Japan Bank for International Cooperation (JBIC) has asked the Omani government to clarify its role in the Barka 3 and Sohar 2 independent power projects (IPPs), sources close to the schemes tell MEED.
This will enable JBIC to assess the projects’ creditworthiness. The export credit agency normally requires some form of government guarantee or support before it can commit to financing a project.
“JBIC prefers to have the government involved as guarantor of the offtake agreement.” says a source close to the bank. “But there could be other ways that the government gives assurances that it will support the project and these are being explored.”
However, when Oman Power & Water Procurement Company (OPWP) issued the request for proposals for the schemes in July, it stated clearly and for the first time that the Finance Ministry would not guarantee its financial obligations to the developer under the power and water purchase agreement.
The request for proposals explained that the government guarantee would expire once OPWP had obtained two out of three minimum credit ratings and maintained them for two years. It would require a BBB rating from Standard and Poor’s, Baa2 from Moody’s or BBB from Fitch.
OPWP will meet these conditions shortly after it signs the contract for the Sohar and Barka projects. Moody’s assigned an A2 rating to OPWP on 26 October 2007and Standard & Poor’s assigned it an A rating in May 2008.
The outcome of JBIC’s deliberations with Muscat could impact the financing arrangements of two of the consortiums bidding for the projects. The first team includes Japan’s Marubeni Corporation with its compatriot Chubu Electric, Qatar Electricity & Water Company and Qatar Petroluem International.
The second group comprises Belgium’s Suez Energy International, Japan’s Sojitz Corporation, Yonden, part of Shikoku Electric Power Company, the local Bahwan Engineering Group and Public Authority for Social Insurance.
The two teams submitted their proposals for both projects alongside five other bidders on 8 December. They include the UK’s International Power with UAE-based Mubadala Development Company and the local National Trading Company; Saudi Arabia’s Acwa Power International with the local Sogex and Oman Holdings International; and Saudi Oger with Korea Electric Power Corporation also bid.
A team of India’s Lanco Infratech and Korea Plant Service & Engineering also bid as did the US’ Balkan Energy Company.
Iran’s Mapna Group submitted an eighth bid, but this only covers the Sohar plant.
Although all the bidders have now submitted their technical and commercial bids, OPWP will not open these until January. As the client did not hold a separate prequalification process for the projects, it will now assess whether the groups have met the qualification criteria specified in the request for proposals. It will then open the second part of the bids form companies that pass this assessment.
The winning bidder will develop the projects on a build-own-operate basis. The Barka 3 and Sohar 2 IPPs will have a capacity of 650-750MW of power each. Both projects are scheduled to begin full commercial operation in 2013.
Bank Muscat in association with the UK’s Project Financing Solutions is the financial adviser. The UK’s Berwin Leighton Paisner is the legal adviser and Switzerland’s Electrowatt Engineering Services is the technical adviser.