Riyadh in talks with Acwa Power for Qurrayah 2 IPP

15 August 2011

Saudi Electricity Company mulls power plant award through direct negotiation instead of tender

Saudi Electricity Company (SEC) is in negotiations with local power developer Acwa Power to build a second independent power project (IPP) at Qurayyah.

Acwa Power was selected to build the first Qurayyah IPP in the second quarter of 2011. The combined-cycle gas turbine plant will have a capacity of nearly 2,000MW.

The developer submitted a bid of 7.417 hals/unit in March, which was significantly cheaper bid than the five other competitors (MEED 1:4:11).

The second lowest bid was submitted by Japan’s Marubeni and South Korea’s Doosan and Hanwha with a bid of 8.56 hals/unit for a 2,030MW project.

According to the head of SEC’s IPP programme Amer al-Swaha, SEC has entered into negotiations with Acwa Power for the second Qurayyah IPP due to the competitive price entered for Qurayyah 1 IPP.

“We are considering giving them a contract for six blocks instead of three” said Al-Swaha. SEC’s original schedule planned for Qurayyah 1 to come online in 2014, while Qurayyah 2 was to be completed by 2015.

Should Acwa be awarded a contract for the second project, both phases would be completed by 2014. This is a significant factor for SEC, according to Al-Swaha in addition to a likely discount on the price of the second IPP.

Acwa Power is currently in final negotiations with lenders for Quarayyah 1 IPP. Three export credit agencies (ECAs) and six commercial banks are set to lend for the project (MEED 27:7:11). The sponsors are targeting financial close for the end of August/early September.

After Qurayyah 2 is awarded, SEC will tender contracts for a 1,800MW IPP at Dheba to be in service by 2016 and another project at Rabigh with a capacity of 1,800MW, which will be in operation the following year. SEC also plans to develop 2,520MW IPPs at Abu Kamis and Jeddah South.

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