Saudi Electricity Company (SEC) has dropped plans to rebid the Rabigh 2 independent power project (IPP), allowing the local Acwa Power to restart talks with banks about completing a $1.5-1.7bn financing package to fund the plant.
Riyadh said it would no longer provide oil for new power projects earlier this year, prompting a last-minute change in the configuration of the Rabigh 2 scheme despite SEC having already awarded the contract to Acwa. At the beginning of July SEC said it would retender the project as a result of the fuel change, but it has now contacted developers to say it will not go through a rebid process, and is instead awarding the 2,000MW Rabigh 2 scheme to Acwa.
|SEC IPP programme|
|IPP=Independent power project. Source: SEC|
SEC took the view that a rebid would cause too significant a delay to the project, and there is no guarantee it would get a price any cheaper than what Acwa is offering, says one source in the kingdom involved in the project.
Acwa is back in negotiation with lenders and is aiming to complete the funding package by the end of October, according to sources working on the deal. The financial agreements all stay pretty much the same despite the fuel changing, so financial close should be able to happen fairly quickly, says one banking in the kingdom. The majority of the funding is coming from the local Al-Rajhi, Alinma, Samba, National Commercial Bank and Banque Saudi Fransi. Japans Mizuho and the UKs Standard Chartered are also contributing a dollar facility understood to be less than $200m.
In addition to the change in the fuel for the plant from oil to gas, SEC has also reduced the length of the power purchase agreement (PPA) it will sign for the Rabigh 2 plant from 26 years to 20 years, allowing banks to also reduce the tenor of the debt required to fund the project. The long PPA had caused some concern among lenders as previous project finance loans have not exceeded 25 years.