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1 IPR in the Middle East January 2006. 2 Introduction Mark Williamson.

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Presentation on theme: "1 IPR in the Middle East January 2006. 2 Introduction Mark Williamson."— Presentation transcript:

1 1 IPR in the Middle East January 2006

2 2 Introduction Mark Williamson

3 3 Our commitment to the region Creating value through core skills Project development and construction Offtake contract design and execution Project financing Plant operation - both power and desalination 34% 66% PPA Merchant (short/medium term contracted) Contract Type - IPR Group (by net MW) Net MW Net MW under construction Set up in region Al Kamil, Oman Shuweihat, UAE Umm Al Nar UAE Tihama Saudi Arabia 35% Al Kamil IPO Ras Laffan B Qatar Al Hidd Bahrian MW ME Net MW Middle East... in the IPR portfolio

4 4 Contribution to IPR from the region Only includes equity from operating assets EBIT Middle East EBIT (£m) Equity Middle East... in the IPR portfolio

5 5 Overview Ranald Spiers

6 6 IPR in the Middle East Six projects in six years with an enterprise value of US$6.5 billion current IPR equity commitment of nearly US$400m Creation of new region - £29m PBIT by 2004 Existing assets performing well Construction is the other major regional activity Power and desalination IPR largest private supplier of desalinated water in the world Pipeline of future projects three currently in bid/negotiation UAE Oman Saudi Arabia Qatar Bahrain Al Hidd Al Kamil Ras Laffan B Tihama Shuweihat Umm Al Nar

7 7 IPR in the Middle East Fuel Type IPR Share (MW) Al Kamil Shuweihat Umm Al Nar Tihama Ras Laffan B Al Hidd Total Net Steam Capacity (m lbs / hr) % of ownership CountryName End of Power Contract Oman UAE KSA Qatar Bahrain ,214 Gas Net Desal Capacity (MIGD) Middle East EBIT (£m)

8 Al Kamil Umm Al Nar extension Shuweihat Tihama 650 MW retires at the end of Ras Laffan B (1) 2007 Al Hidd Umm Al Nar MW , ,550 1,075 1, ,155 2,655 3,355 6,570 6,870 6,995 (1) 285 The Middle East - a growing asset portfolio

9 9 The Middle East Team Abu Dhabi Development Office project selection, bidding, negotiating, project development and management Project companies construction, asset management, client and partner relationships, operations and maintenance Operating companies operations and maintenance, owner and partner relationships

10 10 Key markets Primary target markets: UAE Qatar Saudi Arabia Oman Bahrain Kuwait

11 11 Macro environment Stable Governments, low country risk rankings and good credit ratings Massive oil and gas reserves Petrodollar economies Strong economic growth driven by high oil prices and diversification away from oil Growth rates between 5% to > 10% pa Drivers for power and water demand infrastructure development / tourism replacement vs incremental demand GCC states becoming increasingly interconnected and interdependent

12 12 Regulatory overview Pragmatic regulation, primary method of control via long-term contracts Markets unlikely to liberalise in the short or medium term Environmental regulation most new plants gas-fired

13 13 Commercial structure Long-term contracts which set in stone all major revenues and costs Major risks laid off wherever possible PWPAs, PPAs, ECAs, NGSAs EPC costs fixed with LDs for delays in construction and poor performance Long term operations and maintenance service agreements with OEMs Interest rates and currencies hedged

14 14 Return on investment Return profile similar across the region UAE local shareholder return 13% Seek to enhance returns by O&M, success fees and TSAs Cash generation, use of Equity Bridge Loans Scope to increase return once project has been commissioned, for example by refinancing

15 15 Financial structuring Projects structured using project finance carried out in conjunction with London-based project finance team Maximise use of senior debt Availability of local capital and international debt with international MLAs /JBIC High leverage is not a problem

16 16 Competitive environment Projects becoming increasingly competitive but IPR still winning regularly New players from Japan, Korea, Malaysia Traditional competitors (Suez/Tractebel, AES, Marubeni) Fewer EPC contractors tends to limit competition Competitors or partners (eg Mitsui)

17 17 Partnerships Partnering is a key element of risk diversification and gaining local knowledge ADWEA, CMS, Saudi Oger, QEWC, Mitsui, TEPCO, Sumitomo, Chubu, Suez We choose the right partners to help us win the deal Each partner brings something different to the table

18 18 Desalination Strong power demand and even stronger water demand Most Gulf projects are designed to offer both power and water Increases the overall efficiency of the plant Uses waste heat from the steam IPR has assets with the major thermal desalination processes

19 19 Agenda Contract StructuresDavid Wadham Financing our GrowthPeter Barlow DesalinationJaideep Sandu Coffee Break OmanTom Mackay & Kevin Cox Abu DhabiDavid Barlow & Ed Metcalfe Saudi ArabiaDavid Barlow, Jeff Wright & Steve Pedrick QatarTom Mackay Coffee Break BahrainJohn Hurst SummaryRanald Spiers

