A group of Gulf investors plans to raise about $2.45 billion to fund iron and steel projects in the Middle East to tap demand in the world's largest oil exporting region, an executive involved in the deals said on Thursday.

The Foulath consortium, which includes Industries Qatar's steel unit and National Industries Group, is in talks with two groups to finance the largest project, a $1.4 billion steel plant in Bahrain, said Khaled al-Qadeeri, head of manufacturing at co-investor Gulf Investment Corp (GIC).

Foulath is partnering a subsidiary of Japan's Yamato Kogyo Co to build the plant and expects to close financing by the end of the year despite turmoil on global financial markets, Qadeeri told Reuters.

Foulath had initially sought to finance its projects with 70 percent debt and 30 percent equity, but may revise the ratio due to the credit crisis which has stalled lending between banks.

'The terms of the loans could change. They may look at 60-40 percent debt-equity, rather than 70-30 percent, and this is because of the global crisis,' Qadeeri said, adding that falling commodity prices could reduce costs.

Arab Bank, Banque Saudi Fransi, Societe Generale, Mizuho Bank, Japan Bank for International Cooperation (JBIC) and Al-Rajhi bank form one group, he said, adding that it had offered more than $1 billion for the Bahrain plant, which will produce 3.5 million tonnes of three types of steel.

Qadeeri declined to identify the banks in a second consortium as discussions were still at an early stage.

Demand for steel and other building materials has soared in the Gulf region, where governments are investing more of their record oil revenues in infrastructure and other construction projects.

Qadeeri said Foulath, which was set up in 2006 as a holding company for GIC and its Gulf partners to invest in steel, would look to tap into new areas of production, enabling it to avoid any potential downturn in steel demand.

'This is the only plant in the Middle East that will be producing beams and sections from light to heavy ... so we do not have a competitor and that's why it is a very strong project,' he said.

As part of its expansion plans, Foulath is also seeking similar financing deals for two $700 million iron pelletising plants in Egypt and another $700 million facility in Oman, Qadeeri said.

Financing agreements for Foulath's other projects would be reached in the first quarter of next year, he said, but the consortium had yet to approach banks. 'The pelletising industry will not be hit hard (by price fluctuations) as it is a scarce commodity and it is controlled by only four companies in the world.' - Reuters