Key fact

International Power had a total power equity capacity of 7,400MW as of November 2011

Source: MEED Insight

On 3 February 2011, the merger of the UK’s International Power and France’s GDF Suez’s non-European energy assets was finally sealed and announced by their respective boards. With gross power generating assets of 72,360MW in operation worldwide, a global giant had been born in International Power (the name the merged entity operates under).

International Power is the only developer with assets in every GCC market where private production is allowed

The merger was closely monitored in the GCC since GDF Suez and International Power were already the two largest developers by equity capacity in the market. Their merger not only formed a powerhouse, but also raised monopoly issues in several regional jurisdictions.

Biggest power developer

The scale of the newly merged entity is underlined in MEED Insight’s latest annual survey of developers in the GCC. International Power’s total power equity capacity reached 7,400MW as of November 2011. This was more than double the size of the second-ranked developer, Japan’s Marubeni Corporation, whose power portfolio was under 3,100MW. Similarly, International Power’s desalination equity capacity of 291 million gallons a day (g/d) dwarfed the estimated 140 million g/d held by Saudi Arabia’s Acwa Power.

Top 10 international developers* in the GCC 
  Equity capacity (MW) Number of IPPs/IWPPs involved in
International Power 7,440 17
Marubeni Corporation 3,095 7
Acwa Power  2,634 8
Gulf Investment Corporation 1,531 5
Sumitomo Corporation 908 3
Korea Electric Power Company (Kepco) 864 2
Chubu Electric 788 3
Samsung C&T 687 1
MENA Infrastructure Fund 684 2
Sembcorp 611 2
*=At November 2011. The survey covers projects where the purchase agreements have been signed and companies have participated in competitive tendering. As a result, Abu Dhabi National Energy Company (Taqa), Qatar Petroleum, Qatar Electricity & Water Company (QEWC) and Public Inv are not included, as they are granted stakes automatically in their domestic markets. Source: MEED Insight

International Power also ranks as the most diversified developer. It is the only one with assets in every GCC market where private power and desalination production is allowed. It also has the largest number of interests, with 17 power projects and 12 desalination schemes.

International Power’s equity power capacity would have been even higher had it not been forced to reduce its stake by 16 per cent in SMN Power Holding as part of the Omani generator’s initial public offering (IPO). The divestment, which decreases its shareholding to 31 per cent, was expected: IPOs are required in all private power companies in the sultanate within four years of contracts being signed.

A further asset sell-down is on the cards, but unlike SMN Power’s IPO, the partial divestment in Bahrain’s Hidd Power Company (HPC) will be a direct consequence of the merger. With the merged company having interests in all three private power companies in the kingdom, including a 70 per cent stake in HPC, Manama had made it clear from the outset that monopoly rules would force a sell-off. The process of selling a 40 per cent stake in HPC is now under way, with the generator’s other shareholder, Japan’s Sumitomo Corporation, having the first right of refusal.

To date, there have been no indications that International Power may have to take similar action elsewhere in the GCC. Among the other markets, it would appear to be most vulnerable in Oman, where it has five assets in what is the region’s second smallest generating sector.

However, activity in the secondary market for build-operate assets remains subdued in the GCC. Since the US’ AES Corporation exited the region in 2010, selling its stakes in Oman and Qatar to Acwa and Qatar Electricity &Water Company (QEWC) respectively, only two transactions have been concluded. In March 2011, Japan’s Osaka Gas bought a 10 per cent interest from Marubeni in Abu Dhabi’s Shuweihat 2 project, while two months later, Bahrain-based Instrata acquired an 8 per cent stake from Acwa in Oman’s Barka 1 plant.

Despite the sales, both Marubeni and Acwa managed to increase their GCC portfolios in 2011, cementing their positions as the second and third biggest developers in the region. With a 50 per cent interest, Marubeni was the largest shareholder in the developer consortium that won the 2,000MW Sur independent power project (IPP). The consortium also included QEWC, which secured its first asset outside Qatar as part of an overseas expansion drive.

Top-ranked power firms

Acwa confirmed its near domination of the Saudi Arabian market, leading the winning consortium on the 3,927MW Qurayyah project. The win meant that the Riyadh-based developer has now been successful on all but one of the last seven private power and desalination projects tendered in the kingdom.

Top 10 international developers* in the GCC
  Capacity (million g/d) No. of IWPPs/IWPs involved in
International Power  291 12
Acwa Power 140 6
Marubeni Corporation 90 5
Gulf Investment Corporation 61 4
Sembcorp 49 2
Sumitomo Corporation 47 2
Khazanah Nasional 27 2
Malakoff Berhad 27 2
JGC Corporation 20 2
Tepco 20 1
*=At November 2011; g/d=Gallons a day; The survey covers projects where the purchase agreements have been signed and companies have participated in competitive tendering. As a result, Abu Dhabi National Energy Company (Taqa), Qatar Petroleum, Qatar Electricity & Water Company (QEWC) and Public Inv are not included, as they are granted stakes automatically in their domestic markets. Source: MEED Insight

Qurayyah also marked South Korean Samsung C&T’s debut as a regional asset holder and expanded the equity portfolio of the Middle East and North Africa Infrastructure Fund.

Acwa has not fared so well elsewhere in the GCC. For example, it was not qualified to bid for the Shuweihat 3 IPP in Abu Dhabi, as it was judged to be a UAE-domiciled firm. However, it has bid for the Al-Zour North independent water and power project in Kuwait and is among the prequalifiers for the Hassyan IPP in Dubai.

Private power capacity by location*
(Percentage of 44,000MW)
Bahrain 7
Qatar 15
Oman 16
Saudi Arabia 30
Abu Dhabi  32
*=As at November 2011. Includes capacity for which the PPA/PWPA has been signed. Source: MEED Insight

The other major movers in the 2011 developer rankings were Sumitomo and Korea Electric Power Company, the foreign partners on Shuweihat 3. The award elevated both companies into the top six for the first time.

Despite only three IPPs being concluded, 2011 was a record year for private power in the GCC with 7,500MW of new capacity contracted. It is unlikely to be a one off either with a similar volume expected in 2012. Saudi Arabia, Oman and possibly Abu Dhabi are all planning to award more private capacity and are due to be joined by Kuwait and Dubai, the GCC’s last bastions of state generation.