x Abu Dhabi, UAEThursday 18 January 2018

Kepco and Sumimoto awarded $1.5bn power plant contract

Firms from Korea and Japan are set to increase their investment in the UAE utilities sector with a $1.5 billion power plant in the Western Region.

Korea Electric Power Corporation (Kepco) and Japan's Sumitomo Corporation have been awarded a US$1.5 billion (Dh5.5bn) contract to build and operate a gas-fired power station in Abu Dhabi.

As part of the contract, Kepco and Sumitomo will invest more than $113 million for their stake in the station.

The contract signed this week is the latest move by east Asian companies to take advantage of what they consider a favourable Middle East power generation market.

GCC countries do not require companies building and operating power plants to supply fuel, unlike other parts of the world where they must secure that supply themselves.

"That means more risk lies with the bidders," said Young-min Koh, a senior manager for overseas project development at Kepco.

"The projects are more safe in the GCC countries like the UAE or Saudi Arabia, so that means that we prefer the projects in the Middle East rather than Asia or other countries."

Under the agreement signed on Tuesday, Kepco will invest $54m for a 19.4 per cent stake and Sumitomo $59.7m for a 20.4 per cent stake in the 1,600-megawatt gas-fuelled plant in Shuweihat, 250km west of the capital.

Abu Dhabi Water and Electricity Authority (Adwea) will take on the remaining share.

The companies expect to raise the rest of the project's $1.5bn budget from the Export-Import Bank of Korea, Japan Bank for International Co-operation and seven international bank syndicates.

The contract deepens the companies' investments in the UAE and both are considering more power-generation projects in the country.

In 2008, Sumitomo won a contract to build and operate a power and desalination plant, also in Shuweihat, and in 2009 Kepco won a bid as part of a Korean consortium to build four nuclear reactors in Abu Dhabi, a deal worth $20.4bn.

"The UAE is a rich country and they are developing the privatisation of the power sector," said Mr Koh, adding that Kepco plans to bid this year for another plant in Taweelah.

"We can expect a lot of business opportunities there … the GCC region is the best place to do business for us."