20 20 Contract structures David Wadham

21 21 Similarities across contracts Part-owned in conjunction with other international or local partners Financed on a highly leveraged, project finance (limited-recourse) basis Operate with the security of a long-term power (and water) offtake contract for the plants available capacity and output Contract with sovereign/quasi-sovereign counterparty states single buyer of power and water

22 22 Differences across contracts PWPAs structured on an energy conversion basis (ECA) or fuel supply agreement (FSA) Most projects are BOO, some BOOT Sub-contracted O&M or combined owner/operator structures Government interest in some projects

23 23 PWPAs and PPAs Project company responsible for: design construction commissioning Offtaker obligation to provide connections to power and water grid and purchase available capacity and output Flat tariff with capacity charge to recover debt service, fixed O&M and equity return; pass-through output charge to cover variable O&M and fuel Payment is in local currency (except Tihama) but includes exchange rate protection ownership operation maintenance

24 24 PWPAs and PPAs (cont.) Capacity or termination payments guaranteed by the host government Revenue protection for offtaker defaults and political force majeure (war, change in law, government action/inaction) Commercial documents subject to local law but international arbitration Finance and construction documents subject to English law

25 25 PWPAs and PPAs (cont.) Energy conversion (Abu Dhabi, Tihama) or separate fuel supply arrangements (Oman, Qatar, Bahrain) BOO (Abu Dhabi, Oman, Bahrain), BOOT (Tihama and Qatar), with a transfer to the offtaker Accounting treatment: always an operating or finance lease Terms vary from 15 years (Oman), through years (Tihama, Abu Dhabi and Bahrain) to 25 years (Qatar), but without market liberalisation renegotiation clauses

26 26 Operation and maintenance Abu Dhabi Requires a separate operator owned by foreign investors Payment on a fixed price basis Ability to generate Operator fees and bonuses against a lower equity stake (e.g. Umm Al Nar, 20% stake in the generator, but a 70% stake in the operator) Others More flexibility (e.g. Al Kamil, Ras Laffan) Advantages of a combined owner/operator

27 27 Gas turbine maintenance Long-term arrangements with the OEM (Al Kamil, Umm Al Nar, Tihama with GE and Shuweihat and Ras Laffan with Siemens) For one or two maintenance cycles The benefits of an LTSA include: All scheduled maintenance sub-contracted for a fixed price, with a degree of unscheduled outage cover provided within the price Based on a term warranty concept, i.e. OEM guarantees to replace all program parts as needed

28 28 Shareholding structure Abu Dhabi IWPPs have 60% holding retained by the government Al Kamil initially 100% owned by IPR, now 65% owned following a mandatory IPO on the Muscat Stock Market Ras Laffan has no direct state involvement, although QEWC holds 55% and is in turn listed on the DSM Tihama and Bahrain owned entirely by private investors The advantages of a government shareholding and the need to generate local investment opportunities

29 29 Umm Al Nar Shareholders Agreement Foreign shareholder has the ability to manage the project and enjoys significant minority protection coupled with government partner with shared goals as an investor Board of 7 directors (4 ADWEA and 3 foreign investors) Foreign investor appoints the Executive Managing Director Ed Metcalfe Voting on all significant matters at board and shareholder level requires approval of both ADWEA and the foreign investor Government IPO provisions (Taqa was listed on the ADSM in July 2005)

30 30 Conclusion Long-term off take arrangements with single state buyers, guaranteed by sovereigns with investment grade ratings and a strong economic future Robust contractual terms offering secure future returns with revenue protection for supplier and offtaker defaults and for political force majeure events Projects are embedded in the region, with governments participating as co-investors or encouraging direct public ownership Key cost risks (financing and gas turbine parts and maintenance) well mitigated through long-term hedging and supply arrangements Upside remains through refinancing opportunities, the ability to reduce costs over time and merchant tail on BOO projects

31 31 Financing our growth Peter Barlow

32 32 Project finance Fundamental part of IPRs financial strategy Objective is to finance on a non-recourse basis at the asset level

33 33 Structure of Middle East IPPs/IWPPs Assets backed by long-term (20yrs+) Power (and Water) Purchase Agreements (PPAs/PWPAs) Contractual Structure designed specifically for non-recourse financing Clients obligations backed by Government guarantees Predictable, long-term cashflows allow high leverage without sponsors support

34 34 Lenders view on IPP/IWPP risk/ country risk No merchant risk Excellent track record of project financed IPPs/IWPPs: success stories / accepted model in the banking market Loan syndication allows diversification of lending across different projects/countries: lower risk Project financed IPPs/IWPPs include security on assets and stricter covenants than corporate loans ME countries hydrocarbon-rich, financially sound and politically stable: country risk acceptable to most international PF lenders

