AES Corporation's power assets sale offers chance to expand

08 February 2009
Buying existing assets could be the only way for many developers to grow during the downturn.

The decision by the US’ AES Corporation to sell its interests in power plants in Jordan, Qatar and Oman is likely to attract significant interest. For a developer, taking a stake in an operational plant is a safe and fast way to increase its market share and, given current economic conditions, it looks a particularly attractive option.

Buying existing assets is a relatively risk-free move as they produce revenues straight away, and those revenues are guaranteed under long-term power and water purchase agreements.

On top of that, long-term finance, which is now difficult to secure for new projects, is already in place.

While buyers could be taking on a significant refinancing risk for the future, it is one that many seem willing to take, particularly investment firms that want to increase their portfolios of power and water projects.

For example, the sale of a stake in the Al-Manah independent power project in Oman held by Belgium’s Suez Energy International has attracted five bidders, all of them investment funds, banks or private equity firms.

Other deals have attracted developers. In September 2008, Japan’s Sumitomo Corporation said it was buying a 20 per cent stake in the Shuweihat 1 independent water and power project (IWPP) in Abu Dhabi.

In either case, while the number of new projects has slowed down, buying existing assets could be the only way for many developers to expand during the current downturn.

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