Saudi Electricity prepares to launch next independent power project

15 January 2010

Utility to shortlist bidders for PP11 scheme in February

Saudi Electricity Company plans to launch its next independent power project (IPP) during the first half of this year, a senior source at the utility tells MEED.

The company hopes to issue a request for proposals for the planned Qurayyah scheme by the summer.

The oil-fired plant will have capacity of 2,000-2,400MW of power. Located in the Eastern Province, it is scheduled to begin operation in April 2014.

Saudi Electricity is likely to issue an invitation for expressions of interest in the new scheme after it has concluded a power purchase agreement (PPA) for its current project, Riyadh PP11.

The utility is now seeking clarifications from the top three bidders for the Riyadh project and expects to shortlist two or three of them in February. It then aims to sign the PPA by the end of March.

A team of Japan’s Marubeni Corporation, Kansai Electric Power Company, also Japanese, and the local Saudi Masader Company for Power & Water submitted the lowest bid in December.

The consortium’s tariff was 28 per cent lower than the second lowest bid, which came from Belgium’s Suez Energy International and the local Al-Jomaih Group.

Developers and bankers continue to speculate as to whether the Japanese consortium simply submitted an extremely competitive bid or left some components of the price out.

The Japanese group bid with Germany’s Siemens and South Korea’s Samsung Corporation as its nominated turbine supplier and engineering, procurement and construction (EPC) contractor respectively.

It is a similar configuration to that which a team of the UK’s International Power with Saudi Oger and Korea Electric Power Corporation has opted for. That consortium has chosen Siemens and South Korea’s Doosan Heavy Industries & Construction as its EPC contractors. However, its price was 67 per cent higher than Marubeni’s.

Rival bidders have suggested that the group may have omitted the fuel cost from its tariff, but a source close to Marubeni in Saudi Arabia insists that this is not the case.

In its request for proposals (RFP) for the PP11 scheme, Saudi Electricity specified that the tariff should include capital and operating expenditure, which should in turn include fuel and financing costs.

Other developers have also suggested that the anomaly may have been caused by a miscalculation of the cost of electricity. For its previous IPP scheme at Rabigh, SEC had asked bidders to calculate their price based on the total number of kilowatt hours that the plant is capable of producing.

The client altered this requirement for the PP11 project, telling bidders to base their figures on the actual number of kilowatt hours dispatched from the plant. Using a value for available rather than dispatched kilowatt hours could therefore result in a lower electricity cost.

However, if Marubeni’s figures are correct, developers agree it deserves to win the contract.

“If the Marubeni consortium can comply with the RFP with no fiddles or deviation and deliver that tariff they surely deserve to be awarded this project without any delay,” says another source close to the project.

A third project source concurs. “If I were Saudi Electricity Company, I’d bite their hand off and tell them to build it now,” he says.

Marubeni could not be reached for comment.

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