifies the holder of the remaining twenty per cent. The companies expect a financial impact from the project at the start of commercial operations at the full plant, which they put in the second quarter of twenty twenty nine.
The project sells its output to Saudi Power Procurement Company, the kingdom's single buyer, under a power purchase agreement signed earlier this year.
The length of the debt is the number that matters. A tenor of around thirty four years against a plant that will not reach full commercial operation for close to three years tells you the lenders are pricing a contracted revenue stream rather than a merchant generator, and that the single buyer structure continues to carry Saudi power financings into territory that would be unavailable to an equivalent project in a liberalised market. That is the mechanism by which the kingdom has been able to add generation capacity at speed without putting the cost on the sovereign balance sheet.
The carbon capture ready specification is the second point worth drawing out, and it is a commercial hedge rather than an environmental gesture. Building a gas plant with the space, layout and process design to retrofit capture equipment costs more now and preserves optionality later, which is a rational trade when the plant has a thirty year contracted life and the policy environment over that period is unknowable. It also keeps the asset financeable by lenders who are tightening their own thermal generation criteria.
A note of caution on the reporting. Trade coverage of the transaction has described it as a project worth about 2.5 billion dollars, which is close to the dollar equivalent of the SAR 9.69 billion debt figure. The filings disclose the financing quantum, not a total project cost, and the two are not the same thing.