35 35 International and regional debt providers IPRs approach: mix international and regional lenders expertise International lenders particularly active in most countries in the region: UAE, Oman, Qatar and Bahrain Predominantly regional lenders in the Kingdom of Saudi Arabia (KSA) so far Recent improvements in KSA (e.g. entry in WTO) suggests increased role of intl lenders there Islamic financing further source of liquidity, of which IPR has experience through Umm Al Nar and Shuweihat Export Credit Agencies being increasingly used

36 36 IPR capabilities in debt capital raising Core skill - IPR takes lead role in every project financing To date 5 IPPs/IWPPs project financed in the region Raised $3.9 billion in non-recourse bank debt IPR successfully financed first large scale IPP in Saudi Arabia Financing also achieved in potentially adverse market conditions (e.g. Shuweihat syndication launched on 12 Sept.2001; Umm Al Nar financing arranged at start of 2nd Iraq war) In 2004 successful IPO of Al Kamil on Omani stock exchange

37 37 IPR capabilities in debt capital raising Non recourse long-term debt Al Kamil: $100m Shuweihat: $1.2 billion (of which $100m Islamic Tranche) Umm Al Naar: $1.1 billion (of which $250m Islamic Tranche) Tihama: $510m Ras Laffan: $663m Al Hidd $1.0 billion (in negotiation)

38 38 Lenders appetite for future deals Competitive pricing and increasing level of interest suggest large appetite for future IPP/IWPP deals in the region Virtually all major international project finance lenders present in the region and display appetite for more deals More regional players are becoming familiar with project finance through participation in loan syndications

39 39 Case study: Umm Al Nar Largest IWPP in the world: existing net capacity: 870 MW (power) MIGD (water) after construction net capacity: 1,550 MW (2,200 MW for 2 years during construction) + 95 MIGD 23 year PWPA with ADWEA: proven contractual structure (4th such deal in Abu Dhabi, but longest tenor to date); Largest ever project finance deal at the time, when lenders appetite in the region was limited; Financing plan structured to maximise liquidity and included use of Islamic financing, short and long term conventional debt; Long-term debt tenor: 20 years; Optimal utilisation of operating cash flow for project funding

40 40 Case study: Umm Al Nar Debt Facilities Amounts US$ million Main Features 1) Equity Bridge Facility441Tenor / Repayment: Bullet repayment on July 2008 Of which: Islamic Tranche291 Of which: Conventional Tranche150 Other: 100% guaranteed by Shareholders 2) Short Term Facility232Tenor / Repayment: July 2006 to July 2008 Of which: Islamic TrancheNil Of which: Conventional Tranche232 Other: Ranking Pari-Passu with Long Term F. 3) Long Term Facility1,105Tenor / Repayment: Of which: Islamic Tranche250 Of which: Conventional Tranche855 Other: Total Debt Facilities1,778 Door-to-door 20 years; Profiled repayments: Jan 2009 to Jul 2023 "True-Up Advance": Drawdown at end of availability period to repay part of EBF and achieve 80:20 gearing (subject to cover ratio covenants)

41 41 Case study: Umm Al Nar Capital Structure Amounts US$ million Total Funding Requirements:2,116 Of which: Acquisition Purchase Price1,000 Of which: EPC Contract736 Sources of Funds US$m% % Short Term Facility %00.0% Long Term Facility %1, % Equity Bridge Facility % 00.0% Equity Injection00.0% % Cash Flow From Operations % % Total Sources of Funds: 2,116 Before "Refinance" After "Refinance"

42 42 Desalination Jaideep Sandhu

43 43 Introduction Removal of salts from seawater suitable for human consumption, agriculture or industrial use Desalination Processes Thermal Distillation Processes - Multi Stage Flash (MSF) - Multi Effect Distillation (MED) Membrane Processes - Reverse Osmosis - Electro Dialysis Hybrid Plant (Thermal with RO)

44 IPR Middle East Desalination portfolio Shuweihat S1 IWPP MSF (Fisia) Umm Al Nar MSF & MED (Fisia, IHI, Sidem, Doosan, Hitachi Zosen)* Ras Laffan Facility B MSF (Doosan) Al Hidd, Bahrain MSF & MED (Fisia, Sidem) Total Desalination capacity Potential opportunity: Abu Dhabi Reverse Osmosis Plant Assume construction

45 45 Typical Power/Water Revenue Split Dependant on power and water capacities and load factors Power/Water capacity ratio of 15:1 (1,500 MW/100 MIGD) e.g. Shuweihat, water contributes around 40% of the revenue and profit Power/Water capacity ratio of 5:1 (1,000 MW/100 MIGD) e.g. UAN, water contributes around 68% of the revenue and profit

