Tractebel confirms regional commitment
- From: Vol 5, Issue 8 (August 2004)
- Category: General
- Region: Middle East
- Country: Oman and United Arab Emirates
- Related Companies: BNP Paribas, Doosan Heavy Industries, Gulf Investment Corporation, International Power, National Trading Corporation, Siemens, Sogex Oman, Standard Chartered Bank, Suez, Tractebel, WJ Towell & Co and Zubair Corporation
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The company has answered some of its doubters in the best way possible – by claiming two new $500 million deals.
Since it pulled out of the running for Abu Dhabi’s Umm al-Nar IWPP in November 2002, Belgium’s Tractebel has kept a relatively low profile in the Middle East. This year, however, the Suez group company returned to the fold in impressive style by winning the tenders for Sohar and Al Ezzel and achieving second place in the tender for Taweelah B in a consortium with International Power.
GWI interviewed Guy Richelle, CEO of Tractebel Middle East, at the company’s offices in Dubai last month to find out more about the group’s recent successes and its increasingly aggressive strategy.
Richelle starts by making it clear that Tractebel’s commitment to the region has never been in doubt. “We have been ever present in the region”, he states. The company has been involved in the Middle East in an engineering capacity since the mid-1980s.
Its first success as a developer came in 1994 when it was awarded the Al-Manah IPP in Oman in conjunction with a group of local investors.
The 90MW plant entered commercial operation in 1996. A further 180MW of open cycle capacity was then added in 1999/2000. Richelle states that 40% of the shares of the project company, United Power Company, are now traded on the Muscat Stock Exchange.
Tractebel followed up its success at Al-Manah with the 1,350MW and 84MIGD Taweelah A1 project in Abu Dhabi. Its foreign partner in this case is France’s Total, with whom it owns 40% of the project’s equity. Taweelah A1 entered commercial operation in 2003.
However, around the time it was completing construction of the Taweelah A1 plant, Tractebel surprised the market by withdrawing from the Umm al-Nar project. Development of Umm al-Nar had become incompatible with Suez’s Action Plan, which aimed to cut group debt and reduce its exposure to emerging markets.
After a quiet year in 2003, Tractebel has assumed a more prominent position in the region this year. It has focused on three bids – Oman’s Sohar IWPP, the Al Ezzel IPP in Bahrain and ADWEA’s Taweelah B IWPP. It has been successful in the first two of these deals and is only fractionally behind the first ranked bidder for Taweelah B, having submitted an offer of $1.59 billion.
Sohar and Al Ezzel
In mid-July, the company confirmed that its consortium had been selected for the Sohar IWPP. The project consists of a 585MW combined cycle power plant and a 33MIGD desalination facility. Siemens will supply three gas turbines of the 150MW class for the power plant. Desalinated water will be produced in four MSF trains supplied by Korea’s Doosan Heavy Industries. Doosan is also the main EPC contractor. Tractebel’s developer consortium is comprised of the local National Trading Corp., Zubair Corp., WJ Towell & Co, Sogex Oman and the Ministry of Defence Pension Fund.
Richelle says there is no single reason why the company’s bid for Sohar was successful. “When you want to win a project of this complexity you need to put all the ingredients together and they all need to be competitive”, he states. “You need a competitive EPC contractor, competitive financing and you need to correctly estimate the plant’s operation and maintenance costs. We have been able do this on the basis of our experience in the region”.
The total investment for Sohar is about $500 million. With a debt to equity ratio of 80:20, Tractebel is looking to raise about $400 million of bank debt to fund the deal. Its proposal has been underwritten by BNP Paribas and Standard Chartered. Both banks are the consortium’s mandated lead arrangers and BNP Paribas is the global coordinator.
The Sohar plant is due to enter operation in two phases, explains Richelle. The first phase of 360MW will be operating in open cycle by 1 April 2006. Commercial operation of the complete plant is scheduled for 1 April
Tractebel followed up the Sohar announcement with news at the end of July that it had won the tender for the Al Ezzel IPP. This project consists of a plant of approximately 1,000MW of electric capacity and is the first IPP in the Bahrain government’s privatisation programme. The company’s partner on the $500 million project is Gulf Investment Corporation. The plant will sell electricity to Bahrain’s Ministry of Electricity and Water under the terms of a 20-year power purchase agreement.
Now that Tractebel has two new projects under its belt, where does Richelle see the next deal coming from? “We will consider further opportunities on a case-by-case basis”, he says. The company is among the prequalifiers for Saudi Arabia’s Shoaiba IWPP. “We haven’t made a decision at this point in time with respect to Shoaiba”, says
Richelle. “We will look at the merits of the project when we have more information”.
Tractebel has also prequalifed for the Marafiq and Fujairah IWPPs and is studying the RFP for the former. However, Richelle points out that nothing should be read into this. “The prequalification process is non-committal and merely enables us to look at a project and evaluate the potential opportunities”, he says. “We have not come to a conclusion about any of these projects yet”.
Tractebel, or Suez-Tractebel as it is now known, is the Suez group’s energy division. The company is organised into two units – Tractebel Electricity & Gas International (Tractebel EGI) and Tractebel Electricity & Gas Europe (Tractebel EGE). Tractebel EGI is responsible for Tractebel’s energy responsibilities outside Europe. Tractebel
EGI has a regional office in Dubai.
Tractebel EGI operates in North America, the southern cone of Latin America, Asia and the Middle East. It develops, builds and operates energy facilities in electricity and gas, including LNG. It transports and distributes natural gas and LNG in a number of countries outside Europe and is a trader and marketer of electricity and gas. It also offers energy-related services to industrial customers. Tractebel EGI turnover in 2003 was €4.49 billion. Total power capacity in operation, under construction or under development is 26,000MW.
Water is not part of Tractebel EGI’s core business but the nature of the market in the Middle East means that it is impossible for the company to ignore it, as most regional IPPs have a water component. There is considerable water know-how and competence at the parent company level but Suez group companies, such as Degrémont, mostly operate as independent entities.