Sanaa’s plans to develop Yemen’s first three independent power projects (IPPs) face delays because of ongoing negotiations over the level of financial support that the government is prepared to give the scheme.

The country’s finance minister Numan Salih al-Suhaybi is reluctant to commit to additional guarantees beyond those it has already agreed for the project, according to a source close to the scheme.

The International Finance Corporation (IFC), a subsidiary of the Washington-headquartered World Bank, is advising the Yemeni government on how to tender the scheme. The Electricity & Energy Ministry is scheduled to hand over the government’s proposed package of guarantees to the IFC by the end of March. However, sources close to the deal say the deal is now likely to be delayed by the negotiations.

Yemen's Power Production

Yemen’s power production by source
  Capacity (megawatts)
Network steam power 435
Networ diesel power 410
Off-grid diesel power 290
Source: Public Electricity Corporation 

The ministry launched the IPP scheme in 2009 and attracted interest from 40 companies. The process of prequalification for the deals was expected to follow by the end of 2009 or early 2010.

Sanaa will award the project to the developer that offers to produce the cheapest power for the government at each of the three locations. The winning developers will build a 150MW plant at Aden in the south, another 150MW plant at Hodeidah in the west, and a third plant with capacity of 75MW at Al-Mukalla, east of Aden, on a build-own-operate-transfer basis.

The US’ K&M Engineering & Consulting, the UK’s Norton Rose with the local Al-Suwaidi & Luqman, and London-headquartered PricewaterhouseCoopers are the respective technical, legal and accounting advisers on the project.

The plants will use heavy fuel oil as feedstock, but Sanaa wants to have the the option of running them on natural gas in the future.

The state-owned Public Electricity Company will buy the plants’ power output.