Thursday, July 31, 2008

GDF Suez to power Abu Dhabi

Original Article

Abu Dhabi is estimated to need more
generating capacity by 2011 to meet
GDF Suez, a French energy company, says it has been awarded a multibillion-dirham contract to rescue Abu Dhabi from a looming power crunch with a new 1,500-megawatt, gas-fired power station.

The Shuweihat 2 plant will plug a forecasted shortfall in Abu Dhabi’s power generation capacity. According to official forecasts, 2011 will be the last year that the emirate’s current generating capacity will be able to meet demand, which is growing at about 15 per cent annually.

Eric Miller, a Suez spokesman, said yesterday that the company continued to view the UAE in particular as “a very attractive market”, because it offered stable and safe rates of return in a country with very high demand growth.

“In the Gulf, they have fairly well-structured contracts and we don’t have to worry about the payment capacity or other aspects of the off-takers,” he said.

The Shuweihat 2 facility, which will also desalinate more than 450,000 cubic metres of water a day, will be built west of the capital and start operations by 2011. The plant will be Suez’s second facility in the partially privatised Abu Dhabi market, which it dominates in tandem with the Marubeni Corporation, a Japanese firm, and International Power, which is based in the UK.

Dirk Beeuwsaert, the chief executive of Suez International, said the 10 plants the company had in the Middle East produced 12,000 megawatts of electricity and “are an increasingly significant part of GDF Suez’s overall energy assets”.

“We firmly believe in the energy and water opportunities in the Gulf, which offer long-term off-take contracts within a well-developed legal framework in a region with strong growth,” he said.

The Abu Dhabi Water and Electricity Authority (Adwea) will retain a 60 per cent share of the project, as it does with all power projects in Abu Dhabi, and Suez will hold the remaining 40 per cent. Mr Miller estimated that the total value of investment into the plant would exceed US$2 billion (Dh7.34bn).

When it announced the Shuweihat 2 project in May, Adwea said it would also build a Shuweihat 3 station with a capacity of 1,500 megawatts. That project, however, had not been put out to tender, and Mr Miller indicated it could be granted directly to Marubeni.

“My understanding is they’re in discussion with Marubeni Corporation,” he said, referring to Adwea.

Despite a much publicised shortage of natural gas across the country, Mr Miller said that Suez continued to see the UAE as a major market for its natural gas-fired equipment.

“I don’t think that at this point there is any real limitation for additional gas-fired technology,” he said.

Douglas Caskie, an associate director of gas economics at IPA Energy + Water Consulting, which has analysed the UAE’s gas challenge, concurred in part with that assessment. Mr Caskie said higher prices on the domestic power market would make it economical for companies to make more supplies available.

“The issue is prices, really. More gas could be made available if the price increases,” he said.

The company is not limiting itself to gas-fired technology in the Abu Dhabi market. In January, Total, a French oil and gas major, said it would team up with Suez and Areva, another French energy firm, to help the Government develop a nuclear regulatory structure and design and build two 1,600-megawatt nuclear reactors in the emirate.

The Government has not yet accepted the French proposal for the two plants, and is also entertaining offers from British and American companies.

Mr Miller said there was room in the burgeoning nuclear market for all competitors. “My understanding is the ultimate goal of the UAE is to have a number of partners to diversify their portfolio,” he said.

The Suez contract came the same day that a Dh2bn wastewater contract was awarded by Adwea to Veolia Water, making it a great day for French companies.

Veolia’s contract is for two wastewater plants with a combined capacity of 430,000 cubic metres a day, in Al Ain and the capital.

The company will build and operate the plants in partnership with Besix, a Belgian construction firm, which will take a third of the project’s operating revenues. Veolia said the contract to build and operate the plants would generate €364 million (Dh2bn) in revenue for the company over its 22.5-year lifespan.

The expansion of wastewater facilities is in line with Government’s plan to increase the use of recycled water in irrigation and industry.

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