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Sembcorp Salalah Signs Contract for US$1 Billion Salalah Independent Water and Power Project in Oman
November 23, 2009
Sembcorp Salalah Power & Water Company (Sembcorp Salalah), a joint venture formed between Sembcorp Industries’ fully-owned subsidiary Sembcorp Utilities and the Oman Investment Corporation, has executed a 15-year contract to supply power and water to the Oman Power and Water Procurement Company, which is wholly-owned by the Government of Oman.
The company will be investing approximately US$1 billion to develop, build, own and operate the Salalah Independent Water and Power Plant (Salalah IWPP) in Oman.
Sembcorp Salalah is 60% owned by Sembcorp Utilities and 40% owned by the Oman Investment Corporation, whose shareholders are the Gulf Investment Corporation, the National Investment Funds Company, State General Reserve Fund of the Sultanate of Oman and BankMuscat.
Targeted to begin full commercial operations in the first half of 2012, the Salalah IWPP will consist of a gas-fired power plant which will have a net capacity of 445 megawatts and a seawater desalination plant which will employ reverse osmosis technology to produce 15 million imperial gallons (69,000 cubic metres) per day of water. Set to be the largest and most energy-efficient power and water plant in the Governorate of Dhofar in Southern Oman, the entire electricity and water output from the facility will be sold under the 15-year power and water purchase agreement.
The new facility will increase the power capacity in the Dhofar region from 256 megawatts to 746 megawatts. Given the power and water demand growth in the region, the plant is expected to continue providing power and water beyond this initial term of 15 years. In addition, the facility will be operated and maintained by a joint venture company, Sembcorp Salalah O&M Company, which is 70% owned by Sembcorp Utilities, under a long-term operation and maintenance (O&M) contract for the entire term of the power and water purchase agreement. The remaining 30% of the O&M company is owned by the Oman Investment Corporation. SEPCO III Electric Power Construction Corporation of China is the engineering, procurement and construction contractor under a fixed-price, date-certain turnkey contract and Hydrochem (S), a wholly-owned subsidiary of Hyflux, is the sub-contractor for the seawater desalination plant.
The project cost of approximately US$1 billion will be 75% funded through 17-year non-recourse project finance loans, and 25% by shareholder loans. The non-recourse project finance loans will be provided by Standard Chartered Bank (also the Financial Advisor), Bank of China, China Development Bank, BankMuscat, KfW-IPEX Bank and Sumitomo Mitsui Banking Corporation as Mandated Lead Arrangers, and National Bank of Oman and Bank Sohar as Arrangers. The loans will be in US dollars, except for those from BankMuscat, National Bank of Oman and Bank Sohar, which will be in Omani Rials.