Four Consortia Bid For Dubai’s First IPP
Dubai Electricity and Water Authority (DEWA) has attracted bids from four consortia to develop its first independent power project (IPP). The lowest bidder was a consortium that included Marubeni, the UAE’s TAQA and SK, which offered to develop the 1.6gw capacity Hassyan 1 plant for 19.057 fils per kilowatt hour (kwh). The other three comprised Siemens Power, Qatar Electricity and Water Authority (QEWC), Qatar Petroleum International (QPI) at 19.134 fils/kwh; ACWA, KEPCO and Samsung with 20.27 fils/kwh; and Suez, Mitsui and Korea’s GS with 20.48 fils/kwh. DEWA, in collaboration with the advisory consortium led by HSBC, will asses the technical, financial and commercial and environmental aspects of the bids. This procedure should be concluded in February and then a winner will be announced.
Securing four bids was a good result for Dubai, said experts. As Dubai’s first IPP and its first public-private partnership (PPP) it was expected to attract considerable interest. Developers were looking to get a foothold in what is expected to be an ongoing IPP or independent water and power project (IWPP) program for Dubai – the site can accommodate up to six projects. However, there were some concerns about the debt problems that beset the Dubai government since the global credit crunch. However, it reached an agreement with its creditors early this year (MEES, 28 March) and has recently commented that it can meet its ongoing commitments. “I think DEWA got a very decent price, given the issues they were facing,” commented one developer.
While the IPP does not carry a guarantee from ruling emirate Abu Dhabi, “the banks would recognize that DEWA has a stronger credit profile on a standalone basis than the Dubai government itself,” said the developer. DEWA announced in October that it would be paying back $4.36bn over the next two years in outstanding obligations on ongoing projects (MEES, 10 October). And it even sold $1bn worth of notes, which were oversubscribed with an $11bn order book last year, despite the fact talks to reschedule Dubai’s debt were ongoing at the time (MEES, 26 April 2010).
While bank pricing details have yet to be revealed, the starting margins on at least one of the bids was under 300 basis points (bps), said one banker. He pointed out that this is lower than for Dubai’s Salik Toll Collection System, which is a project to monetize toll receipts. This $800mn deal was signed in June and priced at 325 bps for six years. The margin erosion indicates that appetite is increasing for Gulf deals, he said. The bidding consortia were supported by export credit agencies (ECAs). They have been crucial to financing most projects post credit crunch. The Marubeni/TAQA/SK consortium included the Japanese Bank for International Cooperation (JBIC) and Korea’s KEXIM, and the group was advised by Citi.
DEWA opened the bids on 12 December after extending the deadline to give developers more time to submit their plans. It had invited 18 selected developers to participate on the project in late May (MEES, 6 June) after attracting interest from 27. The selected bidder will own 49% of the project and DEWA will retain 51%. The combined cycle plant will be located 60km southwest of Dubai. In order to implement its IPP plans, Dubai amended the law that established DEWA in 1992, and passed Law Number 6 this year which regulates the private sector’s participation in producing power and water in the emirate.
© Copyright MEES 2011.