The Independent Water and Power Project (IWPP) of the Power and Water Utility Company for Jubail and Yanbu (Marafiq), Saudi Arabia's first private utility company, is to be upgraded to meet the growing requirements of power and water across Saudi Arabia. Marafiq has taken this decision virtually on the eve of the revised bid deadline for its project, which was initially announced almost a year ago.The deadline for submission of bidders' proposal for the Marafiq project as conceived initially, which was 16th May 2005, has now been postponed. Marafiq is now preparing amendments to the Request for Proposals (RFP) covering the scope, structure and timing of the project. A pre-bid conference covering the changes in the RFP will be announced. It is expected to take place by the middle of June.
The capital investment requirement of the project, placed at SR.8 billion, will now be increased by 20 percent to SR 10 billion as a result of the production upgrade.Marafiq is owned by four major stockholders, namely Saudi Basic Industries Corporation (SABIC), Saudi Arabian Oil Company (Saudi Aramco), the Royal Commission for Jubail and Yanbu, and the Public Investment Fund (PIF), each owning 24.81% of the stocks, and seven private investors whose share is 0.76%.
The much touted IWPP now plans to increase its projected desalinated water output from 300,000 cubic meters (as provided for initially) to 800,000 cubic meters day and the power output from the original 2,400 megawatts to 2,500 megawatts.
More Drinking Water
The IWPP was originally envisaged to meet the increasing demand for power and water by industries in Jubail. With the upward revision of IWPP's production target, surplus water (after satisfying the needs of Jubail Industrial City, including the proposed Industrial City 2) will be sold to the Saline Water Conversion Corporation (SWCC) for distribution in the Eastern Province.
More Power for National Grid
The IWPP will be interconnected to the national grid of the Saudi Electricity Company (SEC) at 380 kilovolt instead of the current local Jubail Industrial City transmission network at 230 kilovolt. Marafiq and SEC will sign a power exchange agreement to facilitate the offtake. The excess power generated will be supplied to other areas of the Kingdom. With the new plan for upgrading of the power and water output, the commissioning of the IWPP, originally planned for 2007, is now expected to take place towards the end of 2008 or early in 2009.
Mr. Khalil I. Al Watban, vice president, engineering and project management, said the decision to upgrade the IWPP has been taken because of the increasingly important role of Marafiq in meeting long term demand for power and water in the Kingdom. "We are seeing an expanded role of Marafiq in addressing demand for utilities as the Kingdom pursues development targets," he said.
Sovereign Guarantee
Meanwhile, it has been decided that the government, through the Ministry of Finance, will issue a guarantee to cover Marafiq's power and water purchase agreement, an issue which has been under discussion for quite some time. It is also learnt that the Public Investment Fund (PIF) and SEC are also interested in participating as shareholders in the project company, in which Marafiq will be the major shareholder.
The Citygroup and the Saudi American Bank Financial Group are the financial advisers of the IWPP. A team of technical advisers has also been formed composed of Lahmeyer International of Germany, Kuljian Engineering Corporation of US, and ILF Consulting Engineers of Austria.
The IWPP offering is considered a very attractive investment because it is located in an industrial growth area, which is the Jubail Industrial City, has credible owners, its products pose no risk because of high demand, and, being a private commercial entity, it has a strong management profile. "Interest from developers and financial institutions is keen," Mr. Al-Watban said.
Gas Supply Assured
The IWPP project has also got the guarantee of the Ministry of Petroleum and Mineral Resources for the supply of natural gas to meet the feedstock needs of the project. Being the first example of privatization, Marafiq has also the government support.
J.A.
© Saudi Commerce and Economic Review 2005
