Abu Dhabi to Invite Proposals for $2 Billion, 1,600-Megawatt Shuweihat 3 Power Plant in March

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Researched by Industrial Info Resources (Sugar Land, Texas)--With domestic demand for water and power expected to rise between 7% and 8% each year for the next five years, Abu Dhabi expects to invite proposals for a new 1,600-megawatt (MW) power plant, Shuweihat 3, in March this year.

According to Abu Dhabi Water and Electricity Authority (ADWEA), the prequalification process has already started, and ADWEA expects to issue requests for proposals in early March. Final selection of the developer will be made in November, followed by financial closure aimed to be attained by April 2011. The plant is scheduled to come online in the summer of 2013.

Abu Dhabi announced a privatization plan for power projects in 1998, under which foreign companies are able to take a share in developing and operating power and water projects. To date, there have been eight such projects in Abu Dhabi, but these have all been independent water and power projects (IWPPs). Together, these eight IWPPs contribute 12,000 MW of electricity and 800 million gallons of water per day.

The Shuweihat 3 project will be the first independent power project in the emirate lacking a desalination facility, which has been omitted largely because of a lack of available capacity to transmit water from the area, as well as a desire to restrict investment requirements for water pipelines and other desalination equipment, according to ADWEA.

The project is expected to be financed by a mixture of debt and equity, and the successful developer will hold a 40% share of the project, with ADWEA holding the remainder. In October last year, Abu Dhabi secured a $2.15 billion financing deal for the Shuweihat 2 IWPP through a consortium of 15 international and regional banks, headed by Japan Bank for International Cooperation (Tokyo, Japan), which contributed $1.2 billion, or about half the project finance.

The Shuweihat 2 IWPP is scheduled for completion in 2011 and includes a 1,507-MW natural-gas-fired power plant and a desalination unit with a capacity of 100 million gallons per day. The successful developers, GDF Suez Energy International (Brussels, Belgium)--a subsidiary of GDF Suez SA (EPA:GSZ) (Paris, France)--and Marubeni Corporation (TYO:8002) (Tokyo) will each have a stake of 20% in the project, with ADWEA again taking a 60% share.

With both GDF Suez Energy and Marubeni expected to show an interest in Shuweihat 3, several other international developers are expected to be in the running for the project, including General Electric Company (NYSE:GE) (Fairfield, Connecticut), Hyundai Heavy Industries Company Limited (SEO:009540) (Ulsan, South Korea), Mitsubishi Corporation (OTC:MSBHY) (Tokyo) and International Power plc (LSE:IPR) (London, England).

Demand for electricity in Abu Dhabi is expected to triple by 2020, and the emirate, the world's third-largest oil exporter, has also set up a nuclear-generating program to help meet the rapidly growing demand. In December last year, a South Korean consortium led by Korea Electric Power Corporation (NYSE:KEP) (Seoul, South Korea) won a $40 billion nuclear power project, one of the largest deals ever awarded in the Middle East.

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