Finnvera guarantees an Islamic export credit for Al Qatrana Cement PSC in Jordan

Finnvera is one of the first Export Credit Agencies to cover export credit structured according to Islamic financing principles. An Islamic financing product called Murabaha is used to arrange financing for the supply by Wärtsilä Finland Oy of a 50 MW captive power plant related to a green-field cement project in the Kingdom of Jordan.

BNP Paribas, as sole Mandated Lead Arranger, Financier and Agent, grants several Asset and Commodity Murabaha-type export credit facilities, totalling USD 113 million, to the Purchaser, the project company Al Qatrana Cement PSC (QCC). Facilities are backed by the guarantee from QCC’s main share-holder, Arabian Cement Company which is also one of the main listed cement companies in the Kingdom of Saudi Arabia. Finnvera covered Asset and Commodity Murabaha arrangements are in the aggregate amount of USD 43 million and the project’s financing includes also a Hermes covered export credit facility for the cement production line from Germany, being as such the first Islamic multisource export financing.

Murabaha is an Islamic financing tool as per which the Financing Bank purchases an asset from an equipment supplier, e.g. power plant from Wärtsilä, against a certain Cost Price and sell it to the Purchaser with immediate transfer of title but deferred payment of a Sale Price, which Sale Price consists of the Cost Price plus a mark-up or Profit, given that collecting interest or “riba” is prohibited in Islamic financing. Sale Price is payable over 9 years, consisting of a 2 year drawing period during which only Profit will fall due followed by a 7 year repayment period when Sale Price is payable on a semi-annual and equal principal basis.

According to the Islamic principles there has to be an underlying tangible asset in a Murabaha financing. However, as the turn key-contract of a power plant also includes services related to installation and supervision, it has been necessary to structure a separate Commodity Murabaha facility to finance these intangible services, together with export credit insurance premium due to Finnvera, which are not eligible to the Asset Murabaha. In Commodity Murabaha scheme the Financing Bank and the Purchaser enter into a deferred payment-based commodity trade through commodity brokers in an amount corresponding to the borrower’s funding needs. Instead of tangible machines and engines, the underlying asset in such Commodity Murabaha scheme is a tradable commodity such as any Shari’a compliant metal.

For further information:

Satu Savelainen, Senior Adviser tel. +358 20 460 7289 or +358 40 827 5855
Topi Vesteri, Executive Vice President, tel. +358 20 460 7238 or +358 400 702 002