Infrastructure Financing through Islamic
Finance in the Islamic Countries
58
Chart 3.11: Master Wind Energy Limited Financing Structure
Source: Adapted from Ahmed (2017)
The uncertainty in revenue stream was mitigated with the Upfront Tariff Regime announced
by the GoP in 2013 whereby the Feed in Tariff along with permitted indexations and
escalations was applicable throughout the 20 years concession period. The arrangement was
also backed by guarantees provided by the GoP under the Concession Agreements. However,
the project assets were insured and in case of total loss, the insurance claims would be
distributed among the financiers and project sponsors according to their shares of musharakah
assets. The structure of the financing is shown in Chart 3.11.
Case Study: Doraleh Container Terminal Project
Djibouti’s Doraleh container terminal project was one of the first, large PPP infrastructure
projects that was wholly financed by Islamic syndication. Initiated in 2007, DP World of the
United Arab Emirates (UAE) and Port Autonome International of Djibouti were the key
sponsors of the project. They established the Doraleh Container Terminal S.A. (DCT) as a
Project Company to develop and operate the port under a 30-year concession agreement. DP
World provided the initial USD 5 million equity in the project and then the Project Company
raised USD 422 million through Islamic syndication. Dubai Islamic Bank, Standard Chartered
Bank and WestLB AG provided the funds in the syndicate through an investment agent, which
acted as the Funding Company.
The Islamic project financing used in the project was complex and included four contracts of
musharakah, istisna, ijarah and takaful. Under musharakah, a partnership (DCT Musharakah
JV) was formed by the Project Company (DCT) and the financiers (Funding Company) to
procure the assets of the project. The DCT Musharakah JV then appointed DCT as their agent to
construct the terminal using the istisna contract. The payments for the construction were made
from the musharakah to DCT as multiple drawdowns. The financier’s co-ownership interests in
the project were leased to DCT under an ijarah agreement. Since the contract was for a long
period of time, the rental payments had both fixed and floating components. The ijarah
contract included advance rental payments during the construction period and regular rental
payments payable to the financiers after the completion of the terminal.
Islamic Financiers
AEDB
Investment Pool
Project Company
(MWEL)
Musharakah
Project Assets
USD 100 million
GoP
Guarantee
Concession
OPIC
USD 32 million