Nakheel revises terms for Jebel Ali plants

10 October 2008
Delays likely as contractors await full details of agreements for desalination schemes on Palm development.

Bidders have received revised contract terms from Dubai-based Nakheel for the development of two desalination plants on Palm Jebel Ali, four months after the real estate developer said it was reviewing the agreements.

Further delays are likely as bidders have yet to receive full details of the concession agreements.

The real estate developer launched the projects in August 2007, but revised its proposals in early October 2008, following criticism from the three bidding groups.

It told the bidders in June this year that new agreements were being prepared.

The shortlisted bidders are UAE-based Metito with Germany’s Berlinwasser; Spain’s Acciona with the local Al-Rajhi Construction and Bahrain’s Instrata Capital; and Norway’s Aqualyng with the UK’s United Utilities and South Korea’s Samsung Corporation.

The three groups submitted bids for the design-build-own-operate contracts in February 2008, and the client held discussions with them in March, during which bidders aired their concerns over the project.

“The previous documents were clearly unbankable,” says a source at one of the bidding groups.

“The original documents were very weak and confused,” adds another bidder.

Nakheel has revised the 30-year concession agreements, but has yet to provide bidders with commercial schedules.

Bidders are unsure if they will be invited to negotiate on the basis of the terms they have received, or if they will be asked to submit fresh proposals once the commercial terms are released, which will cover issues such as tariffs.

Originally, the tariff model formed part of the proposals submitted by the bidders.

Now bidders are speculating that the tariffs for the desalinated water could be set through separate negotiations with the client.

Alongside the revised terms, Nakheel has changed the technical specifications of the reverse osmosis plants.

It has increased the plants’ capacity to 16.4 million gallons a day (g/d) from 12 million g/d, and decreased the size of the area on which they will be built.

In August, Nakheel set up a joint venture with Australia’s Macquarie Bank for the developer’s water and wastewater projects.

However, it appears that the Palm Jebel Ali desalination projects have been excluded from the joint venture’s remit.

For the time being at least, the joint venture is focusing exclusively on wastewater treatment schemes.

Macquarie and the developer’s Nakheel Capital subsidiary will initially invest in wastewater treatment plants for three existing Nakheel developments in Dubai, at the Waterfront, Jumeirah Golf Estates and International City (MEED 8:8:08).

The joint venture has replaced Palm Water, another Nakheel subsidiary, as the company that grants concessions for the wastewater projects.

The schemes, which were originally planned as build-operate-transfer projects, will now be developed on a design-build-operate basis.

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