Sembcorp Salalah’s power and water plant, the Salalah Independent Water and Power Plant, holds a central position in the infrastructure of the Dhofar Governorate. As the largest and most energy-efficient power and water plant in the Governorate, the plant is expected to play a major role in meeting the growing power and water demand of the region over the short, medium and long term.
Sembcorp Salalah has a number of key competitive strengths:
Sembcorp Salalah has strong predictability of cash flows that are not affected by the amount of power and water actually required by Oman Power and Water Procurement Company (OPWP) as the Company is paid on an availability basis, based on the power and water that is made available.
Under the power and water purchase agreement (PWPA), Sembcorp Salalah is entitled to receive capacity charges from OPWP for 100% of the available power and water capacity of the plant, which comprise approximately 90% of the total revenue of Sembcorp Salalah. These capacity charges are payable by OPWP regardless of whether the actual output of the plant is dispatched by OPWP.
Sembcorp Salalah’s project represents one of 12 independent power and/or water production projects to be implemented by the government through OPWP on a “build, own and operate” basis and benefits from a well-established contractual framework.
he power and water sectors are of high strategic importance to the Dhofar Governorate and Oman as a whole. As of July 2013, the plant’s capacity constitutes approximately 72% of the power dispatch and 100% of the net installed water capacity of the Dhofar Governorate.
Given the projected growth in electricity and water demand, the plant is expected to remain critical to the continued supply of power and water in the Dhofar Governorate in the long term.
The plant is completed and has been in full commercial operation for over 14 months. In addition, Sembcorp Salalah benefits from minimal operating risk as its operator, Sembcorp Salalah O&M Services Company (Sembcorp Salalah O&M), is a joint venture indirectly owned by the Project Sponsors, Sembcorp Utilities and Oman Investment Corporation (OIC), creating an alignment of interests which ensures that the plant is operated efficiently. Sembcorp Salalah O&M is managed locally and benefits from the procedures and expertise of Sembcorp Utilities, which is well established in the region and has a demonstrated track record of running similar plants, with facilities of over 5,900 MW of power capacity and over 1,500 MiGD of water in operation and under development globally.
Management believes that the excess of actual capacity over the contracted capacity of the plant will more than compensate for the estimated degradation of the plant over the term of PWPA. The PWPA also allows Sembcorp Salalah to perform maintenance on the power plant at designated off-peak periods of the year. This contemplated maintenance is likely to extend the lifespan of the plant and delay the degradation of its electricity and desalinated water capacity.
Under the natural gas sales agreement between Sembcorp Salalah and the Ministry of Oil & Gas, the plant has mitigated risks associated with gas quality, gas supply and gas price. In the event that natural gas is not available, and provided that Sembcorp Salalah is not in breach of its obligations regarding the operations of the plant, Sembcorp Salalah is still entitled to receive its incremental costs for the use of diesel from the Ministry of Oil & Gas and capacity charges from OPWP.
Sembcorp Salalah benefits from the extensive water and energy experience of the Project Sponsors. Sembcorp Utilities is a leading energy, water and on-site logistics group with a strong track record in identifying, securing, financing and executing energy and water projects and has a number of strategic relationships and long-term partnerships with multinational customers. OIC is a private equity investment company with strong experience of investing in the region and a diversified portfolio of investments in the oil and gas, petrochemical, construction and manufacturing sectors in Oman. The project is strategically important to the Project Sponsors, who provide Sembcorp Salalah with technological and management capabilities and expertise that are critical to its operational success.
Sembcorp Salalah has the advantage of well-trained and experienced personnel, who bring extensive management expertise and the knowledge sharing of know-how accumulated through decades of experience. Sembcorp Salalah personnel are also able to attend training and off-site sessions with personnel of the Project Sponsors around the world in order to share and exchange knowledge and best practices.
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Sembcorp Salalah has two key opportunities for incremental growth of revenues:
| i. | The expansion of existing facilities to deliver additional desalinated water capacity, in line with the current government policy to minimise use of groundwater; and |
| ii. | The sale of current excess power capacity |