Government-related entities (GREs) in the Gulf are changing how project finance is done. Large-scale infrastructure developments and energy transition goals have driven a surge in activity since the mid-2010s in the Gulf Cooperation Council (GCC). This growth accelerated as governments sought to diversify their economies and attract private investment, particularly in renewable energy, utilities, and transportation. Governments in the region, especially in the UAE and Saudi Arabia (KSA), play a pivotal role in these projects, often through GREs, to facilitate funding and ensure project success.
Project finance is growing rapidly in the GCC due to efforts to diversify economies and expand infrastructure. It has become a preferred model because it allows developers to secure long-term funding aligned with project lifecycles while keeping debt off balance sheets. This financing approach aims to manage risks throughout project phases, from construction to operation.
Governments in the region have increasingly turned to project finance to fund large-scale infrastructure, leveraging private sector involvement through Joint Venture (JV) structures while maintaining fiscal discipline, typically between the government and private developers. This approach avoids burdening public budgets and allows governments to stay involved while focusing on long-term sustainability objectives. This is crucial given the region’s massive demand for infrastructure assets—including both renewable and gas-fired power generation, water desalination, data centres and social infrastructure assets.
The GCC’s project pipeline reflects its commitment to sustainability and technological transformation, such as solar and wind farms and hydrogen production plants. These are key components of national strategies such as KSA’s Vision 2030 and the UAE’s Net Zero 2050.
At the same time, investments in digital infrastructure, including data centres and AI systems, are growing rapidly. Sovereign wealth funds have played a vital role, channelling substantial capital into these emerging sectors to support economic diversification.
We believe the rising demand for project finance is a direct result of global sustainability goals, regional economic diversification strategies, and developers’ preference for financing models that match long-term concessions with long-term debt. Public-private partnership (PPP) frameworks established by GCC governments have further encouraged private sector involvement, enabling governments to structure deals as JVs where they can act as landowners, off-takers, or co-shareholders.
Government involvement in infrastructure projects across the GCC is a defining feature of the region’s project finance ecosystem. Governments, primarily through GREs, are deeply integrated into the lifecycle of these projects, from the procurement stage to operations. GREs oversee tendering processes, inviting local and international developers to bid for projects structured under PPP frameworks.
The UAE and KSA have implemented robust PPP frameworks, making project finance the natural choice for funding large-scale developments. We believe the government’s commitment to solid concessions and strong risk mitigation mechanisms—including protections against regulatory and political risks—enhances the bankability of GCC projects and makes them more attractive to investors.
An established contractual framework underpins the quality of projects with tested offtake agreements and limited or no exposure to market risk. These contracts include favourable risk allocation with highly rated counterparties, ensuring predictability of cash flow.
Key qualities in the local PPP market include government-related risks such as change in law, force majeure, and political risks, which are transferred to the state-owned long-term off-taker. Strong termination regimes prevent procurers from terminating contracts for convenience, bolstering the investment structure.
In KSA, the government has shown its commitment to renewable development through a joint partnership between the Public Investment Fund and project developer ACWA Power, where PIF has a 44% stake. This partnership is set to develop 70% of the Kingdom’s renewable energy targets as part of Saudi Vision 2030, which aims to achieve 130 gigawatts of renewable energy capacity by the end of the decade.
In Abu Dhabi, EWEC exemplifies government leadership in renewable energy initiatives, together with project developer Masdar, which is indirectly fully state-owned with its shareholding split between Mubadala Investment Co. PJSC, Abu Dhabi National Oil Company (ADNOC) and TAQA. EWEC is driving future capacity expansion through projects such as Al Ajban Solar PV (photovoltaic) and giga-projects like Khazna and Zarraf Solar PV, which are currently under tender or being awarded. This follows the commissioning of the Sweihan PV Power Co. PJSC in April 2019 and the Al Dhafra Solar Project in June 2023, two of the world’s largest single-site utility-scale PV plants. All these Abu Dhabi-based projects follow the same template, whereby the government indirectly holds a 60% majority stake and provides a government guarantee on EWEC’s offtake obligations.
By taking on multiple roles—shareholders, lessors, guarantors, and concession providers—GCC governments create a strong alignment of interest between stakeholders. The GCC government’s involvement in projects reduces credit risk, enhances financing conditions, and improves overall project resilience.
S&P Global considers a project finance transaction to be a GRE when sufficient and timely extraordinary government support is likely to be extended in times of stress. Such willingness does not necessarily hinge on government ownership in the project. It could be based on the project’s importance to the economy and the government’s national objectives, potentially leading to the elevation of the final rating, and notching from the project’s SACP.
While project finance transactions are non-recourse or limited recourse, a government’s willingness to intervene can go beyond the strict contractual obligations. This happens when the government seeks to protect strategically important projects, depending on its capacity and willingness to intervene.
When assessing the likelihood of government support, we also evaluate precedents where government actions have mitigated credit risks. For instance, in the UAE, the government supported desalination plant special-purpose vehicles during red-tide incidents despite no contractual obligation to cover scenarios in the water-purchase agreements. Similarly, during the pandemic, governments extended power-purchase agreements to compensate for construction delays. Additionally, during the global financial crisis, the UAE government provided equity injections to ensure the completion of an IWPP project funding. These interventions demonstrate the government’s commitment to avoiding disruption in critical infrastructure and ensuring the financial viability of essential projects.
The GRE status for projects is based on several factors. For instance, if we look at our rated Abu Dhabi-based I(W)PPs, including the 1,177 MW solar photovoltaic project – Sweihan PV -, they all have a strong government presence, with a government or government affiliate acting as the majority shareholder, landowner, sole off-taker, provider of a guarantee backing the offtake in case of termination, or fuel provider. The significance of these projects extends beyond ownership, as they play a crucial role in key economic sectors due to their large scale.
Additionally, governments have a track record of explicit support for some of these entities,
reinforcing our view of the likelihood of continued extraordinary intervention if needed. This history of government backing and the sovereign’s ability and willingness to intervene during financial distress underpins their GRE status and the associated rating uplift.
