ACWA Power’s fully owned subsidiary — Saudi Arabian Water and Electricity Company (SAWEC) — has signed a binding Letter of Intent (LoI) with Mitsubishi Corporation of Japan (MC) to purchase MC’s six percent indirect shareholding in Shuqaiq Water and Electricity Company (SqWEC).

SqWEC owns an 850 MW power generation and 212 cubic meters per day of water desalination capacity IWPP Plant in Shuqaiq on the western shores of Saudi Arabia 130 km north of Jizan.

The project achieved commercial operation in May 2011.

SqWEC is currently owned by a group of government and private sector investors.

The government ownership is in two parts; 32 percent by Public Investment Fund (PIF) and 8 percent by Saudi Electricity Company (SEC).

The private sector ownership totals 60 percent of the project and is in three parts; ACWA Power (through SAWEC) owning 34 percent, Gulf Investment Corporation (GIC) owning 20 percent and MC owning 6 percent.

The three private sector investors have invested in SqWEC through their holding company Shuqaiq International Water and Electricity Company (SIWEC).

The 6 percent indirect stake of MC in SqWEC would be acquired by ACWA Power (through SAWEC) by purchasing all of MC’s shares in SIWEC.

Upon completion of the transaction ACWA Power’s indirect stake in SqWEC will increase from 34 percent to 40 percent.

The transaction remains subject to consents to be secured from various counterparties.

MC and SAWEC also expect to sign a Share Purchase Agreement (SPA) in respect of the shares within the next two months.

Both parties expect to secure the required consents in the next one month.

Paddy Padmanathan, CEO of ACWA Power, said ” Acquiring these shares is a part of ACWA Power’s wider strategy to deploy its capital in earnings accretive and value creating transactions. “

The CEO added :“This transaction represents such an opportunity to ACWA Power and furthermore also gives an opportunity to increase its stake in a project which was completed before time and below budget and where ACWA Power was the lead developer. Being the managing private shareholder of SqWEC will enable ACWA Power to conclude this transaction in a short time.”