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 currently planned.
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 years.
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 level.
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 counterpart.