The authority was approached by an international developer and is in negotiations with the firm for the construction of the IWPP.

“Discussions are going on at a very high level,” says a senior Dewa official. “It is still an idea. Nothing solid has been reached.”

The plant, which will be located on the Fujairah coast, will have capacity of 2,000MW and 100 million gallons a day of desalinated water.

Whether the planned project goes ahead will depend largely on the availability of feedstock.

“We do not have a clear picture yet,” says the official. “The most important thing is to secure fuel. Our partner has taken the commitment to make it available.”

In 2006 and 2007, Dewa was unable to source sufficient quantities of natural gas to meet its feedstock requirements.

It resorted to the more expensive alternative of oil, which hit the authority's profits.

Driven by burgeoning demand, Dewa plans to increase its installed power and water capacity by two-and-a-half times between 2008 and 2012, at an estimated cost of $19.1bn.

Dewa's projects to date have all been delivered through conventionally procured engineering, procurement and construction (EPC) contracts. And while an IWPP may cost Dewa less money, financial considerations are not the reason for the change in approach.

“Of course it will cost less, but we will get less in terms of quality,” says the official. “They [developers] go for the bare minimum. We go for the maximum. We pay more but we get more. If you compare like with like, our bids are more competitive than theirs.”

With all of Dewa's EPC projects located around Jebel Ali and Al-Aweer, space in the emirate is already restricted.

The Fujairah coast is ideal for a plant as the risk of an oil slick affecting its operation is far less, says the official.

Abu Dhabi Water & Electricity Authority (Adwea) already has one IWPP in Fujairah and a second is due to commence in 2010.

Declining interest in EPC contracts from international contractors has also pushed Dewa in the direction of private investment. “The problem we are facing is that companies are not willing to participate in EPC contracts,” says the official.

“They prefer to quote for IWPPs so this should improve participation as well.”

“In an IWPP, the risk for the bidder is much lower. Also, under the detailed functional specifications of an IWPP, the bidders can offer standard solutions. There is less engineering involved than for an EPC contract.”

TABLE: Planned UAE IWPPs

Adwea=Abu Dhabi Water & Electricity Authority; Dewa=Dubai Electricity & Water Authority

Source: MEED