Acwa Power to finalise funding on $11.5bn Saudi gasification scheme by the end of 2019

The utility company is building the project with Saudi Aramco and Air Products

Dubai, United Arab Emirates -Interview with Rajit Nanda, Chief Investment Officer at ACWA Power  and  Paddy Padmanathan, President and CEO of  ACWA Power at WETEX, Dubai International Convention and Exhibition Centre.  Leslie Pableo for The National for Jennifer Ghana's story

Acwa Power will reach financial close on an $11.5 billion gasification project being developed with Saudi Aramco and Air Products by the close of the year, according to its chief executive.

The utilities company based in Riyadh will have a 25 per cent stake in the scheme, which is expected to produce steam, hydrogen, oxygen and a small amount of desalinated water, all for local consumption and use at the nearby Jazan refinery.

"Power generation capacity [on the scheme] is essentially 3,800 megawatts. We expect to bring that to a close this year. It's $11.5bn and it's been integrated with other components," Paddy Padmanathan told The National.

State-owned Aramco is building a 23 billion riyal (Dh22.5bn) refinery in Jazan Economic City on the Red Sea coast, which is part of the kingdom’s plans to develop industrial zones, create jobs and attract foreign direct investment. US company Air Products will hold at least a 55 per cent stake in the joint venture.

Acwa Power, in which Saudi Arabia's sovereign Public Investment Fund has a 25 per cent stake, is one of the kingdom's leading developers in conventional and renewables. Saudi Arabia, which has been moving away from burning crude to gas-fired power plants, is now looking at green energy as it seeks to free up its oil for export.

The kingdom recently revised its renewable energy targets to 27.3 gigawatts from 9.5GW, to be achieved by 2024.

Acwa Power, which is constructing the kingdom's first utility-scale solar power project, a 300MW scheme in Sakaka, is bidding on $5bn worth of projects for the remainder of the year.

“But more interestingly, we have about $6bn of projects that we have bid, which are under evaluation and I would say 90 per cent of the projects that we are bidding on are in the renewables space or in the desalinated water space,” said Rajit Nanda, the company’s chief investment officer.

In August, Saudi Arabia invited 60 pre-qualified companies to submit bids for six solar energy projects, for which it hopes to attract $1.4bn in investment.

Bidding on the schemes has not started yet, said Mr Padmanathan. The kingdom's Renewable Energy Project Development Office is likely to tender the projects in two batches from January 6, he added. Acwa Power will participate in the utility scale tenders which have a total capacity of 1,410MW.

“It’s a structured bid in two groups. They’re both solar, together it is about just under 3,000MW,” said Mr Padmanathan.

In the UAE, Acwa Power submitted the lowest bid of 1.69 US cents for the 900MW fifth phase of the Sheikh Mohammed bin Rashid Solar Park this month. The developer, Dubai Electricity and Water Authority, is evaluating the shortlisted bidders and is expected to sign a power purchase agreement with the chosen party in the "early part of 2020", said Mr Nanda.

Last week, Acwa Power also signed a preliminary agreement with Aramco to invest up to $3bn in a gas-to-power scheme in Bangladesh. The 3,600MW project will be built in "three phases with each phase being 1,200MW", said Mr Nanda.

“The intention is to sign the PPA in the second half of 2020 and to achieve financial close and start construction in 2021 for phase one and thereafter we will build each of the second and third phases in the space of 12 months,” he said.

Aramco will supply liquefied natural gas for the project with Bangladesh expected to import 3 to 4 million tonnes of the super-chilled fuel on an annual basis through state-owned Petrobangla.

Acwa Power's planned initial public offering meanwhile would be done "sooner than later," said Mr Padmanathan, with a domestic listing being the priority.