Hidd sale peps up IP’s bidding power

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The sale of a 40% stake in the Bahraini IWPP marks a major expansion in the region for Malakoff. For market leader International Power, it is part of a rationalisation process that will free it up to bid on future contracts.

Malaysia’s Malakoff International Berhad has made its third major move in the MENA water market with the $113.4 million purchase of a 40% equity stake in the Hidd IWPP in Bahrain.

Malakoff used a newly arranged $90 million debt facility from Mizuho and the EXIM Bank of Malaysia to fund the purchase from International Power, which retains a stake in the project.

Hidd is a combined power and water project generating 929MW of power and 409,140m3/d of water through MED desalination technology, and was commissioned in 2007. It currently provides around 75% of the water consumed in Bahrain. The project company that holds the power and water purchase agreement with the Bahraini Electricity and Water Authority now comprises Malakoff (40%), International Power (30%) and Sumitomo (30%).

Malakoff’s largest water holdings are in the Shoaiba IWPP and its expansion in Saudi Arabia, which together generate 1.03 million m3/d of desalinated water for the Kingdom. Malakoff was part of a team of three Malaysian backers that partnered with ACWA Power to secure a 60% stake in the project, which reached financial close in January 2006. Malakoff’s equivalent stake in the project is 12%.

It also holds a 37.5% stake in the 200,000m3/d SWRO plant in Sidna Ouchaa, in the Tlemcen region of Algeria, through a partnership with Hyflux.

At $113.4 million, the price tag for the Hidd stake came in below what some had predicted, but vendor International Power told GWI that it was pleased with the value received. In its preliminary full-year results for 2011 published earlier this year, IP said it was expecting a reduction in income of €70 million ($93 million) in 2012 due to the sale of the stake.

The sale process was triggered by the regulatory limits on the amount of power capacity that a single company can own in Bahrain. The combination of GdF Suez Energy International’s non-European portfolio with International Power in 2010 meant that the enlarged company started to butt against these limits in some countries. In Oman, IP is in the process of diluting its holdings through the government-mandated process of IPOs in publicly owned projects.

“To respond to the Omani regulators, we gave up the Al Manah power plant in 2009, but we still have the operational aspect,” confirmed Shankar Krishnamoorthy, IP’s CEO for the Middle East, Turkey and Africa. “By winning the two last projects in Oman in 2010, Barka 3 and Sohar 2, we again reached the maximum market share level in the Sultanate. Our position will, however, improve as a result of our commitment to the process of initial public offerings,” he told GWI. “Moreover, market limits will continue to move upwards with rising needs. With growing demand, we will again be able to answer to tenders while respecting the authorised limits.”