Dubai launches first private power and water project

06 January 2010

Emirate scraps plans for Hassyan 1 engineering, procurement and construction contract

Dubai Electricity & Water Authority (Dewa) has scrapped plans for its Hassyan 1 power and water plant, and instead is now seeking consultants to advise on the emirate’s first ever independent water and power project (IWPP).

The authority issued a request for proposals for consultancy services on the IWPP at the end of December, with a deadline for bids of 22 February.

The winning consultant will advise Dewa throughout the project. This will include reviewing, assessing and advising the authority on the appropriate regulatory framework and IWPP strategy.

The winning bidder will also suggest an efficient configuration for the transfer of power from Hassyan to Dewa’s network, according to documents seen by MEED.

The IWPP plans appear to directly replace Dewa’s previous plan to develop the Hassyan 1 power and water plant on an engineering, procurement and construction (EPC) basis.

The new plant, which will also be located at Hassyan, will have capacity of 1,500MW of power and 120 million gallons a day of water – the same as the Hassyan 1 plant. Dewa will buy the output of the plant under a power and water power purchase agreement.

Contractors submitted their bids for the Hassyan 1 scheme on 8 November.

A team of Spain’s Iberdrola Ingenieria Y Construccion and France’s Alstom was the low bidder for the power portion of the project with a price of AED6.6bn ($1.8bn). Italy’s Saipem also submitted an offer for the power portion.

At AED3.3bn, Italy’s Fisia Italimpianti was the low bidder for the desalination plant. South Korea’s Doosan Heavy Industries & Construction bid for both the power and water plants.

While Dewa has yet to tell the bidders of any change to its plans, contractors tell MEED that they now do not expect Dewa to proceed with the project on an EPC basis.

“It’s not easy for them to proceed because of the economic crisis in Dubai,” says one contractor which submitted a bid for Hassyan 1. “If they have some internal financial problems, they will try to find another way and one of these ways is to go for an IWPP.”

Bankers and developers tell MEED that the success of the new IWPP plans could hinge on whether banks will be willing to accept a guarantee from the Dubai government on buying the output from the plant, given the financial difficulties at other government-related bodies in the emirate.

The IWPP is scheduled to come on line in 2014, three years later than Hassyan 1.

The economic slowdown in Dubai over the past year has affected power demand in the emirate, enabling Dewa to delay the commissioning date.

With power capacity at 7,464MW and peak demand at 5,622MW, Dewa is already in a comfortable position. The rate of power demand growth in the emirate has fallen from 12 per cent in 2008 to 5 per cent in 2009.

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