International Power and Saudi Oger Sign for $430 MillionTihama Power Expansion

---

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--A major expansion in power and steam production will result from the signing of energy conversion agreements (ECAs) by Saudi Aramco (Riyadh) with Saudi Oger Limited (Riyadh) and International Power (OTC:IPRPY) (London, England), which is 70% owned by GDF Suez (OTC:GDFZY) (Paris, France), at their power sites in Tihama, Saudi Arabia.

The long-term ECAs will run through 2026 and see expansions at three of the four existing sites. The ECAs also will generate additional capacity of 532 megawatts (MW) and 868 tons per hour of steam. The sites to be expanded are at Saudi Aramco's oil and gas refineries in Juáymah, Shedgum and Uthmaniyah. The engineering, procurement and construction contract will be executed by Hyundai Heavy Industries (KSX:009540) (Ulsan, South Korea) and the gas turbines supplied by General Electric (NYSE:GE) (Fairfield, Connecticut).

The ownership structure of the expansion is the same as the existing Tihama project, which is 60% owned by International Power and 40% by Saudi Oger. In 2003, the two companies were awarded four 20-year ECAs by Saudi Aramco to develop, own and operate the four cogeneration plants at the refineries. The existing four refineries have a total generating capacity of 1,063 MW and 2,000 tons of steam per hour.

The total project cost of the expansion program is estimated to be about $430 million, which is being funded by a mix of debt and equity in an 80:20 ratio. Full financial closure is anticipated shortly, and the expansion is scheduled for completion in 2015.

International Power-GDF Suez Middle East, Turkey and Africa has two existing power plants in Saudi Arabia. It owns 60% in Tihama, 20% in Marafiq (2,741 MW), and 20% in Riyadh PP11 (1,729 MW), which is under construction.

"Saudi Arabia is a key market for International Power in the Middle East, with important projects supported by long-term power purchase agreements and backed by very high quality off-takers," said Philip Cox, the company's chief executive officer. "We're delighted with our continued strong relationship with Saudi Aramco and with our increased presence in the country."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.