GDF Suez Secures $900 Million Bridge Loan for Abu Dhabi's Shuweihat 2 Power and Water Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--GDF Suez SA (EPA:GSZ) (Paris), one of the world's leading suppliers of natural gas and electricity, and the Abu Dhabi Water and Electricity Authority (ADEWA) (Abu Dhabi, United Arab Emirates) have secured a nine-month bridge loan of $900 million from a consortium of banks for the Shuweihat 2 power generation and seawater desalination project in Abu Dhabi. Lenders to the project include Bayern LB (Munich, Germany), Calyon Credit Agricole CIB (Paris), KfW Bankengruppe (Frankfurt, Germany), Natixis (Paris), the National Bank of Abu Dhabi (Abu Dhabi) and Standard Chartered Bank (LSE:STAN) (London).

Shuweihat 2 is a greenfield power and water project being developed to generate 1,500 megawatts (MW) of electricity based on natural gas to supply 454,610 cubic meters per day (cmd) of water, catering to the potable water requirements of more than 1.5 million people. The independent water and power project (IWPP) is slated for commissioning in August 2011.

GDF Suez won the contract for the project in July 2008 and entered into a 20-year power- and water-purchase agreement with the Abu Dhabi Water and Electricity Company (ADWEC) (Abu Dhabi), a wholly owned subsidiary of ADEWA, for the entire power and water output from the facility. The value of the contract is estimated at $5.6 billion over a period of 20 years.

Construction is estimated to cost $2.15 billion. The engineering, procurement and construction (EPC) contract for the project was awarded to a consortium of Doosan Construction & Engineering Company Limited (SEO:011160) (Seoul, South Korea), Samsung Engineering Company Limited (SEO:028050) (Seoul), and Siemens AG (NYSE:SI) (Munich). Samsung secured an $810 million EPC contract for the power plant while Doosan secured an $800 million EPC contract to set up the water desalination facility.

The proposed project will include a combined-cycle power plant comprising four V94.3A gas turbines to be supplied by Siemens, two back-pressure steam turbines, and associated heat-recovery steam generators. The desalination unit will employ a multistage flash distillation process. The plant is being developed in Jebel Dhana in western Abu Dhabi, about 280 kilometers from the 1,300-MW Al Taweelah power and 380,000-cubic-meter-per-day water desalination plant, in which GDF Suez holds a 20% interest.

In November 2008, GDF Suez, which originally owned a 40% stake in the Shuweihat 2 project, conceded half of its stake to a consortium of Marubeni Corporation (TYO:8002) (Tokyo, Japan) and Osaka Gas Company Limited (TYO:9532) (Osaka, Japan) because of difficulties it faced in project financing. ADEWA owns the remaining 60% stake in the project.

Abu Dhabi is looking to increase its power generation capacity by 35% over the next five years. Demand for power in the emirate is expected to grow by nearly 80% by 2012. According to ADWEC, demand for electricity in the emirate is slated to increase from 5,286 MW in 2007 to 12,817 MW by 2013 and further to 16,469 MW by 2020 and 23,554 MW by 2030 based on an average annual growth of 6.7% from 2007 to 2030. ADWEC also anticipates a shortfall of 774 MW in power generation capacity by 2012 that could increase to 2,000 MW by 2013 in the absence of new power projects.

Demand for water in the emirate is slated to rise at an annual rate of 5% by 2012. The desalination plant market in the Middle East is expected to reach $20 billion by 2010. ADEWA is planning to launch Shuweihat 3, another IWPP with a capacity similar to that of Shuweihat 2.

GDF Suez owns direct equity interests in 10 power and desalination projects in the Middle East, including the Shuweihat 2 project, representing an aggregate capacity of over 13,000 MW of power and 2.5 million cubic meters per day of water output. Other IWPP contracts secured by the firm in the Middle East in 2008 include the Al Dur 1 1,234 MW power and 218,000-cubic-meter-per-day desalination project in Bahrain and the Ras Laffan C 2,730-MW and 286,000-cubic-meter-per-day desalination project in Qatar. The firm is also constructing the Marafiq IWPP in Saudi Arabia with a power generation capacity of 2,745 MW and a desalination output of 800,000-cubic-meter-per-day of water.

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