UAE project finance bankers are examining potential bids for Abu Dhabis 350MW photovoltaic (PV) solar project.
The banks will decide which bidders to support for the project, before prices are due in September.
Abu Dhabi Water & Electricity Authority (Adwea) has prequalified eight companies to participate in the tender either as standalone bidders, or as part of a consortium. It has conditionally prequalified the remaining 26 firms to participate in teams.
As the cost of solar equipment falls rapidly, finance costs are taking up a larger proportion of the tariff offered.
The cost of finance is also rising as liquidity tightens in the UAE. The Emirates one-year interbank rate was at 1.62 per cent on 11 May, up from 1.48 per cent at the beginning of the year and 1.07 per cent in May 2015.
Bankers backing the low bidders, Saudi Arabias Abdul Latif Jameel Energy and Abu Dhabis Masdar, claimed finance costs were broadly similar for all the bidders. The cost reductions that brought the levelised cost of energy (LCOE) to 3 cents a kilowatt hour (kWh) are thought to be on the technical side.
The financial sector has raised concerns over the sustainability of these prices.
They will also reduce the number of bidders able to compete for utility-scale projects at such low margins to under 10, following trends in the conventional power development space.