Saudi Arabia cannot wait too long for power project

Nov 26, 1997 01:00 AM

Saudi Arabia may have to abandon plans to have a private consortium finance the construction of the planned Shuaiba power plant because surging demand for power has made its completion more urgent, a senior Saudi official said recently.
The $ 2 billion steam-power Shuaiba plant, to be built in the kingdom's south-west for the Saudi Consolidated Electric Co-West (SCECO-West), has long been touted as possibly the first independent power project (IPP) facility in the kingdom, using build-own-operate (BOO) financing. But Bakr Khoshaim, director-general of SCECO-West which feeds the port city of Jeddah and the Islamic holy cities of Medina and Mecca, said his company might have to consider a turnkey approach instead to save time. In this case the kingdom would finance construction and own the plant after completion. "We cannot wait. We have to finish because we need the power plant," Khoshaim said. "If we cannot do it in time, perhaps we have to do Shuaiba as a turnkey and do the next one on an IPP basis."
Bankers and economists say losses incurred by Saudi power firms in the heavily subsidised sector make raising finance and attracting private funds very difficult. In the year to June 1997, SCECO-West posted a 976 million riyal ($ 260.2 million) net loss.
Khoshaim said the kingdom's power development plan for 1995 to 2020 foresaw average annual growth of 4.5 % in peak demand, translating into an increase from 19,573 MW to 59,267 MW. He said Shuaiba, with a final capacity of 3,850 MW, was being built to keep up with an anticipated annual power demand growth of 4.4 % in the western region.
The first 1,750 MW stage was expected to come on line by 2002. The full project would be completed by 2010.
SCECO-West had invited turnkey and BOO bids. He said SCECO-West had told bidders of "our firm position that we would not accept by any means a sovereign guarantee requirement."
Khoshaim said the cost of the turnkey option would be about $ 2 billion, but did not give a figure for the BOO alternative. "Equal weight is being given to the turnkey and the BOO alternatives," he told.
Bids from five groups are being considered:
- ABB Energy Ventures with the local Kingdom Holding Co
- Japan's Mitsubishi Heavy Industries and AES Corp of the United States
- Enron Corp of the U.S. with Saudi Binladen and Italy's Ansaldo Energia
- Anglo-French GEC Alsthom with National Power of the U.K. and Saudi Oger
- Saudi Xenel Industries and CMS of the U.S.
Khoshaim told the bidders were invited to Saudi Arabia for talks on an energy conversion deal. A decision on awarding the tender would be made end 1998.
Asked how SCECO-West would finance Shuaiba if it decides against a BOO scheme, he said: " In normal projects, the government supports all our investment. This is an option to finance Shuaiba as an IPP. If not, we will probably do it the way we have done the other projects."

Source: not available
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