Tendering Process for Dubai's 1,500-Megawatt Hassyan Power Project to Begin in September

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Researched by Industrial Info Resources (Sugar Land, Texas)--State-owned Dubai Electricity and Water Authority (DEWA) (Dubai, United Arab Emirates) has announced that it will begin the process of accepting tenders for the 1,500-megawatt (MW) power plant at the Hassyan complex by September of this year. The engineering, procurement and construction (EPC) contract will be awarded to the selected bidder in the first quarter of 2010.

The $5.94 billion power plant is part of the proposed Hassyan mega-power and desalination project. The complex will consist of three power stations - P, Q and R - each of which will be completed in two stages. The United Kingdom's Mott MacDonald (Croyden) is the consultant for the first phase of the P station (P-1), while Lahmeyer International (Bad Vilbel, Germany) has been selected as the consultant for the second phase (P-2). The P-1 and P-2 stations will each have a 1,500-MW power plant and a water desalination facility with a capacity of 100 million to 120 million gallons per day. When fully operational, the Hassyan complex will be able to generate 9,000 MW of power and 720 million gallons per day of water.

The Hassyan mega-power project, which will be located next to Dubai World Central, was earlier expected to start operations by 2016. The EPC contract tenders for the P-1 and P-2 units were initially issued in December 2007, but DEWA cancelled the bidding for the P-1 unit in the last quarter of 2008. In February this year, DEWA announced that it would defer plans to build the 1,500-MW P-1 power plant at Hassyan. The company stated it had decided to delay the process since Dubai had surplus reserves of power and water. DEWA also indicated that the construction and commissioning of the P-2 station would be carried out first. The tender process for the two phases of the Q station and the first phase of the R station were also put on hold.

DEWA, which received a credit rating of "A" from Moody's Corporation (NYSE:MCO) (New York, New York) and "A+" from Fitch Ratings (New York), recently signed an agreement with 18 banks to borrow $2.2 billion to refinance its loans. The Ijara, an Islamic leasing instrument, has been arranged by Standard Chartered plc (LSE:STAN) (London, England), National Bank of Abu Dhabi (Abu Dhabi, United Arab Emirates) and Emirates NDB (Dubai). The financing scheme has a three-year maturity period. According to a report by Thomson Reuters (NYSE:TRI) (New York), government-owned enterprises in the United Arab Emirates presently have $8 billion in loans from foreign banks and institutions. The loans will mature before the end of 2010.

Dubai has seen a surge in demand for water and power after unprecedented growth in property and real estate investments. In 2007, prior to the economic slowdown, DEWA had embarked on a five-year program with an investment of $19.57 billion to develop new power plants and desalination projects to meet growing demand. The Hassyan complex was also part of this strategy. With the slump in real estate development in Dubai, the country is not expected to require massive power and water supply augmentation as was planned earlier.

Power consumption in Dubai this year increased 13% and 17% in January and February, respectively. Dubai's power generation capacity by the end of this year is expected to increase 9% to 7,287 MW, and water-desalination capacity is expected to rise to 333 million gallons per day. Dubai's current power generation capacity is around 6,676 MW, while the current water demand is 264 million gallons per day.

In 2008, DEWA commissioned 28 substations of 132 kilovolts (kV) each and one 400-kV substation. This year, the firm plans to develop water storage and pumping facilities, a new network for water distribution and 27 substations of 132 kV each. DEWA plans to review its projects in June this year to decide on the action plan for the rest of the year.

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