GDF Suez still tops power and water developer rankings

15 November 2013

It has been a quiet year for developers in the GCC’s power and water sector, with only one independent water project having been signed, but 2014 promises more opportunities

GDF Suez Energy International (GDF Suez) remains the largest private developer in the GCC, according to MEED’s survey of developers active in the region’s power and water sectors.

The UK/French company’s total power capacity of 7,449MW is more than double that of Japan’s Marubeni Corporation, which ranked second in the survey. The firm enjoys similar dominance in the desalination sector, with its total equity capacity of 1,151,380 cubic metres a day (cm/d), 82 per cent more than second-ranked Acwa Power of Saudi Arabia.

GDF Suez established its dominant position in the GCC private power and water market following the merger of non-European energy assets the UK’s International Power and France’s GDF Suez in early 2011.

Al-Zour North

Its position at the top of the power and desalination rankings will be strengthened further once the power purchase agreement (PPA) for the Al-Zour North independent water and power project (IWPP) has been concluded.

In January, Kuwait’s Partnerships Technical Bureau (PTB) awarded a GDF Suez-led consortium the contract to build the Al-Zour North project, which will have a power capacity of 1,500MW and a desalination capacity of 102-107 million gallons a day (g/d). The consortium also includes Japan’s Sumitomo Corporation and Kuwait’s AH Sagar & Brothers Group,

The Al-Zour North IWPP, Kuwait’s first public-private partnership (PPP) project, has had a protracted tendering process, with the PTB having selected the GDF Suez consortium as preferred bidder in February 2012.

The project stalled when Kuwait’s National Assembly (parliament) voted to scrap it a few months later, but the PTB was able to push it through. The selection of the consortium does not appear to have quickened the process, as almost 10 months have passed since the contract was awarded. However, sources in Kuwait say the PTB is making efforts to ensure the scheme reaches financial close by the end of the year.

International developers are eagerly waiting for the Al-Zour North IWPP to close, with a slew of other, major IWPP schemes planned for the country over the next few years. As part of plans to boost Kuwait’s installed generation capacity from 14,000MW to 31,000MW by 2023, the PTB has already invited interest for the second phase of the Al-Zour North scheme. The bureau is also currently in talks about the development strategy for the planned 3,000MW Al-Khiran IWPP. With several other major independent power projects (IPPs) and IWPPs planned across the Gulf in the next decade, the region will remain a key focus of GDF Suez.

Equity decline

During 2013, however, GDF Suez’s equity capacity actually declined by 58MW as it sold 10 per cent of its stake in the Sohar IWPP in Oman to the investment holding group Mena Infrastructure. It will also have to sell shares in its newly commissioned Barka 3 and Sohar 2 IPPs, as every private power firm in Oman is required to launch an initial public offering (IPO) within four years of a PPA contract being signed.

Oman’s IPP regulations also resulted in Sembcorp Salalah Power & Water Company launching an IPO in late September to offer 35 per cent of shares to the public in the Salalah IWPP. Sembcorp Salalah was previously 60 per cent owned by Singapore’s Sembcorp, with Oman Investment Corporation holding 35 per cent and Bahrain’s Instrata having held the remaining 5 per cent. Sembcorp’s total equity capacity dropped by 87MW and 13,600 cm/d following the flotation.

While Sembcorp remains in 11th position in the GCC power ranking, the 3,600 cm/d drop in desalination capacity led it to lose a place to Sumitomo in the desalination list, so it now sits in seventh position. The Singaporean developer has already begun to capitalise on its first project in Oman, having been awarded a contract, in partnership with Takamul Investment Company, to build utilities for the Duqm Special Economic Zone in May this year.

While not the largest in the Gulf in terms of capacity or volume of projects, Oman’s power and desalination sector continues to offer a steady stream of opportunities for the developer market.

The sultanate is the only GCC state to have concluded a private power or water project PPA in 2013, with the signing of the Ghubrah independent water project in February. A consortium led by Sumitomo will build the desalination facility, which will have a capacity of 190,000 cm/d.

Sumitomo and Malaysia’s Malakoff International will each have a 45 per cent holding in the project, with the other consortium member, Spain’s Cadagua, owning the remaining 10 per cent. The new capacity has enabled Malakoff to leap above Sumitomo into fourth place in the desalination ranking.

While GDF Suez’s position at the top of the power developer list is unlikely to be threatened in the medium term, Acwa Power looks set to move into second place when it completes negotiations for the 2,000MW Rabigh 2 IPP in Saudi Arabia.

