Dubai could look to the capital to deliver its first privately financed power plant after the Abu Dhabi National Energy Company (Taqa) submitted the lowest bid to build the project.
Dubai Electricity and Water Authority (Dewa) yesterday received bids from 13 companies, allied in four consortiums, for the construction and running of the Hassyan independent power project (IPP).
Taqa, which is owned by the Abu Dhabi Water and Electricity Authority (Adwea), teamed up with Japan's Marubeni and South Korea's SK Engineering & Construction to submit a tariff of Dh19,057 (US$5,187) per kilowatt/hour, making it the cheapest option. Dewa is expected to award the project in six to eight weeks.
While Abu Dhabi has a track record in using private finance to build power projects, Dubai has until now relied on conventional contracts. Under IPP arrangements, a developer builds and operates the plant, and owns all or part of the asset. The developer then sells the electricity under a power purchase agreement.
A Taqa official confirmed the consortium's status as the front-runner and put the investment at about $1.3 billion.
In the energy sector, companies that submit the lowest bid commonly win the contract. Moreover, Marubeni is an established player in the UAE's power sector, holding stakes in the Shuweihat 2 and Fujairah 2 independent power and water projects, plants in which Taqa owns a majority stake.
South Korean contractors also enjoy a good reputation in the region, with 60 per cent of all engineering, procurement and construction contracts won by Korean companies being executed in the Middle East, according to the Emirates Center for Strategic Studies and Research. The UAE is South Korea's single largest market in the region, with more than a third of all contracts won here.
The bids are not far apart, however, with the most uncompetitive offer costing Dewa less than 1 fil per kilowatt hour more.
The second-lowest bid was received from a consortium of Qatar Electricity & Water Company, Qatar Petroleum and Siemens Power Ventures.
The bid by Acwa Power, Kepco, Samsung Engineering and CNT was slightly less competitive, with the most expensive bid received from GDFSuez, Mitsui and GS Engineering & Construction.
The gas-fired power plant will generate 1,600 megawatts of electricity. The winning consortium will own 49 per cent of the project and sell Dewa electricity under a 25-year power-purchase agreement. Dewa will hold the remaining stake in the power plant.
Marubeni and Taqa each have a 40 per cent share in the bidding consortium, with SK holding the remainder. The Japanese power company is leading the bid.
Taqa invests in Abu Dhabi's independent power projects, as well as a diverse set of energy projects worldwide.
Abu Dhabi's Adwea owns a 51 per cent stake in the investment fund, with the Fund for the Support of Farm Owners in the Emirate of Abu Dhabi holding 24.1 per cent. The rest is publicly listed.