Shoaiba tests bidders’ staying power

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Already far from a straightforward deal, Shoaiba now faces competition from the Marafiq IWPP. Developers might not have the appetite for both.

The delay in issuing RFP documents for the Shoaiba IWPP is testing the nerve of developers prequalified to bid for the project. At least one of the potential bidding groups has withdrawn and several others are thought to be considering their next move.

It is likely that five groups from the original 11 which prequalified will proceed to the next round. At this stage, two of these are considered serious contenders for the project, which involves the construction of a greenfield 850MW and 880,000m3/d power and desalination plant.

Mitsui, Sumitomo and Al-Zamil’s National Power Company have joined the International Power consortium, which includes Saudi Oger and Xenel. This puts the IP team in a strong position and it must now be considered a frontrunner for the project.

The other heavyweight in the race is the group headed by Malaysia’s Tenaga Nasional Berhad (TNB) which includes ACWA Power, Black & Veatch, Mada and Malakoff. Japan’s Itochu Corporation has joined this consortium. It has an existing relationship with ACWA Power in Saudi Arabia and is working with Black & Veatch on Algeria’s 86,000m3/d and 314MW Kahrama project.

AES Oasis has joined the Abu Dhabi-based team of Mubadala Development Company and the Union Water & Electricity Company (UWEC). Mubadala and UWEC are owned by the Abu Dhabi government. This bid depends on whether Oasis has the stomach for a project the size of Shoaiba.

Tractebel’s strategy is still something of a mystery. It prequalified with the relatively unknown Saudi trading company Al-Bugshan Group. At the time, the Suez subsidiary was not considered a serious bidder but its position is thought to be shifting. In partnership with other local or regional developers, Tractebel could emerge as a candidate to be reckoned with.

Of the remaining groups to prequalify, the team led by Al-Jomaih and including CCC, RWE, Mott MacDonald and Steag has withdrawn. A spokesman gave concerns over the guarantee structure as the main reason. “The guarantee should really have been sorted out by now”, he said.

This leaves two other groups: the Power & Integrated Projects Company (PIPCO)/SNC Lavalin team and the Al Baraka/Independent Power Corporation group. The latter does not have a full consortium and is unlikely to proceed in its current form. The PIPCO and SNC Lavalin pairing, which is backed by Bahrain’s powerful Kanoo Group, is thought to have a better chance of moving forward.

Complicating matters for developers is the Marafiq IWPP. This is a large co-generation plant with a planned capacity of 2,400MW of power and up to 400,000m3/d of water. The off-taker for the project is Marafiq, the company established by Royal Decree in 2000 to provide utility services to domestic and industrial users in Jubail and Yanbu.

At this stage, Marafiq is an infinitely more attractive client than the Water & Electricity Company (WEC), the joint venture established by SWCC and the Saudi Electricity Company to off-take the power and water produced by the Shoaiba plant. Unlike its rival, Marafiq is backed by a powerful and creditworthy shareholder group which includes the Saudi Basic Industries Corporation (SABIC) and Saudi Aramco.

With the prospect of both deals coming to market at the same time and other projects such as Oman’s Sohar IWPP and the Taweelah B-C IWPP in Abu Dhabi also competing for funds, developers could be forced into choosing between the two. “It will be difficult for developers to go for Marafiq and Shoaiba”, said a source close to the transactions. “I’m not
sure there is enough capacity in the market to do both deals at once”.

One option for developers is to dilute their equity commitment in the Shoaiba project and it is not inconceivable that some might seek only a minority shareholding.

A lot depends on which deal comes first. Marafiq is going through a PQ process and a number of developers are understood to have submitted statements of qualification. The transaction advisers said they had “received a positive response from the industry leaders”.

Shoaiba on the other hand has been bogged down by problems over the exact form of credit support for the off-taker (see GWI, February 2004, p9). An RFP is understood to be due soon but this is by no means certain. The longer the tender process goes on, the less confidence developers are likely to have in the project.