Wednesday, Mar 12, 2008
(This item was originally published Tuesday.)
By Oliver Klaus
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Dubai's monopoly power utility is in talks with partners to build a $3 billion hydrogen-fueled electricity plant that will become the emirate's first privately managed facility as it struggles to meet surging demand, an official said.
"It will be an independent power plant. The size of it is 2,000 megawatts," Saeed Al Tayer, Chief Executive of Dubai Electricity & Water Authority, or Dewa, told reporters.
Dewa, which has fiercely guarded its Dubai power and water monopoly, is turning to international investors in an effort to boost output to 21,000 megawatts, or half Florida's electricity capacity, by 2020.
The utility is in talks with a group led by U.S. company Sino Global to develop the plant, which would be the world's largest hydrogen-fired power station, Al Tayer said on the sidelines of an energy and environment exhibition.
Dubai lags behind its larger neighbor Abu Dhabi in leaning on international companies to invest and manage its power and water desalination plants.
The world's largest private power developers such as International Power PLC (IPR.LN), Suez (SZE) and AES Corp. (AES) are already involved in running power and desalination plants in Abu Dhabi.
Dewa is also turning to debt markets to meet its own spending needs. The utility just closed a $2 billion loan facility, which was oversubscribed, Al Tayer said.
$3 Billion Islamic Debt
In the third quarter, Dewa plans to launch a $3 billion Islamic bond, which was delayed last year due to unfavorable market conditions. The sukuk may be dollar or U.A.E. dirham denominated, or a mix of both currencies, Al Tayer added.
Shortages of power and desalinated water could pose a risk to Dubai's economic boom that saw its economy grow by over 10% last year amid a surge in real-estate construction and tourism investment.
Dewa is considering alternatives such as hydrogen, nuclear and renewable energies to help Dubai keep up with runaway demand that will require the utility to boost generating capacity to 8,000 MW by 2010 from an installed capacity of 4,736 MW now, according to Al Tayer.
The need for more power generation and desalination capacity in the region has pushed up natural gas demand in Dubai and elsewhere in the Persian Gulf, leaving the natural resource in scarce supply.
Under the latest plans for the independent power project, or IPP, Sino Global will import hydrogen produced from coal in the U.S. to Dubai and use it to fire the new facility, which would start operations in 2011.
Fuel Problem
"They realize the reality. They have a fundamental fuel problem," a senior executive in the U.A.E.'s power industry said, adding that the decision to rely on imported hydrogen may partly solve this problem.
Dewa is now "negotiating the price" with Sino Global, Al Tayer said.
Under a so-called power purchase agreement, or PPA, Dewa would be the sole buyer of all electricity and water produced at the hydrogen plant for a period of 20 years, and then sell it on to the local market, Al Tayer said.
Dewa's expansion plans until 2020 also involve building a 9,000 MW power and desalination complex near the border with Abu Dhabi, known as Hassyan station, at a cost of $11.6 billion, Al Tayer said, adding that construction contracts for the plant's first phase would be awarded this summer.
Phase one will produce 3,000 MW of power and 200 million gallons of desalinated water a day. Overall completion of Hassyan, also known as P station, is due in 2020, he added.
In addition, Dewa will complete adding 5,000 MW at the existing Al Habab power facility within five years, Al Tayer added.
-By Oliver Klaus, Dow Jones Newswires, +9714 364 4962 Oliver.Klaus@dowjones.com
Copyright (c) 2007 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
12-03-08 0401GMT