The Rabigh 2 IPP has been one of the most controversial power projects of the year. The client, Saudi Electricity Company (SEC), selected Acwa Power as the preferred bidder in January, but then in May announced the configuration of the plant was going to be switched from oil-fired to gas. The change was a result of national oil company Saudi Aramco’s decision to no longer supply oil for power schemes, which it feels can be more lucratively exported.

Following the decision to switch the fuel, SEC was expected to retender the contract in July, but subsequently decided to keep Acwa Power on for the project. According to sources in Riyadh, Acwa Power is expected to sign the PPA before the end of November.

Gains and losses

The Rabigh 2 PPA will further cement Acwa Power’s dominance in its domestic power market, with the developer having won all but one of the past eight private power and desalination projects tendered in the kingdom. Its position was also boosted in January when the Saudi government, through two investment funds, acquired an equity stake in the firm of about 20 per cent. However, while Acwa Power is set to gain new equity capacity from the Rabigh 2 IPP, it is also expected to lose some capacity.

A joint venture of Saudi Aramco, Sumitomo and Rabigh Refining and Petrochemical Company (PetroRabigh) has issued a notice to Rabigh Arabian Water and Electricity Company (RAWEC) that it intends to terminate its water and energy conversion agreement. PetroRabigh issued the notice of cancellation of the contract in September and explained in a statement that it was due to two blackouts of the power and steam supplies from RAWEC between 29 December 2012 and 11 September 2013.

The notice will result in the ownership of RAWEC’s assets being transferred to PetroRabigh, which will manage the power, steam and the rest of RAWEC’s facilities. Japanese firms Marubeni, JGC and Itochu, own 30, 25 and 20 per cent of RAWEC shares respectively, with Acwa Power owning 24 per cent and PetroRabigh 1 per cent. They will all record a reduction in capacity if the agreement is cancelled.

Top 10 EPC power sector contractors*
CompanyCountry of originCapacity under contract (MW)
Hyundai Heavy Industries (HHI)South Korea5,812
Samsung C&TSouth Korea5,720
Arabian BemcoSaudi Arabia5,671
DoosanSouth Korea5,500
Daewoo E&CSouth Korea4,274
Hyundai E&CSouth Korea3,792
Sepco 3China3,343
*=Capacity under contract in the Middle East and North Africa region. Source: MEED; MEED Insight

Despite only one PPA having been signed in 2013 to date, the GCC power market will offer some major opportunities for developers in 2014 with Oman, Qatar and the UAE pressing ahead with IPPs. The next 12 months should also see a new development in the region’s power sector, with GCC states turning to the IPP model to execute renewable energy schemes.

Dubai is planning for the 100MW second phase of its Mohammed bin Rashid al-Maktoum Solar Park to be developed as an IPP and Saudi Arabia is also reportedly considering using integrated solar combined-cycle technology for its next IPP.

The GCC power market will offer major project opportunities in 2014 as Oman, Qatar and the UAE press ahead with IPPs

South Koreans dominate power contracting market

South Korean contractors cemented their dominance in the Middle East and North Africa (Mena) region’s power engineering, procurement and construction (EPC) market in 2012 and 2013, with the Asian country accounting for five of the six most active contractors in the region.

 South Korean contractors have been particularly aggressive in recent years, with firms such as Samsung C&T and Daewoo Engineering & Construction having won their first major power contracts in the region since 2009.

Much of their success is due to contract wins in Saudi Arabia, the region’s biggest power projects market.

Since 2010, South Korean firms have won contracts to build 18,875MW of the total 29,431MW capacity awarded in the kingdom. This equates to about 65 per cent of all EPC power deals in this period.

Hyundai Heavy Industries (HHI) has enjoyed particular success, winning 24 per cent of the total capacity awarded in Saudi Arabia since the beginning of 2010.

South Korean contractors have also managed to enter the power market in Iraq. Hyundai E&C has been awarded more than 2,000MW of  capacity since 2011 and STX won a contract to build the 500MW Amara gas-fired plant in 2012.

The only regional firm in the top 10 contractors active in the region’s power sector is Saudi Arabia’s Arabian Bemco, due to its success in its local market. In 2011, Bemco was by far the region’s biggest power contractor. However, due to the completion of projects and several contract awards for South Korean contractors, it has now fallen to the third spot on the EPC contractors list, behind HHI and Samsung C&T.

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