Government-related entities (GREs) in the Gulf are changing the way 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 United Arab Emirates (UAE) and Saudi Arabia, play a pivotal role in these projects, often through GREs to facilitate funding and ensure project success.

In this report, S&P Global Ratings examines the role of GREs in shaping the GCC's infrastructure development and the factors influencing project creditworthiness. We answer frequently asked questions on the circumstances under which a project finance transaction qualifies as a GRE and the impact of government support on ratings. We also highlight how GRE involvement aligns project objectives with government priorities, providing critical credit strength and mitigating risks.

Frequently Asked Questions

Why is project finance growing rapidly in the GCC?

Because of efforts to diversify economies and expand infrastructure. Project finance has become a preferred model because it allows developers to secure long-term funding aligned with project lifecycles, while keeping debt off balance sheet. This financing approach aims to manage risks throughout project phases, from construction to operation.

Governments in the region have increasingly turned to project finance as a tool to fund large-scale infrastructure leveraging private sector involvement through JV structures, while maintaining fiscal discipline. The project finance transactions are typically structured as JVs between the government and private developers. This approach avoids burdening public budgets, allows governments to stay actively involved while freeing capacity to focus on long-term sustainability objectives. This is crucial given the massive demand for infrastructure assets in the region--including both renewable and gas-fired power generation, water desalination, data centers and social infrastrucure assets.

What types of projects are driving this expansion?

The GCC's project pipeline reflects its commitment to sustainability and technological transformation. Projects such as solar and wind farms as well as hydrogen production plants are key components of national strategies such as Saudi Arabia's Vision 2030 and the UAE's Net Zero 2050.

At the same time, investments in digital infrastructure, including data centers and AI systems, are growing rapidly. Sovereign wealth funds have played a vital role, channeling 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.

The region has historically struggled to attract foreign institutional investors. But we now see increasing participation from alternative asset managers and traditional banks. This evolution has positioned the region as a global hub for sustainable and technology-driven infrastructure investment.

How are governments involved in projects in the region?

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 procurement stage to operations. GREs oversee tendering processes, inviting local and international developers to bid for projects structured under PPP frameworks.

In the utilities sector, the Emirates Water and Electricity Company (EWEC) and the Dubai Electricity and Water Authority (DEWA) are mostly leading the power and water procurement in the UAE. The Saudi Power Procurement Company (SPPC) and the Saudi Water Partnership Company (SWPC) are leading the same in Saudi Arabia.

The two countries have implemented robust PPP frameworks, making project finance the natural choice for funding large-scale developments. S&P Global Ratings believes 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 both regional and international investors.

An established contractual framework underpins the quality of projects, in our view, with tested offtake agreements and with limited or no exposure to market (volume/price) risk. These contracts include favorable risk allocation with highly rated counterparties, ensuring predictability of cash flow.

Key qualities we see in the local PPP market include the fact that government-related risks such as change in law, force majeure, and political risks are transferred to the state-owned long-term off-taker. There are also strong termination regimes in place to prevent procurers from terminating contracts for convenience. This bolsters the investment structure.

What are some notable renewable energy projects among GREs in the region?

In Saudi Arabia, 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. We believe this collaboration is instrumental in advancing the country's renewable energy objectives. 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 gigawatt (GW) of renewable energy capacity by the end of the decade. This underscores the government's dedication to diversifying the energy mix, reducing reliance on fossil fuels, and promoting sustainable development.

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.

A notable EWEC project is the world's first large-scale 24/7 solar PV and battery storage giga scale facility, to be developed in collaboration with Masdar. This project will combine a 5.2GW solar PV plant with a 19 gigawatt-hour (GWh) battery energy storage system, delivering up to 1GW of continuous clean energy.

All these Abu Dhabi-based projects follow the same template, whereby the government indirectly holds a 60% majority stake, while also providing a government guarantee on EWEC's offtake obligations.

We believe that by taking on multiple roles--shareholders, lessors, guarantors, and concession providers--GCC governments create strong alignment of interest between project stakeholders. The GCC government's active involvement in projects reduces credit risk, enhances financing conditions, and improves overall project resilience.

Under what circumstances does S&P Global Ratings consider 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 to support does not necessarily hinge on government ownership in the project. It could equally be forthcoming depending on the importance of the project to the economy and the government's national objectives. If we consider this to be the case, it could lead to elevation of the final rating adding notching from project's SACP.

While PF transactions are typically non-recourse or limited recourse, meaning they rely solely on contractual cash flows to service debt, there are cases where a government's willingness to intervene goes beyond the strict contractual obligations. This can be the case if it seeks to protect strategically important projects, and equally depends on the government's capacity and willingness to intervene.

