Dubai Awards ACWA $1.8 Billion Power-Plant Deal on Rising Demand

  • Coal-burning plant's capacity may reach 3,600 MW in 3 phases
  • Emirate's energy demand seen rising faster than forecast 5%

Dubai’s government-owned utility picked Saudi Arabia’s ACWA Power International to partner in a $1.8 billion project to build the emirate’s first coal-burning generating plant as it steps up efforts to meet rising electricity demand.

The 1,200-megawatt facility will be followed by two more, each of the same size and using the same fuel, Saeed Mohammed Al Tayer, chief executive officer of Dubai Electricity and Water Authority, said Tuesday at a news conference in Dubai. Power use in the emirate has risen 6.4 percent in 2015, faster than the utility’s forecast of 5 percent growth for the whole year, he said.

The second-largest sheikhdom in the United Arab Emirates, Dubai has become a dynamic commercial hub for the Middle East. As the emirate’s economy has expanded, so has its need for electricity. Dubai must import liquefied natural gas and is also building solar plants to generate power.

Chinese Lenders

DEWA, as the utility is known, will invest about $200 million toward its 51 percent share of the coal-burning project, Al Tayer said. ACWA will invest a similar amount as holder of the remaining 49 percent, Paddy Padmanathan, chief executive officer of the Riyadh-based power producer, told reporters.

The joint venture will finance an additional $1.4 billion of the plant’s cost with bank loans and funds from China’s state export credit agency, Padmanathan said. Industrial & Commercial Bank of China Ltd., Bank of China Ltd., Standard Chartered Plc and First Gulf Bank PJSC are among possible lenders for the project, he said.

The power station will be located at Hassyan, along Dubai’s border with Abu Dhabi, the U.A.E.’s largest emirate and holder of most of its oil reserves. It will consist of two 600-megawatt units, the first to be completed by March 2020 and the second unit 12 months later, Al Tayer said.

Diversifying Supply

Harbin Electric Co. of China and Alstom SA will build the plant as contractors to ACWA, and Electricite de France SA’s EDF Trading unit will supply the coal, Padmanathan said. ACWA will sell electricity under a 25-year agreement at a cost of 4.501 U.S. cents per kilowatt-hour.

Dubai is targeting by 2030 to generate 15 percent of its electricity from renewable energy and 7 percent from coal, while also buying 7 percent of its power from nuclear reactors planned in Abu Dhabi. The remaining 71 percent will come from natural gas, said Al Tayer, who is also vice chairman of the Dubai Supreme Council for Energy.

Earlier this year, the utility tripled the amount of solar-power capacity it plans to build in the emirate to 3,000 megawatts by 2030. It was motivated by greater demand and the lower cost of building solar plants, Al Tayer said.

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