Saudi Electricity Co. (SEC) has obtained $1.5 billion in financing from Industrial and Commercial Bank of China (ICBC), one of the largest loans ever extended by a Chinese bank in the Gulf.
The loan from ICBC, the world’s biggest bank by assets, underlines growing business ties between China and the region. In January, China and the six GCC states said they aimed to conclude a free trade agreement this year.
The five-year “direct commercial funding agreement” was signed on June 29 and will be used to finance some of SEC’s capital projects, the company said.
The loan was unsecured, meaning Saudi Electricity did not need to pledge any collateral, a source close to the deal said.
With state revenues slashed by low oil prices, Saudi Arabia’s government and state-run firms are increasingly turning to borrowing to fund themselves.
The low oil price environment provided an opportunity for liquid Chinese banks to chip in with funding at a time when liquidity was more constrained in the region’s financial sector, said Hongbin Cong, managing director, Invest Dubai at Falcon and Associates, a strategic advisory firm.
Since it opened a branch in Riyadh last year, ICBC has sought to position itself to benefit from economic reforms designed to cut Saudi Arabia’s dependence on oil. Earlier this month, the kingdom unveiled a five-year plan which is to involve SR270 billion ($71.99 billion) of state spending on projects in housing, mining, renewable energy and other areas.
ICBC has the largest presence of any Chinese lender in the region, with offices in Riyadh, Dubai, Abu Dhabi, Doha and Kuwait.
Earlier this year it provided a $230 million unsecured loan to Emirates National Oil Co. in the UAE and participated in a $1.7 billion club loan to Emirates NBD, Dubai’s largest bank.

Source: Arab News