46 46 Multi Stage Flash Technology - 1 Steam Condensing Brine Vapour & Brine Droplets Vapour Desalinated Water Vapour & Brine Droplets Vapour Brine recirculation Power Reject Brine Seawater Vacuum

47 47 Multi Stage Flash Technology - 2 Well proven track record Large capacity units Low O&M cost High quality product water Used in IWPPs where adequate steam and power is available Technology - Doosan, Hitachi Zosen, HHI/Sasakura and Fisia

48 48 Multi Effect Distillation Technology - 1 Seawater Reject Brine Steam Condensate 1 St Effect Vapour 2 nd Effect Vapour Condenser Desalinated Water Vacuum

49 49 Multi Effect Distillation Technology - 2 Well proven track record Mid-size units Low O&M cost High quality product water Used in IWPPs where adequate steam is available but may be some constraints on power Technology - Sidem, Weir Techna, IDE and Doosan

50 50 Reverse Osmosis Process - 1 Reject Brine Chemicals Potable Water Post treatment system Membrane Racks Desalination Water Pre treatment system Chemicals High pressure pump

51 51 Reverse Osmosis Process - 2 Preferred option for stand alone water plants Low capacity units Easy O&M Lower installation cost Higher O&M Cost Standardisation of membranes

52 52 Integrated Power and Water Plant Combined Power and Water Plant G Gas/Oil Air G Gas Turbines HRSGsHRSGs Steam Turbines MSF/MED distillers S/W Intake Brine Return

53 53 Growth potential Driven by increasing scarcity of fresh water resources coupled with increases in population, urbanisation, and industrial development In parts of the region and around the world, development of desalination plants essential for survival Currently 75% of Global Desalination capacity in 10 countries, mainly focussed in Saudi Arabia 17.5%, UAE 16.5%, USA 16%, Kuwait 6.5% The efficient Integrated Power and Water Projects becoming a standard in the Middle East IPP process sets a good precedent for development elsewhere

54 54 Middle East IWPP Desalination markets Anticipated Integrated Power and Water Plant Investment Abu Dhabi Oman Qatar Saudi Arabia Bahrain $4 bn $2 bn $3 bn $12 bn $2 bn

55 55 Oman Tom Mackay & Kevin Cox

56 56 Macro environment Ruled by Sultan Qaboos since 1970 GDP in 2004: US $24.4 billion Currency: Omani Rial pegged to US$ Codified legal system, existing alongside a Sharia system Oil dominated economy - proven reserves of 5.5bbl Recent diversification utilising gas reserves of 29TCF - mainly LNG sales DOE/EIA database 2005 MEED Dec 2005 S&P GDP growth rate Credit rating Inflation Population growth 3.3% BBB+ 1.6% 2.5% (1) (3) (2) (1) (2) (3)

57 57 Market structure Electricity and Water Sector deregulated in 2003 separation of generation, transmission and distribution/supply Independent Regulator overseas power and water sector Transmission Company (Transco) dispatches plant based on economic merit order and system requirements Government owned Power and Water Procurer (PWP) is sole purchaser of power and water - then onsells to Distribution companies Government owned Electricity Holding Company (EHC) - holds shares in 100% government owned companies pending privatisation Real commitment to privatisation with Government completely divesting its interests in privatised entities

58 58 Power and Water Sector Peak demand 2,500 MW in 2005 growing at 6% in both power and water Market shares : 953,326Total PSEG0200Gas/OilSalalah Suez Energy33585Gas/OilSohar (in construction) AES20427Gas/OilBarka 1 IPR285Gas/OilAl Kamil Suez Energy0280Gas/OilAl Manah EHC334Gas/OilWadi Al Jizzi EHC0688Gas/OilRusayl EHC42527Gas/OilGhubrah Owner Water MIGD Power MW Fuel Type Facility (2004 figures) PWP estimates 2004 Electricity Holding Company 46% 13% Suez Energy IPR 5% 6% Dhofar Other smaller investments 6% AES 24%

59 59 Al Kamil asset overview Location: Sharquiya region Gross capacity: 285 MW OCGT Fuel: Gas with oil back-up Employees: 30 plant and 7 Muscat office Configuration: Dual fuel plant using GE frame 9E turbines (3 units) Operational: Q UAE Saudi Arabia Oman Al Kamil

60 60 Al Kamil commercial overview Publicly listed on Muscat Securities Exchange IPR own 65%, balance held by local shareholders 15 year PPA and GSA expiring April 2017 backed by Oman Government guarantees PPA is US$ and PPI linked with capacity payments based on availability Original investment of $133m, funded 80/20 debt/equity O&M subcontracted to an IPR subsidiary backed by 9 yr GE LTSA

61 61 Al Kamil performance Commercial availability of 99.9% No lost time accidents Excellent maintenance and inspection record with 3 inspections carried out on time and within budget Fully compliant with all environmental requirements Successful in exceeding Omanisation targets with 45% Omani staff Excellent relations with all relevant Governmental agencies

