Bids to be invited for private power and water plants

31 May 2002

The Saudi Electricity Company (SEC)and the Saline Water Conversion Corporation (SWCC) are ready to issue requests for proposals (RFPs) for private power and water generation projects, Fareed Zedan, governor of the Electricity Services Regulatory Authority told the MEED Power in the Middle East conference on 29 May in Abu Dhabi.

'I would like to see an RFP come out in the coming weeks. SEC and SWCC are in a position to issue it. We will certainly see the first private project come out by the end of the year,' Zedan said.

The timing of the RFP issue is expected to be dependent on the gas initiative, which includes proposals to establish independent water and power projects (IWPPs). 'We want to see the gas initiative succeed. But it is clear that in view of the need for new capacity, we cannot wait forever,' Zedan said. 'There should be a deadline for the gas initiative. If by that date nothing has happened, then SEC and SWCC should be allowed to go ahead with their own projects.'

Oil sources say that the future direction of the gas initiative is expected to be decided over the next two months. Petroleum & Mineral Resources Minister Ali Naimi is set to present a report about the status of the gas initiative to the council of ministers by the end of June. It is understood that Naimi will meet Lee Raymond, chairman of the US' ExxonMobil Corporation, the leader of core ventures (CVs) 1 and 2, for crucial talks about progress in negotiations with international oil companies (IOCs) before then. As a prelude to the meeting, Naimi held discussions on 28 May in Riyadh with Phil Dingle, the ExxonMobil executive who is head of CV1.

Zedan said that one of the outcomes of the gas initiative was that both SWCC and SEC are now ready to co-operate on new projects. One sign of this is that the two companies have agreed to form a joint offtake company for private projects. Both companies, along with a foreign partner or partners, may also jointly take equity stakes in new project companies.

Zedan also confirmed that while the price of the power and water produced by the IWPPs would be determined by SEC and the government, steps were being taken to ensure that guarantees would be in place for payment to be made on time. One idea, Zedan said, was for the establishment of a special reserve account, along the lines of the now-disbanded halala fund, which was used to guarantee payments on the construction of the PP9 project in the central region. Under the plan, the government would ensure that funds were available in the new account to ensure that any late payments to the developer were covered.

Sources close to the gas initiative negotiations say that pressure is mounting for progress in water and power projects which have been delayed pending the completion of talks with IOCs. It is understood that some local officials advocate that water and power projects in the initiative should be implemented outside the programme. They argue that prime sites have been allocated for water and power projects and that unless agreement is reached with the core ventures within two months they should released for development.

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