Dubai’s decision to shelve a planned independent power project (IPP) is expected to hit the emirate’s wider plans to use the private sector to develop future infrastructure schemes.

Dubai Electricity & Water Authority’s (Dewa) plans to develop an IPP at Hassyan was intended to be the first of several further IPPs and other public-private partnerships (PPPs). The government hoped to use PPPs to enable it to continue developing infrastructure without having to pay for it up front, as it did before the economy collapsed in 2009, leaving it with a budget deficit it is trying to balance.

Shelving the Hassyan project is now expected to taint interest from bidders on future Dubai projects. “I don’t think anyone will bid on an IPP for Dewa again,” says one source involved in the Hassyan project. “And who would bid for any PPP in the rest of Dubai now?”

As one of the most bankable assets in an economy, power projects are typically used to start off PPP programmes.

Projects in the transport, healthcare and education sectors had all been considered ripe for private sector involvement and Dubai had been drafting a PPP law to enable a raft of privately-owned infrastructure projects to be built.

Dewa is understood to have been planning to tender a solar power project at Hassyan later this year. “Unless the solar developers are really hungry for the work, the responses to this will not be as strong as if the first IPP had gone ahead,” says one source in the power sector.

Dubai’s Roads and Transport Authority has also been trying use the PPP model develop a marine transport project and the area around Union Metro station. A hospital PPP has also been planned.

According to sources close to the Hassyan bidding process, the top two bidders had almost managed to secure fully underwritten 23-year financing for the project. Funding was expected to be one of the most serious challenges to Dubai’s private sector project plans following its debt crisis of 2009.