62 62 Al Kamil creating value Operation Maintenance of high availability and control of direct costs Financing IPO in August 2004 of 35% of equity at 1.7x par value Renegotiated Senior Debt in November 2005, extending maturity, lowering margins and back-ending repayment profile Medium term Expansion of plant as local load grows Extension of PPA or exploitation of merchant tail Use of non-OEM parts or renegotiation of LTSA terms Further potential for future refinancing

63 63 Future prospects / outlook Regional and international finance available for Omani Power deals New project opportunities: 685 MW Rusayl / MW, 30 MIGD Barka II IWPP, bid due 27th March 2006 future privatisation of Ghubrah (527 MW and 42 MGD) and Wadi Al Jizzi (334 MW) expansion of Al Kamil standalone IWP programme in Oman

64 64 Summary Economically and politically stable Committed to privatisation programme Well structured, low risk business at Al Kamil Excellent technical and commercial performance Real potential to enhance returns of existing business and add additional projects

65 65 Abu Dhabi David Barlow & Ed Metcalfe

66 66 Macro environment UAE - federation of 7 Emirates political power Abu Dhabi GDP in 2004: $103bn Currency: UAE Dirham pegged to US$ Oil: 98 bbls proven reserves 8% of proven world reserves Gas TCF proven reserves - 5th largest in world Codified legal system existing alongside a Sharia system Source: MEED, 2004 Moodys, Dec 2004 Oil & Gas Journal, 2005 GDP growth rate Credit rating Inflation Population growth 6.4% A1 3.4% 6.0% (1) (2) (1) (2) (3)

67 67 Abu Dhabi Power & Water Sector Abu Dhabi Water & Electricity Authority (ADWEA) Regulation & Supervision Bureau Abu Dhabi Water & Electricity Company (ADWEC) single procurer and seller of electricity and water Abu Dhabi Transmission Company transmission of both power and water Abu Dhabi Distribution Company and Al Ain Distribution Company Generation of IWPPs and ADWEA owned Companies

68 68 Abu Dhabi IWPPs Middle Easts most successful privatization programme six projects ~ in excess of US$ 5 billion invested Contractual structure 60% government ownership guarantees stability and fair treatment for the project company Long-term off-take arrangements backed by robust demand growth for power and water significant oil reserves and a strong economy

69 69 Demand growth

70 70 Demand growth

71 71 Location: Emirate of Abu Dhabi Net capacity: Present 873 MW, 162 MIGD: Final 1,550 MW, 95 MIGD Fuel: Gas (CCGT)/desalination Employees: Present 500: Final 160 Configuration (final): 5 GE 9FA gas turbines; 2 x295 MW Toshiba steam turbines; 2x12.5 MIGD Hitachi Zosen, 5x12.5 MIGD Doosan MSF, 2x3.5 MIGD Sidem MED desalination units Umm Al Nar asset overview Oman Saudi Arabia UAE Umm Al Nar

72 72 Umm Al Nar

73 73 Umm Al Nar commercial overview IPR 20%, ADWEA 60%, TEPCO 14%, Mitsui 6% 23 year PWPA with ADWEC $2.1 billion investment (80% debt and 20% equity) Financing - $1,100m 20yr loan, $230m 5yr loan, $440m equity bridge facility: balance from existing plant revenues O&M ownership - 70% IPR and 30% TEPCO

74 74 Arabian Power Company; $2.1 billion project Purchase and operation of current Umm Al Nar, Old Existing Assets and New Existing Assets Construction of Umm Al Nar New Plant Extension and integration with New Existing Assets Closure of old existing assets in 2008

75 75 Old Existing Assets Capacity payments - generous availability targets UAN East Station (commissioned in ); 4 Gas Turbines, total 250 MW 6 MSF Desalination units, total 41.7 MIGD UAN West Station (commissioned in ) consists of; 10 Steam Turbines, total 790 MW 10 MSF Desalination units, total 53.2 MIGD Decommissioned 2008

76 76 New Existing Assets UAN West B Station (commissioned in 2002/3); 5 x 12.5 MIGD Desalination plant (MSF) 2 x 3.5 MIGD Desalination plant (MED)

77 77 UAN New Plant Extension Net capacity 1,500 MW Power 25 MIGD Water Integration of New Existing Assets Full commercial operation 2006

78 78 Contractor for UAN Plant Extension Mitsui single EPC Contractor Toshiba power plant (Toshiba main sub-contractor) Hitachi Zosen Desalination Plant TM T&D 400kV switchyard COD expected Q3 2006

79 79 O&M Agreement IPR/TEPCO experienced management team Existing highly skilled staff IT infrastructure implemented to IPR standards Environmental standard ISO year Contractual Service Agreement with GE

