The developers of Dubai’s Hassyan coal independent power plant (IPP) are renegotiating with Chinese lenders over plans to develop phase two of the power plant in addition to phase one.

Dubai Electricity & Water Authority (Dewa) selected Saudi Arabia’s Acwa Power and China’s Harbin as preferred bidders for the phase one of the project in October 2015.

They were the lowest bidders at 4.501$cents a kilowatt hour for the 1200MW project.

The UK’s Standard Chartered, Abu Dhabi’s First Gulf Bank, and the Industrial Commercial Bank of China began work on project finance as mandated lead arrangers.

But if the $1.8bn project is doubled in capacity, the developers will need significantly more than the planned $1.4bn in finance. The debt equity ratio was expected to be 78:22.

Chinese banks will be the main participants in the financing, which is still expected to close in 2016. Several European banks turned down the deal as the coal project did not meet their sustainability policies. 

The UK’s EY is the financial advisor.

Acwa signed a memorandum of understanding with Chinese state-owned Silk Road Fund for equity and debt on the project, as well as Dairutt IPP in Egypt.

The IPP will be developed under a build-own-operate (BOO) operate model and a 25-year power purchase agreement (PPA) agreement with Dewa.

France’s Alstom will lead the engineering, procurement and construction (EPC) consortium. Netherland’s based Louis Dreyfus will build the coal handling facilities and France’s EDF will supply coal for the plant.

Dewa was to hold a 51 per cent share in the project company, investing $200m in equity, under previous plans.

Dewa was planning to develop 3,600MW of coal-fired generation capacity over three phases. The projects are part of the utility’s aims to meet the emirate’s target for coal to contribute to 7 per cent of the total power supply by 2030.