ACWA expects to retain build contract for Rabigh 2 plant

RIYADH/ALKHOBAR: Saudi-based developer ACWA Power expects to retain a commission to build a 1,800 megawatt power plant for Saudi Electricity Co. despite the utility changing the fuel for the project, ACWA's chief executive told Reuters.
A consortium consisting of ACWA, Samsung C&T and MENA Fund was awarded preferred bidder status for the Rabigh 2 project in January, which was due to cost an estimated $ 2.5 billion to construct and burn heavy fuel oil.
However, since then SEC has changed its mind on the plant's fuel to gas, which requires a significant redesign of the scheme and which has led to speculation that the project could be put out to tender again, banking and industry sources said.
"On Rabigh we have a memorandum of understanding that we're working with and they (SEC) are continuing to work with that," ACWA's Chief Executive Paddy Padmanathan told Reuters.
"We haven't finalized (the revised plans) yet, but I don't expect a re-tender. We have an agreement and we're working toward it."
Electricity generation is a key issue in the Kingdom, where 27 million people face sporadic power cuts when air conditioning usage surges in the hot summer.
The country's minister for water and electricity, Abdullah Al-Hussayen, said in December that SR 500 billion ($133 billion) of investment was required in the next 10 years to meet rapidly rising power demand.
The change of design to a gas-powered plant will make the plant cheaper, meaning the $ 2 billion funding package agreed with a consortium of seven local and international banks earlier this year will also be revised down, a Saudi-based banker said.
The plant is the fourth project in SEC's independent power plant program and is located 175 km north of Jeddah on the west coast of the kingdom.
ACWA, in which two Saudi government funds bought a 19.4 percent stake in January, still plans to offer shares to the public in 2014, with Padmanathan expecting the initial public offering (IPO) to go ahead in the latter part of the year.
The firm has done some preparatory work towards the listing and will appoint a consultant shortly to advise it on its IPO readiness, before mandating an adviser to arrange the offering in the third quarter, Padmanathan said.
Chief Financial Officer Rajit Nanda told Reuters last year that it was eyeing an IPO on the Saudi exchange in 2014, which will see the firm list between 25 to 30 percent of its shares for a market capitalization of between $ 2.5 billion and $ 3.5 billion.
Meanwhile ACWA's plans to complete a debut Islamic bond issue have been put back as the company is currently tied up with several other initiatives. However, it could pick banks to arrange the sukuk in the third quarter, Padmanathan said, without specifying whether the deal would be in dollars or local Currency.