Feb 11 2013

Move to bundle Dhofar Power with new Salalah IPP

By Conrad Prabhu MUSCAT -- Oman Power and Water Procurement Company ( OPWP ), the sole procurer of all new power generation and water desalination capacity in the Sultanate, has notified prospective investors that the development of a new Independent Power Project (IPP) in Salalah is expected to be bundled with the assets of the existing Dhofar Power Company ( DPC ).

Eight prominent international utilities have sought to prequalify for a competitive tender for the development of the new power project -- dubbed Salalah-2 IPP -- at Raysut in Dhofar Governorate. The successful bidder will be granted a 20-year license to develop, finance, design, engineer, construct, own, operate and maintain a gas-fired power station of between 200 -- 400 megawatt capacity.

The Salalah-2 IPP will be established adjacent to the existing power station of Dhofar Power Company ( DPC ), which is majority owned by the Electricity Holding Company SAOC. Dhofar Power operates the governorate's first gas-based power project -- a 250-MW facility that was commissioned in May 2003.

In addition to generating, transmitting and supplying electricity to customers in the governorate, the company also operates the Salalah Power System, comprising an integration of the generation, transmission, distribution and billing components of the power business in the region. An estimated 63,000 customers are served by the Salalah System.

However, following the opening of the Salalah System to further competition, Dhofar Power reverted to majority government-ownership (it is now 98.1 per cent owned by the Electricity Holding Company ) under a restructuring arrangement overseen by the sector regulator.

Bidders for the new Salalah-2 IPP planned alongside Dhofar Power have now been informed that a license may include the takeover of the existing plant via a potential share sale.

" OPWP intends to combine the transaction with the acquisition of the existing power station in Raysut, currently owned and operated by DPC at a fixed price (amount to be determined). A firm decision as to whether the acquisition of the Existing Plant is included in the Project is subject to approval by the Council of Ministers. It is expected that the transaction will be effected through a sale of shares," the state-run power procurement told prospective bidders while inviting interested developers to seek prequalification for the competitive tender.

As a result of the proposed bundling of Dhofar Power with Salalah-2 IPP, the successful developer will be responsible for 450 -- 650 MW of generation capacity, it added.

The deadline for interested bidders to respond to OPWP 's Request for Qualifications (RfQ) for the Salalah-2 IPP competitive tender closed last week. Of the roughly 35 companies that collected the RfQ documents, only major firms submitted offers by the February 4 target. They are Mitsui & Co, Marubeni Corporation, EDF International, Sojitz Corporation, International Company for Water and Power, Mapna Group, GDF Suez and Korea Electric.

Global professional services firm PricewaterhouseCoopers (PwC) is providing financial advisory services to OPWP on the implementation of the privately funded project. International engineering and consultancy services firm Fichtner is the Technical Adviser, while multinational law firm DLA Piper is providing Legal Advisory Services.

A timeline set out by OPWP for the implementation of the IPP envisions a contract award before the end of 2013. The project is due to be brought into operation during 2016.

Peak power demand in the Salalah System is anticipated to grow by 10 per cent annually from 348 MW in 2011 to 690 MW in 2018, says OPWP . In the low-case scenario, demand growth is expected to be sustained at 7 per cent, reaching 571 MW by 2018. But the high-case scenario considers more rapid industrialisation in Salalah, with peak demand projected to jump 17 per cent annually to 1041 MW in 2018.

© Oman Daily Observer 2013

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