Banks' plan for Saudi power scheme not contravening bidding rules

30 September 2009

Samba, Al-Rajhi and Alinma plan to offer up to $1bn for project

Advisers to Saudi Electricity Company say that plans by three local banks to join together and offer financing to several bidders on the PP11 project are not contravening the bidding process rules.

The banks’ plan has been criticised by some sources involved in the process, but will be allowed to go ahead by Saudi Electricity, according to the sources.

Samba, Al-Rajhi and Alinma are planning to offer up to $1bn in committed financing to the bidders on the project.

“There is nothing in the tender rules to stop the banks from doing this,” according to one adviser to the utility company. “There are positive effects, hopefully it should provide greater liquidity to the bidding process and enable more bids to be made. But there will be some loss of competitiveness from the financial side of those bids.”

The source says ultimately, it will be up to the bidders to still provide competitive bids even if some of them have the same financing package. Saudi Electricity wants to avoid the situation that occurred on its last project, the Rabigh power and water plant, when it received only two bids.

Five groups are preparing to bid for the development of the PP11 power project (MEED 18:9:09). One of the parties involved in the bidding process described plans for Saudi banks to join together as an attempt to “exercise their muscle to take an unfair advantage” of the constrained financing market.

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