'[Kahrama's] plan is to focus on building up a record of receiving offtake payments so that a strategic investor can be brought in and the financing restructured,' says a source close to the project. 'Once the plant has begun producing at a credible level and the offtake agreements are running smoothly there should be absolutely no problem finding an investor. The client is very keen to attract a strategic investor in line with its policy for private participation in projects. It wants the investor to take an equity stake of at least 51 per cent, and to have experience in the running of IPPs [independent power projects] or IWPPs, so that it can be involved in hands-on operations at the plant.'

Investors understood to be considering taking a majority stake estimated to be worth at least $75 million include US power developer and investor Globeleq, Malakoff Berhadof Malaysia and South Africa's Industrial Development Corporation (IDC).

Globeleq expressed interest in taking a 60 per cent equity stake in Kahramain the first half of 2005, but commercial considerations are understood to have prevented the signing of a deal (MEED 13:5:05). IDC expressed interest in the Kahrama project in 2004, but negotiations were delayed by exchange control regulations in South Africa now no longer in force.

The development of the Kahrama project is currently being financed by shareholder funds and a bridging loan from the client, state-owned Algerian Energy Company (AEC). Take-or-pay offtake agreements worth an estimated total of $1,500 million over a 25-year period are in place with state energy company Sonatrach for the water element and with state power company Sonelgaz for the power.

The plant comprises three units, each producing about 105 MW of power and about 29,000 cm/d of desalinated water. The first unit came on stream in late August and the second in September. Testing is now under way on the third unit, which is expected to come on stream throughout November.

Oman's Sogexhas already signed the estimated $120 million, renewable 10-year operations and management (O&M) contract on the plant. The engineering, procurement and construction (EPC) contractor is a Japanese consortium of Itochu Corporation and Ishikawajima-Harima Heavy Industries.

Kahramais presently 95 per cent-owned by AEC after the company increased its shareearlier this year, and the US' Black & Veatch, which holds 5 per cent.