IP-led team wins Umm al-Nar IWPP

25 April 2003
The consortium led by the UK's International Power (IP)was officially awarded on 19 April the Umm al-Nar independent water and power project (IWPP). The notification followed approval from Abu Dhabi's Executive Council in mid-April and came a month after the key project agreements were signed by the IP consortium and Abu Dhabi Water & Electricity Authority (ADWEA). The next milestone on the estimated $2,100 million project will be financial close, which is expected to take place in June.

The IP-led team, which also includes Tokyo Electric Power Company (Tepco)and Mitsui & Company, both of Japan, had been in negotiation with ADWEA since late January after being ranked as the preferred bidder for the project, which involves the acquisition and expansion of the existing Umm al-Nar plant. The only other bidder was France's TotalFinaElf(MEED 31:1:03).

The official award ended a month of intense speculation about the selection of the developer. Even after IP signed the project agreements in mid-March, there were persistent rumours that a repricing exercise would be called.

The four project agreements signed cover the 20-year power and water purchase agreement (PWPA), the asset transfer agreement, the operations and maintenance (O&M) agreement and the shareholders agreement.

Under the shareholders agreement, a new project company, known as Arabian Power Company, has been established with ADWEA taking a 60 per cent stake, IP 20 per cent, Tepco 14 per cent and Mitsui the remaining 6 per cent. The shareholding for the new O&M company - ITM O&M Company- is split 70:30 between IP and Tepco.

Besides taking over Umm al-Nar, the new project company is committed to installing new generating and desalination capacity. All the existing 850-MW generating capacity will be decommissioned in phases and replaced by 1,550 MW of new build to be constructed by Japan's Toshiba Corporation and based on Frame 9 gas turbines from the US' General Electric Power Systems (GE). Of the existing 162 million gallons a day (g/d) of desalination capacity at Umm al-Nar, about 70 million g/d of recently- installed capacity will be retained, with the remainder decommissioned. In addition, 25 million g/d of new multi-stage flash capacity build will be constructed by Japan's Hitachi Zosen Corporation. The engineer is the UK's Mott MacDonald.

The new build will be completed in 2006. With the bulk of existing capacity not due to be decommissioned until 2008, Umm al-Nar's contracted capacity for a two-year period will be 2,200 MW of power and 143 million g/d of water.

Of the total project costs, an estimated $1,000 million will cover the acquisition of the existing plant and $800 million for the new build works. The financing package provides for about $650 million to be covered by equity and $1,450 million to be raised through commercial debt.

The mandated lead arrangers for the financing package are HSBC, Gulf International Bank, Bank of Tokyo-Mitsubishi, ING, Sumitomo Mitsui Banking Corporation, West LB, National Bank of Abu Dhabiand First Gulf Bank. The group may be further expanded (MEED 4:4:03).

The financing is likely to be divided into three tranches. The first is a 20-year, $900 million commercial facility. The second, worth $250 million, will also have a tenor of 20 years and will be Islamically structured and lead arranged by Abu Dhabi Islamic Bank, with Kuwait Finance House and Dubai Islamicas probable participants. The third tranche, a $300 million facility, will have a tenor of only five years - it will be used to part-finance the acquisition of existing assets on the brownfield project - and is expected to be the preserve of regional banks in the lead arranging group.

ADWEA is being advised on the project by Credit Suisse First Boston, Germany's Fichtnerand the US' White & Case(MEED 21:9:01).

The selection of a foreign developer on Umm al-Nar leaves the way open for ADWEA to finalise the Taweelah reverse osmosis (RO) project, which will be the emirate's first independent water project. Two groups - France's Ondeoand Japan's Mitsui & Companywith France's Vivendi- are competing for the project, which calls for the construction of a 50 million-g/d RO plant on a build-operate basis.

The next planned project in ADWEA's IWPP programme will be the acquisition and expansion of the Mirfa plant in the western region. Mirfa, which has capacity of almost 200 MW and 16.2 million g/d, will be expanded through the addition of 600-700 MW and 22.5 million g/d of new capacity. Requests for proposals for Mirfa are expected to be sent out in the third quarter (see Banking & Finance).

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