80 80 Location: Emirate of Abu Dhabi Gross Capacity: 1,500 MW, 100 MIGD Fuel: Gas (CCGT)/desalination Employees: 130 staff Configuration: 5 x Siemens V94.3A2 Gas Turbines 2 Siemens steam turbines 6 x 16.7 MIGD Fisia Italimpianti desalination units Shuweihat asset overview Oman Saudi Arabia UAE Shuweihat

81 81 Shuweihat

82 82 Shuweihat commercial overview IPR 20%, CMS 20%, ADWEA 60% 20 year PWPA with ADWEC $1.6 billion investment - 80% debt and 20% equity Financed $950m 20 yr commercial tranche, $250m 20 yr Islamic tranche, $350m equity bridge loan O&M IPR/CMS JV (50:50 ownership)

83 83 Abu Dhabi - new projects ADWEA Planned Projects 52.5 MIGD reverse osmosis desalination plant IPR and Mitsui in discussion with ADWEA 1,500 MW, 100 MIGD Shuweihat S2 IWPP Potential Projects New Abu Dhabi Island developments potential demand of 4, ,000 MW IWPP to supply Aluminium smelter - up to 2,000 MW Fujairah F2 IWPP 1,000 MW + 70 MIGD

84 84 Saudi Arabia David Barlow, Jeff Wright & Steve Pedrick

85 85 Macro environment Saudi ruled by the Al-Saud family GDP $251bn Oil dominated economy: 262 bbls oil reserves, 25% of proven world total Gas reserves: 235 TCF proven, worlds 4 th largest Source: MEED, 2004 S&P / Moodys Oil & Gas Journal, 2005 GDP growth rate Credit rating Inflation Population growth 5.3% A/Baa2 0.2% 2.7% (1) (2) (1) (2) (3) (1) (3)

86 86 Power and water industry Ministry of Water and Electricity Saudi Electricity and Cogeneration Regulatory Authority Saudi Electricity Company existing power generation, transmission and distribution responsible for new build IPPs Saline Water Conversion Company existing desalination capacity Water & Electricity Company jointly owned by SEC and SWCC responsible for new build IWPPs

87 87 Power and water industry Country installed capacity (2001, MWE figures) diesel fuel: 450 MW gas fuel: 15,500 MW oil (HFO/crude): 10,000 MW 1,470 MIGD Demand growth 6% forecast growth rate for power, 8% forecast for water peak demand 24.5 GW in 2001, installed capacity 26 GW growth from population increase and industrial diversification

88 88 Tihama Power asset overview Location: Eastern Province Gross capacity: 4 plants under construction, total capacity 1,085 MW, 4,400,000 lbs/hr steam Fuel: Gas (Cogen) supplied FOC by Saudi Aramco Employees: 140 total Configuration: 3 sites each: 2 x GE 7FA 1 site: 2 x GE 7EA Tihama UAE Saudi Arabia Oman

89 89 Tihama Power commercial overview Owner / operator structure 60% IPR, 40% Saudi Oger 20 year ECAs with Saudi Aramco $612m investment (80% debt and 20% equity) Lenders Bank Saudi Fransi Samba Arab Bank Riyadh Bank International Banks

90 90 Saudi Aramco The client, off-taker and fuel supplier Owned 100% by Saudi Government Number of employees 52,500 Worlds leading producer and exporter of oil circa 3 billion barrels per annum Worlds top exporter of natural gas liquids circa 6.7 billion cu.ft./day Established in 1978 Saudi Oger is an international construction company based in Saudi Arabia Background in construction but business diversification strategy into power and telecoms well underway Turnover $1.8 billion per annum Number of employees 26,000 Saudi Oger

91 91 General Electric Sponsors International Power 60% Saudi Oger 40% Tihama Saudi Aramco Mitsui Banks Owners Engineer PB Power Contractual Services Agreement Shareholders Agreement Usufruct Agreements Energy Conversion Agreements Ancillary Services Agreements EPC Contract HHI Main Contractor Facility Agreement Sub-Contract Packages Civil Mechanical Electrical C&I Fire Protection Banque Saudi Fransi SAMBA Arab Bank Riyadh Bank Saudi Hollandi Etc. Saudi Aramco 3rd party cogen program Project contractual structure

92 92 Tihama Power O&M arrangements IPR / Saudi Oger Management Experienced staff recruited from Middle East and Asia Extensive staff training IT infrastructure and systems implemented to IPR standards 20 year technical services agreement with IPR 12 year contractual services agreement with General Electric

93 93 Uthmaniyah - GE 7FA

94 94 Shedgum - GE 7FA

95 95 Ras Tanura - GE7EA

96 96 Juaymah - GE 7FA

97 97 Tihama Power Generation Company Ltd. Saudi Aramco 3rd Party Cogeneration Project NTP Feb Q1 06 Q2 04Uthmaniyah 311 MWe Gross Q2 06Q3 04Shedgum 311 MWe Gross Q3 06Q4 04Ras Tanura 152 MWe Gross Q4 06Q1 05Juaymah 312 MWe Gross 21 months 22 months

