Abu Dhabi's ADWEA to Invite Tenders for Taweelah C Independent Water and Power Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Abu Dhabi Water And Electricity Authority (ADWEA) (Abu Dhabi, United Arab Emirates), Abu Dhabi's primary water and power procurement and distribution entity, has announced that it will begin the process of inviting international bids for the Taweelah C independent water and power plant (IWPP) by the end of 2009, after completing the financial closure of the $3.2 billion Shuweihat 2 project by October.

The Taweelah C project will have power generation and water desalination capacities of 1,500 megawatts (MW) and 100 million gallons per day, respectively. This project is expected to start construction by 2011 and be commissioned by 2013-14. ADWEA has retained HSBC Holding Plc (NYSE:HBC) (London) as its financial consultant and Fichtner GmbH & Company KG (Stuttgart, Germany) as its technical adviser for the project. Fichtner has already begun the preliminary feasibility studies for the project.

The Taweelah C project is expected to address the surge in demand for power arising from the development of the Khalifa port and its facilities. The proximity of the plant to Dubai will also open avenues for export. However, the project may have to take into consideration the shallow depth of the gulf region around Taweelah, which could lead to high levels of water salinity and temperature. New outfall units and alternatives to seawater intake may be required.

The Taweelah C project, Abu Dhabi's ninth IWPP, will be developed in the existing Taweelah power complex. This site also consists of the 1,350-MW Taweelah A1, the 710-MW Taweelah A2, and the 1,039-MW Taweelah B plants. The combined water desalination capacity of these plants is about 225.7 million gallons per day. The Taweelah A1 plant is undergoing extension, which will increase its power generation capacity to 1,592 MW. The capacity of the Taweelah B plant is also being augmented to 2,000 MW and 160 million gallons per day of water output. In 2008, ADWEA proposed to proceed with the Shuweihat 3 IWPP as the next project, but had to abandon the plans because of issues related to the procurement of funds for the Shuweihat 2 IWPP.

The Shuweihat 2 IWPP, to be located in Jebel Dana about 260 kilometers west of Abu Dhabi, is being built as a joint venture between ADWEA, Marubeni Corporation (TYO:8002) (Tokyo, Japan) and GDF Suez SA (EPA:GSZ) (Paris) on a build-operate-own model. ADWEA holds the majority stake of 60%, while Marubeni and GDF Suez hold stakes of 20% each. The plant will have a water desalination capacity of 100 million gallons per day and a power generation capacity of 1,500 MW. In July 2008, the $800 million engineering procurement construction (EPC) contract for desalination activities was awarded to Doosan Heavy Engineering & Construction Company (SEO:034020) (Seoul, South Korea). Samsung Engineering Company Limited (SEO:028050) (Seoul) was awarded the $810 million EPC contract for the power project. GDF Suez and ADWEA have also signed a 20-year power and water purchase agreement.

In October 2008, the economic slowdown led to banks withdrawing their funding commitments to the Shuweihat 2 IWPP. This delayed the financial closure, which was scheduled for December 2008. In January, ADWEA signed a short-term bridge loan agreement for $900 million with a consortium of banks. This funding was to assist the project until long-term financing could be arranged. In March, Siemens Energy (Erlangen, Germany), the power equipment division of Siemens AG (NYSE:SI) (Munich, Germany), secured a $469 million contract to supply generators, turbines, control and electrical equipment and systems for the project. During the same period, with no prospect of long-term funds, ADWEA began considering financial assistance from government agencies. In May, Japan Bank for International Cooperation (JBIC) (Tokyo, Japan) agreed to provide a $1.1 billion loan under the condition that the Shuweihat 2 IWPP also included a Japanese partner. GDF Suez, which initially held a 40% stake in this project, decided to offload 20% of its equity to Marubeni Corporation. GDF Suez and ADWEA also extended the power and water purchase agreement to 25 years. The $1.1 billion loan granted by JBIC will be utilized to repay the short-term $900 million debt. Recently, GDF Suez announced that the project was on track, with several international banks and financial institutions expressing interest in funding. The company has invited about 30 banks to submit credit approvals by June 15.

Abu Dhabi's demand for power is expected to increase three-fold by 2020 because of the growing population and industrial activity in the region. In the short term, the demand for power is set to increase at an annual rate of 17%-20%. In the long term, through 2030, the annual growth in demand for power is expected to average around 7%-8%. Abu Dhabi is therefore exploring the option of developing nuclear power plants as an alternative to meet growing demand. According to a report published by ADWEA in March this year, Abu Dhabi will require about 10,600 MW of power to meet domestic demand by 2012.

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