Project Safi unlocks shariah finance for PPPs

Author: Danielle Myles | Published: 13 Oct 2014

The first cross-border Islamic financing of an independent power project (IPP) creates a new source of liquidity for public-private partnerships (PPP), particularly across the Middle East and North Africa.

The funding of Morocco’s $2.6 billion Safi power plant overcame incompatibilities between shariah principles and the build-operate-transfer (BOT) structures that are typically used for IPPs and PPPs.

Friction between these models had prevented large-scale Islamic financings of these projects. But the structure used in Safi solved this problem, for the benefit of the project and the industry at large.

"Sponsors looking at these projects now have a new source of liquidity; it presents a very significant shift in the market," said Qudeer Latif, head of Clifford Chance’s global Islamic finance practice who advised the sponsors.

Safi’s financial close follows a wave of sukuk offerings by non-traditional issuers and marks the next step in Islamic finance’s expansion. But its...