DUBAI – Saudi Arabia’s flagship tourism project developer, The Red Sea Development Company (TRSDC), has raised a 14.12 billion-riyal ($3.77 billion) ‘green’ loan from four Saudi banks for 16 new hotels, Chief Executive John Pagano told Reuters on Tuesday.
The hotels form part of a new high-end tourism development across islands, deserts and mountains near the country’s west coast, powered by renewable energy. It will include an airport and housing as well as businesses, shops and leisure facilities.
“It’s a green finance, which is the first of its kind in a Saudi riyal-denominated loan facility, so we’re very proud of that fact. It also helps the banks with their own ESG (environmental, social and governance) credentials,” he said.
The 15-year term loan and revolving credit facility was signed with Banque Saudi Fransi, Saudi British Bank (SABB), Riyad Bank and Saudi National Bank (SNB), Pagano said in an interview.
It has an interest rate of roughly 1% over the Saudi Arabian Interbank Offered Rate.
The project, fully owned by sovereign fund the Public Investment Fund, is key to Saudi Arabia’s Vision 2030, an economic transformation plan aimed at diversifying the economy away from oil.
The kingdom wants tourism to contribute 10% of gross domestic product by 2030. The renewable energy for the project will be provided via a public private partnership with a consortium led by ACWA Power.
The loan finances its first phase, with the 16 hotels due to be ready by the end of 2023, 14 of them on islands in an archipelago and two mainland hotels – one in the desert and one in the mountains.
By the end of next year, three hotels will open and the Red Sea International Airport will begin operating.
TRSDC first approached banks in 2019 about the loan for the first phase, which is worth roughly 30 billion riyals.
“It’s taken a while, but as I said, it’s a complex project, it’s a complex journey, but it’s perfectly timed.”
The company has entered into about a dozen letters of intent with hotel brands about management agreements and will announce in the next few months “the stable of brands that will be coming,” Pagano said, which will mostly be luxury brands.
The CEO said he continued to expect 300,000 tourists a year in the first phase and said he was optimistic global travel will rebound strongly.