98 98 IWPP structure

99 99 Closed Dec 2005 Launched Dec 2005 IWPP and IPP programme SEC WEC Sponsor 195 MIGD900 MWShoaiba 24 MIGD700 MWShuqaiq 176 MIGD2,500 MWRas Al Zour 75 MIGD1,100 MWAl Jubail 150 MIGD2,400 MWYanbu II 150 MIGD2,400 MWRabigh II 3,600 MWQurayyah II 23 MIGD600 MWShuqaiq III 1,725 MWSubukh 1,725 MWRiyadh PP10 (extn) WaterPowerProject 1,725 MWMuzahimiyah (1) (2) (1)(2) Muzahimiyah Riyadh PP10 Subukh Rabigh II Yanbu II Qurayyah II Shuqaiq III Shoaiba Shuqaiq Al Jubail Ras Al Zour UAE Saudi Arabia Oman

100 100 Saudi Arabia - other opportunities Marafiq 2,500 MW MIGD at Jubail (bids due in April 2006) 600 MW Yanbu Aramco possible expansion of existing Tihama assets other cogeneration opportunities Maaden IWPP supply for Aluminium smelter, mining extraction projects Saline Water Conversion Company new build desalination driven projects Privatisation of existing SEC and SWCC assets

101 101 Qatar Tom Mackay

102 102 Macro environment Country ruled by the Al-Thani family following independence from UK protectorate in 1971 GDP in 2004: US $28.4 billion Currency: Qatari Rial pegged to US$ Codified legal system alongside a Sharia system Oil related economy: 15.2 bbls reserves Gas dominated economy: proven reserves of 910 TCF - 3rd largest proven reserves in the world DOE/EIA 2005 MEED, 2005 S&P GDP growth rate Credit rating Inflation Population growth 7.0% A+ 4.7% 2.6% (1) (3) (2) (1) (2) (3)

103 103 Installed capacity Current market share is as follows: Total QEWC/IPR/ Chubu Electric GasRas Laffan B AES/QEWC/ QP/GIC 40756GasRas Laffan A QEWC 29567GasRAF B2 QEWC GasRAF B1 QEWC 33609GasRAF B QEWC 55970GasRAFASAT Owner Water MIGD Power MW Fuel Type Facility 2005 figures from Kahramaa Under Construction (1) QEWC at 76% Power IPR at 9.5 % Power AES at 9.6% Power Other smaller shareholders 4.9% Power

104 104 Power and water sector Installed capacity of some 2,712 MW and 128 MIGD additional 1,592 MW and 89 MIGD under construction Qatar Electricity & Water Company (QEWC) historically developed all power generation and water projects KAHRAMAA sole purchaser and distributor of all power and water in country Electricity/water demand has growth historically 6-8% per annum

105 105 Attractiveness Projected demand for Electricity and Water in 2006 and 2007 is over 20% and 10% respectively Major Industrial developments in Ras Laffan and Mesaieed in the Petro-chemical, LNG expansions and Aluminium Smelter New developments worth US$10 billion plus in 2005 fuelling new expansion in the electricity and water sector Two IWPPs in Qatar Ras Laffan A (AES +EMP) 750 MW, 40 MIGD Q Power (QEWC/IPR/Chubu Electric) 1,025 MW, 60 MIGD

106 106 Ras Laffan B asset overview Location: Ras Laffan Industrial City Gross Capacity: 1,025 MW, 60 MIGD Fuel: Gas(CCGT)/Desalination Employees: IPR, 4 QEWC, 2 Chubu, and during construction around 4,000 Configuration: V94.3 Siemens Gas Turbines and 15 MIGD Doosan Desalination Units Operational from: 2006 UAE Oman Saudi Arabia Qatar Ras Laffan B

107 107 Ras Laffan B commercial overview Q Power (the project company) is owned 55% by Qatar Electricity & Water company, 40% by IPR and 5% by Chubu Electric Power and water capacity and output sold to KAHRAMAA (state- owned single buyer of power and water) under 25 year BOOT Power and Water Purchase Agreement Plant scheduled to enter commercial operation in three phases between $900 investment - 80% debt and 20% equity Long Term LTSA signed with Siemens for Gas Turbine Maintenance

108 108 Ras Laffan B construction progress All three Siemens Gas Turbines are on site and are being installed. 220kV switchgear for all gas turbines completed First Doosan Desalination Unit installed and work is progressing well on its associated pumps and pipe work First HRSG with its associated equipment being erected Progress on connecting to the Seawater intake and outfall pipework in advanced stage of completion

