Change is afoot in the Kingdom of Saud.
Population growth, more wasteful consumption patterns, and the government drive
to industrialise a county whose economy is reliant on crude exports have
created a spiraling demand for power. Water, the most precious commodity of
all, is in equal demand.
These simple truths have not escaped the attention of the
country’s decision makers, and massive investment plans have been launched: For
the next five years alone, over US$130 billion have been allocated for power
and water desalination projects. It has been estimated that to meet rising
demand, the government has to spend at least $260 billion, a third more than
The government has also started to include the private
sector in its expansion plans. Public private partnerships have established
themselves in the region as the predominant model for power and water projects.
According to consultancy Booz & Co., more than two dozen independent power
projects (IPPs) and Independent Water and Power Projects (IWPPs) are now in operation
across the GCC, with a combined installed capacity of 20GW. Current expansion
plans will more than double the region’s IPP and IWPP capacity over the next
five years, bringing the privately developed share of aggregate electricity
generation to about 34 percent.
The Shuaibah III power and desalination plant is a showcase
example of Saudi Arabia’s
power play. Commissioned in 2009, it is the country’s first IWPP, and cost a
stately $2.45 billion. Producing 900MW of electricity for the grid, as well as
883,000 cubic meters of potable water, it is one of the world’s largest
Greenfield IWPPs, and supplies the cities of Mecca, Jeddah, Taif and Baha. It has been
constructed next to the existing Shuaibah I & II power plants.
It is owned and run by the Saudi Water and Electricity
Company (SWEC), a holding company owned by the state-owned Saudi Electricity
Company (SEC) and a host of private companies and investors. While the SEC only
holds a modest 8 percent in the project, 37 private Saudi investors grouped together
in the Private Investment Fund (PIF) hold a 32 percent stake. 60 percent of the
project is owned by a consortium of developers, of which the Saudi power
company ACWA is the biggest stakeholder with half of that share.
The remaining three developers are the Malaysian companies
Tenaga Nasional Berhad, Malakoff Berhad, and Khazanah Nasional Berhad. SWEC has
entered into a 20 year power and water purchase agreement (PWPA) with the Water
and Electricity Company (WEC), an agreement that can be extended by another 10
Siemens and Doosan Heavy Industries were selected as the
lead EPC contractors in 2005. Together, they installed three steam
turbine-generator units, each generating 400MW, along with the electrical and
instrumentation control systems.
Each 400MW unit comprises a high pressure turbine, a
two-flow intermediate pressure turbine, and a 497 MVA hydrogen-cooled
generator. The electricity generated is fed into the grid via 380kV gas
insulated switchgear. Of the 1200MW of total power produced, 300MW is used to
run the plant, around 12MW of which are used to power the multi-flash
distillation desalination process.
The plant is powered by light crude feedstock. To reduce
emissions, Siemens have installed an advanced flue gas desulphurisation (FGD)
plant. Through the flue gas desulphurisation system, the flue gases which are
generated in the process of burning crude oil are cleaned of harmful sulphur
dioxide by processing it with 24 cubic meters of seawater per second, reducing
the sulphur content from 3500mgs to 150mgs per cubic metre, a reduction of 95
percent. The application of this technology is a regional first.
“The Shuaibah IWPP
represents a significant and prestigious operation for Siemens within Saudi
Arabia and is playing a large part in providing sustainable solutions to the
Kingdom’s growing demand for energy and water,” says Lutz Kahlbau, Siemens CEO
in Saudi Arabia.
To fulfil the water needs of the plant, which incorporate
the requirements for cooling, desalination and desulphurisation, massive water
intake and outflow culverts flush 15000 cubic metres of seawater through the plant per hour. To achieve this, a seawater pumping
station was built that pump in water from a depth of 14.5 meters below sea
Due to the desulphurisation process, Shuaibah meets the
environmental standards set out by the World Bank. The importance of this is
not to be underestimated. International lenders are reluctant to lend to anyone
not conforming to these standards, and have attached strict conditions to their
loans. The plant is assessed on its environmental performance once a year. If
the plant fails to meet the requirements, lenders have the contractual right to
recall their credit, exposing SWEC to default.
On top of that, national standards have also to be met: “The
Presidency for Meteorology and Environment (PME) in the Kingdom has a very
solid set of standards and they do monitor those standards fairly rigorously,
they do not give an environmental license to commence a project without the
right mitigation plans submitted and without seeing the contracts include all
the required mitigation equipment,” explains Paddy Padmanathan, CEO of ACWA.
As is typical for the financing of such projects, debt and
equity is split in to a ration of 80:20, with the 20 percent equity ratio being
having been covered by a bridge loan facility. Part of the funding was loans
were given by the Korean Export Import Bank (KEXIM), which provides loans to
projects involving Korean firms abroad, and Hermes, its German