In our global portfolio of 318 publicly rated project finance transactions, we assess only 3% of the projects as GREs: five in the Middle East; four in Latin America; and two in North America.

When assessing the likelihood of the government support, we also evaluate precedents where government actions have mitigated credit risks. For instance, in the UAE, government support for desalination plant special purpose vehicles continued during red-tide incidents, despite the government being under no contractual obligation to cover such 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.

In our view, these extraordinary interventions demonstrate the government's commitment to avoiding disruption in critical infrastructure and ensuring financial viability of essential projects.

What are GCC examples of project finance transactions assessed as GREs? How does such an assessment influence ratings?

Among our 11 globally rated projects classified as GREs, only five benefit from rating uplift stemming from extraordinary government support.

As for the five project finance transactions in the GCC, we consider all as GREs. Ratings on three of them benefit from a GRE rating uplift of one to two notches above their stand-alone credit profile (SACP) (see table 2). For the two other entities, ratings equal their SACPs with no extra uplift for extraordinary government support.

Table 2

We assess that Sweihan PV Power Company and Ruwais Power Co. PJSC (Shuweihat 2) have a moderately high likelihood of government support, resulting in a two-notch uplift.

In contrast, although we assess Emirates SembCorp Water & Power Co. PJSC as having a moderately high likelihood of government support, it receives only a one-notch uplift. This difference arises because Sweihan PV and Ruwais Power Company have lower SACPs, creating a wider gap between their intrinsic credit strength and the sovereign rating of Abu Dhabi (AA/Stable/A-1+). In fact, the greater this gap, the more room for an uplift. Conversely, the relatively higher SACP of Emirates Sembcorp limits the extent of the uplift, as stronger SACPs reduce the relative impact of extraordinary government support.

We base our view on these projects' GRE status on several key factors. 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. Also, we believe their significance 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 in the likelihood of continued extraordinary intervention if needed. This history of government backing, coupled with the sovereign's ability and willingness to intervene during financial distress, underpins their GRE status and the associated rating uplift.

In the case of Abu Dhabi Crude Oil Pipeline and QatarEnergy LNG S(3), there is no uplift, because the strong SACPs of these entities are already equal or just one notch below the respective government rating.

How does GRE classification affect the creditworthiness and final rating of a project finance transaction?

Projects we classify as GREs may benefit from a rating uplift from the project's SACP, depending on the importance of their role to the country and the strength and durability of their link to the government. These two factors determine the likelihood of timely extraordinary government support during financial stress, capturing both the capacity and willingness to support.

However, the fact that project financings are structured on a non-recourse basis may lower our assessment of a government's willingness to support, i.e. our assessment may consider a less strong link than for a government-related corporate entity. Governments often use project finance precisely to shift risk to the private sector, making GRE uplift typically more limited for project financings.

At the same time, we have seen government support kick in for projects, even when there was no contractual recourse. This can be for reputational as well as purely economic reasons, bearing in mind that providing some financial support (in case of unforeseen deviations) is very different from an upfront government commitment to support all project debt.

In actual fact, in the GCC, we have observed a track record of governments' greater willingness to support key strategic assets, beyond contractual commitments. When factoring such expected extraordinary government support into our ratings, we maintain a cautious approach. However, given the massive number of projects in the pipeline, not all of which can be prioritized in our view. Equally, as PPP frameworks continue to mature, governments may be less tempted to intervene in the long run.

Similarly, when assessing the importance of a project's role, i.e. its criticality to essential services, economic impact, and alignment with national policies, we take a forward-looking and long-term perspective. For instance, we may consider the importance of a singular project to diminish over time as additional assets of the same type are developed.

The extent of rating uplift is further influenced by the government's own creditworthiness. The higher the government rating, the greater the potential for the project to benefit from a rating uplift. However, the higher the project's SACP and the closer it is to the government rating, the less room for an uplift.

Editor: Lex Hall

Related Criteria

• General Project Finance Rating Methodology, Dec. 14, 2022
• Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015

Related Research

• GCC GRE Ratings Benefit From Government Support, Feb. 17, 2025
• QatarEnergy LNG S(3)'s Senior Debt Affirmed At 'AA-'; Outlook Stable, July 19, 2024
• Tear Sheet: Abu Dhabi Crude Oil Pipeline PJSC, April 15, 2024
• Tear Sheet: Emirates SembCorp Water & Power Co. PJSC, April 9, 2024
• Tear Sheet: Ruwais Power Company PJSC, April 3, 2024
• Solar Power Project Sweihan PV Power Co. PJSC Debt Rating Raised To 'A-' From 'BBB+'; Outlook Stable, March 7, 2024
• Gulf Nations Invest To Accelerate Deployment Of Renewable Energy, Feb. 27, 2023