109 109 Ras Laffan B

110 110 Ras Laffan B

111 111 Ras Laffan B

112 112 Potential future projects Mesaieed 2,000 MW, 40 MIGD currently in development bids to be in by 15 March 2006 Dukhan 1 & 2 3,000 MW, 60 MIGD Availability of regional and international finance eg Ras Gas LNG train 2 needed US $1.5 billion received US$3 billion in offers

113 113 Bahrain John Hurst

114 114 Macro environment Political stable, liberal, and the most democratic of the Gulf States Currency pegged to the US$ Legal structure very similar to that of the UAE S&P GDP growth rate Credit rating Inflation Population growth 7% A- 4.9% 1.5% (1)

115 115 Power and Water industry Regulatory framework transmission and distribution is solely Government-owned MEW is the sole offtaker for power and water backed by Government of Bahrain Guarantee International Power and Suez Energy key players in the market Demand growth 8% power, 10% water Installed capacity ~2,000 MW (excluding Alba aluminum smelter)

116 116 Location: Manama Gross Capacity: 910 MW and 30 MIGD, 60 MIGD under construction Fuel: Natural gas Employees: 2 IPR, 1 Suez, 1 Sumitomo, 198 Seconded from MEW Configuration: Phase I - 2 x 13E MIGD water Phase II - 3 x 13E2 Al Hidd asset overview UAE Oman Saudi Arabia Qatar Bahrain Al Hidd

117 117 Al Hidd

118 118 Al Hidd commercial overview Hidd Power Company : IPR 40%, Suez 30%, Sumitomo 30% 22-year PWPA with Ministry of Electricity and Water; 22-year NGSA with Bahrain Petroleum Company (BAPCO) $1.25 billion investment - 85% debt, 15% equity Lenders - JBIC, 6 MLAs led by Royal Bank of Scotland Combined Owner/O&M structure

119 119 Prospects / outlook IPR consortium has been operating Hidd plant from 23 Jan 2006 Financial close expected in July 2006 payment of purchase price in July Immediate earnings MEW / MOF are both pragmatic and fair clients 2,000 MW IPP to be released by Government of Bahrain shortly

120 120 Summary Ranald Spiers

121 121 6%5,000 MW4,000 MWKuwait 8%2,000 MW Bahrain 9%5,000 MW2,700 MWQatar 8%30,000 MW26,000 MWSaudi Arabia 6%2,000 MW3,000 MWOman 7%8,000 MW UAE Demand growth % (per year) New capacity required by 2014 Capacity 2004 Country Middle East Regional IWPP markets

122 122 Al Manah, Salalah, Al Kamil, Barka (Oman) Taweelah A2, Taweelah A1 (UAE) TOTAL PROJECT COSTS: $3bn SADAF (Saudi Arabia); Shuweihat, Umm Al Nar (UAE); Ras Laffan A (Qatar); Sohar (Oman); Al Ezzel (Bahrain) TOTAL PROJECT COSTS: $6bn Taweelah B, Taweelah RO, Fujairah, Shuweihat S2 (UAE); Ras Laffan B, Mesaieed, (Qatar), Barka 2, Ghubrah, Rusayl (Oman); Shoaiba, MARAFIQ, Rabigh, Shuqaiq, Raz Al Zhor (SaudiArabia) + ? TOTAL PROJECT COSTS: $15bn Middle East Region - growth in IPP projects

123 123 UAE Shuweihat S2 new build 1,500 MW +100 MIGD Fujairah F2 1000MW + 70 MIGD New Abu Dhabi island development 4,000 MW - 7,000 MW Oman Barka 2 new build 700 MW + 30 MIGD Rusayl 685 MW existing Ghubrah sale of existing 527 MW + 42 MIGD Wadi Al Jizzi 334 MW Bahrain 2,000 MW IPP Qatar Mesaieed 2,000 MW, 40 MIGD Dukhan 1&2 3,000 MW, 60 MIGD Saudi Arabia Shuqaiq 700 MW, 70 MIGD Marafiq 2,500 MW, 176 MIGD Ras Al Zour 2,500 MW, 175 MIGD Middle East Region - short term prospects

124 124 Desalination - growth potential Anticipated integrated power and water plant investment Abu Dhabi Oman Qatar Saudi Arabia Bahrain $4 bn $2 bn $3 bn $12 bn $2 bn Scope for further desalination projects in the Middle East Operating desalination plants - a key skill for IPR Ability to capitalise on the ME experience elsewhere (Australia, USA)

125 125 Strategic focus Extract maximum value from current projects Maintain geographic focus on Gulf States and Saudi Arabia Seek selective opportunities in North Africa (Morocco/Egypt etc) markets with similar commercial and risk profile Target to win one project each year over the next four/five years

126 126 Success factors Best-in-class operation assets performing in accordance with contracts World class project finance capabilities High quality people to implement and run new projects Excellent reputation delivered assets on time and within budget Robust relationships with key clients, partners and contractors

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