Tender to be launched by mid-August
Saudi Electricity Company (SEC) is expected to stop banks from offering financing to more than one bidder for the development of the Qurayyah power plant as a result of lobbying from developers who see the practise as anti-competitive.
Bidders and banks are understood to have spent the last few months lobbying SEC about a change in the tendering rules which allowed two banks, Samba and Alinma, to club together and back four out of five of the bidders for SEC’s last project, the $2.5bn PP11 power scheme.
Saudi Electricity Company schemes | |||
---|---|---|---|
Project | Capacity (MW) | Location | Operation date |
Rabigh | 1,200 | North of Jeddah | 2012 |
PP11 | 2,000 | West of Riyadh | 2012 |
Qurayyah | 2,000 | Eastern Province | 2014 |
Dheba | 1,000 | Red Sea Coast | 2016 |
Ras Azzaur | 2,520 | Eastern Province | 2020 |
Shuqaiq | 800 | Red Sea Coast | 2021 |
Source: Saudi Electricity Company |
“There has been a lot of discussion with all the interested parties about the rules for the financial support of bids,” says a source close to SEC. “Some support the new rules introduced on PP11, and others do not.”
Because banks offered the same terms to a number of bidders, it limited the competition on bids to just technical aspects. Several developers complained that the banks’ behaviour represented a cartel. The banks argue that it enables more consortiums to bid for the project because there is effectively more liquidity available.
A banker at another large institution in Saudi Arabia says he was also considering supporting several bidders. “Our focus is on developing the kingdom, so our preference is to go non-exclusive to ensure that there are as many bids as possible,” he says.
In contrast to the situation when PP11 was tendered in mid-2009, Saudi banks are currently awash with cash and struggling to find good assets to invest in. That means even with exclusivity conditions on financing arrangements, several bidders should be able to secure enough funding.
The exact requirements of the bids on the Qurayyah scheme will not be known until the request for proposals (RFP) is issued, which is due to occur before Ramadan starts in mid-August.
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