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Email PageRegional Review - Middle East
middle east profit from
operations boosted by
an increase in capacity
In the Middle East, profit from operations increased to £68 million (2006: £52 million), principally reflecting a full year contribution from Tihama in Saudi Arabia and the completion of the Umm Al Nar extension in Abu Dhabi, and additional capacity coming on stream at Ras Laffan B in Qatar. Profit in 2007 included a development fee from the Fujairah F2 project, similar to the development fee received in 2006 relating to the Hidd acquisition in Bahrain.
At Umm Al Nar, the final stage of construction was completed in 2007. The plant, which now has an overall capacity of 2,450 MW and 143 MIGD, is operating under the first year of its 20-year Power and Water Purchase Agreement (PWPA). 795 MW and 48 MIGD of the original plant will be decommissioned in 2010. This decommissioning date was extended, at the request of the Abu Dhabi Water and Electricity Company (ADWEC), by an additional two and a half years due to the good operational performance of the existing assets. After 2010, the plant will have a capacity of 1,655 MW and 95 MIGD until the end of the PWPA in 2027.
At Ras Laffan B, in Qatar, the second phase of construction was completed in June, with an additional two steam turbines entering commercial operation providing 307 MW of capacity, and in January 2008 15 MIGD became operational. As at 5 March 2008, the plant has a capacity of 920 MW and 30 MIGD, and completion of the third and final phase of 135 MW and 30 MIGD is expected in the first half of 2008.
In Bahrain, the first phase (12 MIGD) of the desalination extension at Hidd achieved commercial operation in December 2007. The construction of the remaining 48 MIGD extension continues to make progress and we expect this additional capacity to reach commercial operation in the first half of 2008.
| Results - Middle East | ||
| Year ended 31 December 2007 £m |
Year ended 31 December 2006 £m |
|
|---|---|---|
| Profit from operations | 68 | 52 |
| Exceptional items and specific IAS 39 mark to market movements – (profits)/losses | - | - |
| PFO (excluding exceptional items and specific IAS 39 mark to market movements) | 68 | 52 |
In June, the non-recourse debt facility at Tihama was successfully refinanced for a total of US$550 million, achieving improved debt amortisation terms, lower margins and providing an increased distribution of US$45 million to International Power plc.
International Power (in a 50:50 partnership with Marubeni of Japan) was successful
in its bid for a 40% interest in the 2,000 MW and 130 MIGD greenfield Fujairah
F2 independent water and power project in the UAE. The remaining
60% will be held by the Abu Dhabi Water and Electricity Authority. A long-term
PWPA was signed with ADWEC for the sale of power and water, and the project
reached financial close in December. The financing structure comprised two
non-recourse loans, a US$1,284 million 23-year term loan from JBIC and a US$856
million 23-year term commercial bank loan, together with a US$565 million equity
bridge facility. This latter facility will be repaid through an injection of
equity of
In Botswana, the development of the Mmamabula power station (Phase One - up to 2,500 MW) with CIC Energy Corp. is proceeding. We continue to progress the negotiation of the power purchase agreements with Eskom Holdings Limited (for the majority of Mmamabula’s output) and Botswana Power Corporation (BPC), alongside the negotiation of the EPC arrangements.
Market environment and growth prospects
In the Middle East the demand for power and water continues to grow strongly, driven by economic growth and expansion. The markets in which we operate (essentially the Gulf States of the UAE, Qatar, Oman, Bahrain plus Saudi Arabia) require some 50,000 MW of additional power capacity - and very significant additional desalinated water market capacity - by the year 2015. Major new industrial, commercial and residential projects are being planned, which will further increase demand growth in the region. This growth presents us with an excellent opportunity to expand our operations and supply power and water for these developments in the region.
To illustrate this rate of growth, we expect to bid for the development and commissioning of several new power and water projects in some of our key markets in this region, as summarised in the following table:
| Capacity | Project | Country |
|---|---|---|
| 1,600 MW, 100 MIGD | Shuweihat S2 | UAE |
| 400 MW, 15 MIGD | Salalah | Oman |
| 1,200 MW, 50 MIGD | Ad Dur 1 | Bahrain |
| 400 MW | Al Qatrana | Jordan |
| 1,200 MW | Rabigh | Saudi Arabia |
Our strong reputation and track record of delivery in the region places us in a good position to continue to deliver further growth.
We are also exploring/developing projects in selected Northern and Southern African countries. In particular, we are developing a major project (Mmamabula) principally for South Africa, which is experiencing power shortages and strong demand growth for electricity. This project involves the build of a major new power station in Botswana, using indigenous coal supplies, supplying to South Africa and Botswana under long-term power purchase agreements with Eskom (of South Africa) and BPC.
- Majority of plants in the market are integrated to supply both power and desalinated water
- Market type: regulated market – all long-term contracted assets
- Fuel mix: mainly gas fired generation
- Peak demand season: summer
- Revenue is primarily linked to plant availability
- Typically fuel and other major costs passed through to offtaker
- International Power’s current installed operational capacity in the market
2,400 MW and 78 MIGD (net)
– 2,400 MW gas, 78 MIGD water
UAE
Qatar
