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GCC developers prefer project finance to secure long-term funding, lower debt Project finance has become a preferred model for developers in the Gulf Cooperation Council (GCC) as it allows them to secure long-term funding in line with project lifecycles and keep debt off balance sheet, according to S&P Global Ratings report. This financing approach aims to manage risks throughout project phases, from construction to operation, the report said. The project finance transactions are primarily structured as joint ventures (JVs) between the government and private developers. “This approach avoids burdening public budgets, allows governments to stay actively involved while freeing capacity to focus on long-term sustainability objectives.” Project finance is crucial given the region’s massive demand for infrastructure assets, including renewable and gas-fired power generation, water desalination, data centres and social infrastructure assets. Projects such as solar and wind farms, as well as hydrogen production plants, are key components of national strategies such as Saudi Arabia’s Vision 2030 and the UAE’s Net Zero 2050. At the same time, investments in digital infrastructure, including data centres and AI systems, are growing rapidly. “We believe the rising demand for project finance is a direct result of global sustainability goals, regional economic diversification strategies, and developers’ preference for financing models that match long-term concessions with long-term debt,” the rating agency said. Public-Private Partnership (PPP) frameworks established by GCC governments have further encouraged private sector involvement, enabling governments to structure deals as JVs where they can act as landowners, off-takers, or co-shareholders, the report stated. It also observed that the GCC has a track record of governments greater willingness to support key strategic assets, beyond contractual commitments. For example, government-related risks such as change in law, force majeure, and political risks are transferred to the state-owned long-term off-taker. There are also strong termination regimes in place to prevent procurers from terminating contracts for convenience. |
