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Non-recourse bonds and Islamic financing could become more widely used as sponsors look to arrange funding for the 100,000 MW of generation capacity required in the Middle East over the next 10 years, Shibeer Ahmed, partner at Lovells, said. With over $25 billion of Middle East project loans--across all sectors--closed in the last five years, pricing on power projects in the region was more competitive than rates in the U.S. prior to the Sept. 11 terrorist attacks. Despite spreads on commercial bank loans widening dramatically since the attacks, the Middle East market is still attractive, particularly for project bonds, Ahmed noted, adding that the region has never experienced a debt crisis.

Keynote speaker James Rubin, a former state department spokesman in the Clinton administration, presented a mixed view of the outlook for the Middle East and its relationship with the West following the Sept. 11 terrorist attacks. "We are never going to convince the Arab world that our policy makes sense," he told delegates, regarding sanctions against Iraq. Rubin also slammed the idea that Osama bin Laden-sponsored attacks on the U.S. are on behalf of the Palestinians. He noted that the U.S. embassies in Kenya and Tanzania were bombed in 1998 when the U.S. was at the height of its popularity with the Palestinian Authority for putting pressure on the Israeli government of the day to negotiate. "The people of the Palestinian Authority would come out in the street and cheer the Americans," he recalled.

Saudi Arabia's electricity market, the largest in the Middle East, requires an investment of SAR340 billion ($90 billion) to meet Ministry of Industry and Electricity targets of raising installed generation to 60,000 MW from 23,000 MW by 2023. Demand for electricity in the kingdom is growing at 4% per year, Christopher Dann of management consulting firm Arthur D. Little, Inc., said. Saudi Arabia's 75 power plants--including combined power and desalination projects--produce 23 GW, he noted, adding "current peak load this summer was just shy of that."

* "I don't see the chemistry between [Israeli Prime Minister Ariel] Sharon and [Palestinian Authority Chairman Yasser] Arafat yielding anything other than a peace process, rather than real peace."--James Rubin, former state department spokesman, commenting on the Arab-Israeli conflict.

California faces a very significant issue associated with recovery of past power costs. PG&E and Southern California Edison ran up bills of $14 billion before the state Department of Water Resources (DWR) stepped in to buy electricity for them. The DWR has paid about another $10 billion to buy electricity. Generators have unpaid claims for billions of dollars.

Baker & McKenzie is preparing a paper it will present to the Saudi Arabian General Investment Authority, a body created last year to facilitate foreign investment in the kingdom, on a 1972 law which states that the Saudi government has a monopoly over the electricity industry. This issue has arisen in importance since the SAGIA is charged with giving licenses for power projects, John Xefos, partner at Baker & McKenzie told delegates. Foreign sponsors looking to invest in a Saudi power project are "going to want a nice, clean legal opinion," Xefos said. Unfortunately, no only does the GIA's charter apparently conflict with the 1972 law, but "no one seems to have a copy."

Bonds Issue Date Maturity Issuer Amount ($ mil) Offer Price Type of Security Coupon (%) Moody's S&P Bookrunner(s) 10/04/01 10/25/16 EdF 731.1 99.201 Fxd/Straight Bd 5.5 Aaa AA+ CAI/ML/UBS 10/05/01 10/05/04 CA La Electricidad de Caracas 5.2 Market FRNs Floats - - N/A 10/05/01 10/15/04 Powergen 1,200 99.927 Global Bonds 4.5 Baa1 BBB DEUTSCHE BANK/JPM M&A Date Announced Date Effective Target Target Advisors Target Country Acquiror Acquiror Advisors Acquiror Industry Sector Acquiror Country Value ($mil) 10/04/01 - Descon Pvt - India Andrew Yule Co. - Investment & Commodity Firms,Dealers,Exchanges India - 10/05/01 - Portland General Electric CSFB U.S. Northwest Natural Gas Merrill Lynch Electric, Gas, and Water Distribution U.S. 2,849 10/05/01 10/05/01 ZPS Energetika - Czech Republic Mostecka Uhelna - Mining Czech Republic - 10/08/01 - Fiddlers Ferry,Ferrybridge Goldman Sachs U.K. American Electric Power J.P. Morgan Electric, Gas, and Water Distribution U.S. 957.775 10/09/01 - Elia (CPTE/Electrabel) - Belgium City of Brussels - Public Administration Belgium 202.423 Source: Thomson Financial Securities Data Company. For more information, call Rich Peterson at (973) 645-9701.

Syndication of the $232 million Salalah project loan is still scheduled to take place within the next month or so, despite market rumors and press speculation to the contrary, say bankers involved in the deal.

Lead arrangers of a $1.3 billion loan to CMS Energy and International Power's Al Shuweihat S1 project jacked up front-end fees at the beginning of last week to entice banks into the deal and counteract growing nervousness about investing in Middle East projects.

Following is a directory of upcoming Middle Eastern power projects. To report new projects, please call Will Ainger, Managing Editor, at (44-20) 7303-1735 or email: wainger@euromoneyplc.com