Dewa to defer bidding for $8.6 billion Hassyan plant
Dubai Electricity & Water Authority (Dewa) will defer the bidding for the $8.6 billion (Dh31.58bn) Hassyan power and desalination plant for at least eight months, a top official from the state-owned company said.
According to Dewa Managing Director and Chief Executive Officer Saeed Mohammed Al Tayer, the move to delay the project to April next year is due to the fact that the emirate still has "sufficient surplus and reserves".
"The deferment is good actually," Al Tayer told Emirates Business on the sidelines of the District Cooling Summit yesterday. "Last year, we already met the peak requirement with about 1,200MW of reserves. Because we are meeting the requirement we do not want to have huge reserves. Usually, we should have around 15 per cent of our capacity as reserves."
Along with the Hassyan plant, he said 400KV stations would also be deferred. "So this is a big amount that we are deferring," he added.
Data from information provider ProLeads show that the phase 1 of the plant's Station P is slated to cost $1bn and is scheduled for bidding in the fourth quarter of 2008 while the phase 2 of the same station would also cost $1bn and is scheduled for bidding in the second quarter of 2009.
Meanwhile, the phase 1 of Station Q, a $2.6bn Greenfield power generation plant and the phase 3 of Station 4 slated to cost $4bn are still under the planning stages. The former was slated to begin in the third quarter of 2010 while the latter was originally planned to begin in the second quarter of 2011.
Other than the Hassyan plant, Al Tayer said all Dewa projects are on going and are on track as per their original schedules. "There is no cancellation of any project in Dewa. The only project that we defer is the Hassyan power station," he said.
Al Tayer said there are Dh70bn worth of Dewa projects under construction and all these projects would be finished in the next three years. He added that 50 substations will be commissioned this year.
"I do not expect that there would be a high reduction on demand. In fact, there will be growth in Dubai," he said. "This year, definitely there will be a reduction in the peak but our demand will be higher than all the states nearby. Dubai is different in any country in the world. We have recorded the highest growth in energy and water so if there is a reduction, it will be less. Power consumption growth is about 15 per cent and water consumption growth is 12 per cent."
He said Dewa has based their planning that Dubai will continue to grow between six and 11 per cent.
"Even if there is reduction on growth, this percentage is the highest worldwide in this current situation," he said. "In Germany, last year they have around one per cent growth now this year they will have negative growth. The UK last year had zero growth while this year they will have negative growth. In Dubai, we will have positive growth."
Cooling towers to go thermal
A top official has told district cooling companies to "immediately implement" the Decree No27 issued by the Executive Council of Dubai which prohibits the use of desalinated water and mandates all operations to use thermal energy storage.
In a keynote speech at the District Cooling Summit, Saeed Mohammed Al Tayer, Dewa Managing Director and Chief Executive Officer said despite the fact that district cooling systems are efficient in the electricity consumption side, they nevertheless are consuming huge amounts of water in cooling towers.
The decree, issued by Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council of Dubai, orders all district cooling companies in Dubai to start using available alternatives of seawater, grey water or treated sewage effluent water in the new developments.
In addition, it also mandates companies to use thermal energy storage facilities in district cooling operations in all news installations in Dubai to optimise the power demand by means of peak shaving.
"Taking into consideration that the main source of water in Dubai is desalinated water that is produced by energy, the district cooling systems are saving energy, the district cooling systems are saving energy in one process while consuming at least a part of it again in another process," Al Tayer said.
He said Dewa is willing to modify the slabs for these companies based on each firm's contribution in easing the peak load. He said Dewa is continuously increasing the efficiency of their electricity and water production facilities. (Karen Remo-Listana)
Dewa in talks with European banks for funding
Dubai Electricity & Water Authority (Dewa) is currently in talks with government backed-European banks to finance its on-going expansion projects.
Saeed Mohammed Al Tayer, Dewa Managing Director and Chief Executive Officer said the state-owned company is also looking at talking with financial institutions in the United States.
He said they are looking at sealing the borrowing instrument called the export credit facility – a long-term borrowing instrument – by the end of this year.
He told Emirates Business: "We are approaching the banks in their respective countries. I will not name the company but each company has a government support from each respective country. The loan will be long term – maybe 12 years – mainly from Europe. We did not explore the individual states but we are looking at the United States."
Al Tayer did not say the size of the fund but noted that it would be "very big" and would depend on the size of each project and from which country the fund would be sourced from.
He said Dewa will continue all its projects, adding that financing for these projects are "not difficult".
Al Tayer said the utility agency is looking at raising more funds from sukuk (Islamic bonds), bonds and syndicated loans this year. However there are no immediate plans considering the high cost of borrowing.
Dewa is aiming to invest more than $19 billion (Dh69.77bn) on raising electricity-generating capacity by 150 per cent by 2012 from 5,000MW.
Dewa is also expected to add 15.5GW of additional generation capacity by 2017.
"What we stated in the past is correct but maybe the stage-wise or the phase-wise will be different," he said. "Today is not the right time but in due course, we will."
Asked how will Dewa refinance its $2.2bn Islamic loan, which was signed in April 2008, he said: "It depends now because some of the projects are being deferred so the requirement will be different. The time-frame of the requirement would be different. For example, along with the Hassyan project we deferred 400KV stations – this is a big amount that we are deferring."
Al Tayer declined to comment on Dewa's downgraded rating by Fitch Ratings. He nevertheless maintained that Dewa's performance has been "excellent" and that most of the banks remain positively committed to Dewa.
In 2008, Dewa benefited from a government tariff increase and more stable fuel procurement sources from Qatar, which significantly improved its margins and underlying financial performance, said Philipp Lotter, Senior Vice-President at Moody's Middle East Limited in Dubai.
The major challenge, however, is a refinancing plan, which involves addressing a $2.2bn loan maturity by April next year, he explained.
Dewa's long-term IDR was downgraded in December to A+ from AA- with a stable outlook, while the $3.2 billion Islamic bond, or sukuk, issued by DEWA Funding Ltd. and to mature in 2013, was also lowered to A+ from AA-. (Karen Remo-Listana)
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