Projects

Saudi Aramco Cogeneration Plants

Saudi Aramco's latest series of cogeneration plants have all come on line in Saudi Arabia. The plants are producing a

Announcement of contract
December 2003
Commissioning
Throughout 2006
Commercial operation
Phased in between March 2006 and December 2006
Output
1,075MW and 4.4 million lb/h steam
Plant type
Cogeneration
Location
Saudi Arabia (Ras Tanura, Ju'aymah, Shedgum and Uthmaniyah)
Lead finance arrangers
Arab National Bank, Banque Saudi Fransi and SAMBA Financial Group
Estimated investment
The 17-year term financing comprises a non-recourse $510m facility; total equity investment is $130m
Development, ownership and operation
Contracted to International Power and Saudi Oger
Engineering, procurement and construction contract
Awarded to a consortium led by Japan's Mitsui & Co. as prime contractor and coordinator
Subcontractors
Hyundai Heavy Industries Co., Ltd.
Technical advising services
Sargent & Lundy LLC
Legal advice
Clifford Chance and others
Gas turbines
GE
Fuel
Natural gas

Saudi Aramco’s latest series of cogeneration plants have all come on line in Saudi Arabia. The plants are producing a total of 1,075MW and 4.4 million lb/h of steam, and started operation in stages throughout 2006. Uthmaniyah opened in Q1 2006, followed by Shedgum (Q2), Ras Tanura (Q3) and Ju’aymah (Q4).

The contracts to develop, own and operate the four plants were awarded to International Power and Saudi Oger. The plants supply power and steam to Saudi Aramco under four Energy Conversion Agreements.

“Total capacity of the plants will be 1,075MW and 4.4 million lb/h of steam.”

The project is one of a large number of electric power and seawater desalination projects underway in Saudi Arabia. Total capacity of the plants will be 1,075MW and 4.4 million lb/h of steam. It came in on time, with the contractors phasing in commercial operation between March 2006 and December 2006.

INTERNATIONAL POWER TO OWN 60%

The four plants are at Ras Tanura (150MW and 645,000lb/h steam), Ju’aymah, Shedgum and Uthmaniyah (all 308MW and 1,250,000lb/h steam). All are located in the Eastern Province of Saudi Arabia. Natural gas is supplied by Saudi Aramco and the power and steam generated by the plants are used by Saudi Aramco for its processing plants.

International Power’s total equity commitment to the project was estimated to be €35m. International Power owns 60% of the project company and Saudi Oger (a large Saudi-based construction and telecommunications company) holds the remaining 40%. The project company is responsible for the construction, ownership and operation / maintenance of the cogeneration plants. The combined facilities are the largest privately owned power generation project in Saudi Arabia.

BUILD-OPERATE-OWN-TRANSFER

Under the build-operate-own-transfer (BOOT) agreement the independent power producer plants sell their power to Saudi Aramco under 20-year energy conversion agreements. The plants will be transferred Saudi Aramco after a 20-year concession period. Saudi Aramco will use the power and steam generated by the plants for consumption in its processing plants.

This landmark project is the first large-scale Independent Power Project (IPP) to be undertaken in the Kingdom by the private sector, and the schemes are being seen as forerunners to other IPPs in the region as the Kingdom continues to expand its power generation facilities.

FINANCING COMPLETE

International Power and Saudi Oger announced in February 2004 that the financing for the cogeneration projects had successfully been completed. The 17-year term financing comprises a non-recourse $510m facility. Total equity investment in the projects amounts to $130m, of which $78m came from International Power and $52m from Saudi Oger, in line with their respective equity interest.

International Power remarked on strong interest shown by lenders in the financing. The lead arrangers were Arab National Bank, Banque Saudi Fransi and SAMBA Financial Group.

DOMESTIC REFINERY AT RAS TANURA

Saudi Aramco is the world’s largest petroleum company. It operates five domestic refineries, one of which is at Ras Tanura. This was upgraded in 1998 from a hydroskimming refinery to a full conversion refinery, at a cost of over $1.3bn, as part of the Kingdom’s long-term strategy for making its five wholly owned refineries ‘pacesetter’ refineries by 2006.

International Power is an independent power generation company with interests in over 28 power stations in 12 countries around the world. The Saudi Oger construction organisation was founded in 1978 with its headquarters in Riyadh, Saudi Arabia. The company is involved with several major architectural construction projects throughout the Middle East, Africa, Europe and the US.

“This landmark project is the first large-scale Independent Power Project (IPP) to be undertaken in the Kingdom by the private sector.”

MITSUI WAS PRIME CONTRACTOR

The engineering, procurement and construction contract was awarded to a consortium led by Japan’s Mitsui & Co. Mitsui’s order totalled ¥50bn and the company acted as the prime contractor and coordinated the project.

It subcontracted with Korea’s Hyundai Heavy Industries Co., Ltd., and arranged for General Electric (GE) to supply eight gas turbines and Sargent & Lundy LLC to provide technical advising services during implementation of the project.

Clifford Chance advised joint sponsors International Power and Saudi Oger on the financing for the projects. Clifford Chance was assisted by the law firms Yousef & Mohammed Al-Jadaan in Riyadh and Qays Zu’bi in Bahrain. Milbank Tweed and the Law Office of Dr. Mujahid Al-Sawwaf in Jeddah provided legal advice to the lenders. Firms advising Saudi Aramco on the deal included White & Case (legal adviser), Fichtner (technical adviser) and BNP Paribas (financial adviser).

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