The timetable for establishing power company is tight with management approval set for November and board approval set for December. The idea has its complexities and is part of a plan to double Aramco’s cogeneration portfolio. The oil company’s current cogeneration supplier is Tihama Power Generation Company, a $800 million joint venture between International Power and Saudi Oger, which produces 1,076MW of power and 2040 tons per hour of steam at four sites in the Eastern Province.

The complexity is Aramco does not own the assets and instead buys the power and steam under a 20-year purchase agreement. To float a company would clearly need to take some ownership of the assets. Aramco is looking to expand the capacity at the four sites and add new facilities at two more sites. It is possible, therefore, it could become directly involved in the development the new facilities.

Part of the advisory mandate will involve negotiating with Tihama and other potential providers on the expansion projects. The four current sites are at Ras Tanura, Ju’aymah, Shedgum and Uthmaniyah. In addition Aramco and its PetroRabigh refinery partner Sumitomo Chemicals are negotiating for a $1.4 billion expansion of the cogeneration project at PetroRabigh.

The asset is owned by Acwapower, Itochu  and Marubeni and has a 25 year sales agreement. But it is not clear if this asset will become part of power company as it is already in the quoted PetroRabigh company.

Aramco says the vision for the new power company is to aggregate its activities and investments in cogeneration and then leverage these to become a national champion for Saudi Arabian power issues. The new company would share the wealth created by these activities with the Saudi public.