Mitsubishi consortium named preferred bidder for Shuqaiq IWPP

Some old articles on a personal favorite and well-structured financing arrangement. I can imagine why others have not come close to the their bids.

Mitsubishi consortium named PB for Saudi IWPP
10 November 2006

(IJ Online) A consortium led by Japan's Mitsubishi has been named as preferred bidder for the 850MW, 212,000 cubic metres of water per day Shuqaiq IWPP by Saudi Arabia's Water and Electricity Company (WEC).

As predicted by IJ News, the consortium that included Saudi's Acwa and Kuwait's GIC won the US$1.8 billion project by submitting a bid around 20 per cent lower than the next closest offer.

WEC will now negotiate with the consortium and expects to sign a power and water purchase agreement (PWPA) with the project company by the end of the year.

Financial close could come as early as the first quarter of 2007.

The project company will build, own and operate the plant and will be split up as follows:
Acwa/GIC/Mitsubishi - 60 per cent
Public Investment Fund - 32 per cent
SEC - eight per cent

The entire output of the plant will be sold under a 20-year PWPA, which the ministry of finance will guarantee.

WEC has used HSBC as financial adviser, Clifford Chance and Al-Jadaan as legal advisers and Fichtner GmbH as technical consultant.


Opening of Shuqaiq bids reveals firm favourite
01 August 2006

(IJ Online) Saudi Arabia's Water and Electricity Company (WEC) yesterday (Monday) opened bids to develop its latest project, the massive Shuqaiq IWPP - and market rumours put one of the competitors head-and-shoulders above its rivals - writes Luke McLeod-Roberts

This IWPP - which follows hot on the heels of the world's largest IWPP to date, Shuaibah 3 - has seen a host of the usual suspects submit bids, but local sources indicate that a Japan / Saudi / Kuwait consortium is the out-and-out favourite, having seriously low-balled the two other bidders.

The latest WEC venture - a power and water project that will be built in the south west of the kingdom, producing 850MW of power and 212,000 cubic metres of water per day - received bids from the following consortia:

ACWA (Saudi) - Mitsubishi (Japan) - GIC (Kuwait)
Marubeni (Japan) - NPC (Saudi)
Pendekar Power (Malaysia) - Al Jomaih Holding Company (Saudi)

However, the ACWA consortium - advised by Trowers & Hamlins, ILS and its own in-house financial team - is likely to be the winner, given that it is understood to have low-balled the next lowest bid by around 20 per cent.

A formal announcement is not expected until the end of September or the start of October. In the meantime, the bidders have to go through the clarification stage.

Despite a prominent Saudi presence in each of the bidding groups, Omar Al Ghamdi, WEC president, told IJ News that this was not a prerequisite for a successful bid, for which 13 groups pre-qualified after RFP launch in December 2005.

Al Ghamdi revealed that all of the three groups had secure financial packages in place, with international commercial backing and 'a lot of choices', meaning that Shuqaiq could race to financial close before the the mid-2007 target.

The project value will be in the region of US$1.8 billion - an increase on original estimates that were some US$575 million lower. This rise is put down to the global hike in the cost of construction materials.

It will have a 20-year PWPA with WEC, with the option of extending the contract for a further five or six years. WEC will sell on power to the Saudi Electricity Company and water to the SWCC - which is currently being prepared for privatisation.

Shuqaiq will be owned 60:40 by the developer and Saudi public interests. The developer will reportedly be allowed to hold an IPO for 49 per cent of its stake just three years after finacial close, which will be market-based, not price-capped.

The plant will use Arabian heavy fuel oil with conventional steam cycle technology and will be built in the vicinity of Al Shuqaiq, serving the regions of Assir and Jizan.

It is expected to be operational within 52 months from issue of the RFP (March/April 2010) and all units will be completed within eight months of that date.

The next project to be tendered by WEC will be the Ras Al Zour IWPP (RFPs are due out by the year-end) over on the east coast. It will be for 3,000MW and 1,000,000 cubic metres of water per day, and it will be the largest Saudi project yet, dwarfing the much discussed Marafiq project (IJ News, 17 May 2006 ).

Electricity will be fed on to the Saudi grid, while 80 per cent of the water will go to Riyad and 20 per cent to the northern and central region outside the capital.

WEC is in the process of preparing the project report, finalising all requirements with stakeholders and working on the site survey.
It has retained the same advisers for this next project as it has for Shuqaiq - HSBC, Clifford Chance/ Al Jadaan and Fichtner.