RIYADH: Saudi Electricity Company (SEC), the state-controlled power provider, has signed a contract with a consortium for SR7.9 billion to build a gas-fired power plant. The SEC will be committed to buy the electricity for 20 years from the plant as per the provisions of the contract, said Ali Saleh Al-Barrak, SEC chief executive officer, speaking after signing of the power purchase agreement, here Tuesday.

Al-Barrak said that the SEC would buy all of the plant's output over a 20-year period. The signing ceremony was attended by top Saudi officials including Minister of Water and Electricity Abdullah Al-Hussayen and Ibrahim Al-Jomaih, chief of the Jomaih Group. A large number of senior executives of the three consortium companies — the GDF Suez of France, Japan's Sojitz Corp. and Al-Jomaih Holding Group — also attended the event.

Spelling out the salient features of this model partnership deal, Al-Barrak said that the plant was expected to start operation in May 2012, while full completion is scheduled for March 2013. The plant will be situated approximately 125 km west of Riyadh. The SEC chief said that the SEC had entered into a joint venture with GDF Suez, Sojitz Corp. and the Jomaih Holding Group to build and operate this 1730MW natural gas-fired power plant.

The SEC will hold a 50 percent stake in the Durmaa Power Co. joint venture, which has been set up for the development of the plant dubbed as "Riyadh 11" plant, while the other half of the equity will be split between the other partners. The first phase of the power project is expected to start operations in May 2012 and the second phase is scheduled to be completed by May 2013, said SEC officials.

The project will meet 15 percent of Riyadh's power demand and will be financed by a consortium of local and international banks including, Banque Saudi Fransi, Samba Financial Group, and Alinma Bank. "Up to 70 percent of the financing required for Riyadh 11 power plant will come in loans from banks," said Al-Barrak, adding that the partners in the plant will contribute 30 percent of the project's cost in equity. The SEC, whose major shareholder is the Saudi government, has a monopoly over almost all the electric power generation, its transmission and distribution in the Kingdom.

General Electric will supply the equipment for the plant and Hyundai Heavy Industries has been selected as main contractor for the construction of the plant, Al-Barrak added. Aramco will supply the plant with natural gas.

The new power project has added significance keeping in view the power demand in Saudi Arabia, which is rising at an annual rate of eight percent and is expected to triple to 121,000MW from current 40,000MW.

The Riyadh 11 project is one among six IPP projects under way in Saudi Arabia, which are being built to add 11GW of new capacity in response to the Kingdom’s surging demand for power.

In a related development, the SEC signed a SR457.6 million contact with a national company on Monday to expand Hail electricity station with an additional capacity of 126MW.