1 ipr in the middle east january 2006. 2 introduction mark williamson
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1
IPR in the Middle EastJanuary 2006
2
IntroductionMark Williamson
3
Our commitment to the region
Creating value through core skills • Project development and
construction• Offtake contract design and
execution • Project financing • Plant operation - both power and
desalination
34%66%
PPA
Merchant (short/medium
term contracted)
Contract Type - IPR Group(by net MW)
0
500
1,000
1,500
2,000
2,500
2001 2003
Net MW
2002 2004
Net MWunderconstruction
200620052000
Set up in
region Al
Kamil, Oman
Shuweihat,UAE
Umm Al NarUAE
TihamaSaudi Arabia35% Al
Kamil IPO
Ras Laffan BQatar
Al HiddBahrian
MW ME Net MW
Middle East . . . in the IPR portfolio
4
Contribution to IPR from the region
Only includes equity from operating assets
2001 2003
EBIT
2002 2004
Middle East EBIT (£m)
1-1
9
22 23
54
29
85
Equity
Middle East . . . in the IPR portfolio
5
OverviewRanald Spiers
6
IPR in the Middle East• Six projects in six years with an
enterprise value of US$6.5 billion~ current IPR equity commitment of nearly
US$400m
• Creation of new region - £29m PBIT by 2004
• Existing assets performing well
• Construction is the other major regional activity
• Power and desalination ~ IPR largest private supplier of desalinated water in the world
• Pipeline of future projects ~ three currently in bid/negotiation
UAE
UAE OmanSaudiArabia
Qatar
Bahrain
Al HiddAl Hidd
Al KamilAl Kamil
Ras Laffan BRas Laffan B
TihamaTihama
ShuweihatShuweihat Umm Al NarUmm Al Nar
7
IPR in the Middle East
FuelType
IPRShare(MW)
Al Kamil
Shuweihat
Umm Al Nar
Tihama
Ras Laffan B
Al Hidd
Total
Net SteamCapacity
(m lbs / hr)% of
ownershipCountryName
End ofPower
ContractOman
UAE
UAE
KSA
Qatar
Bahrain
65
20
20
60
40
40
185
300
310
645
410
364
2,214
Gas
Gas
Gas
Gas
Gas
Gas
-
-
-
2.7
-
-
2.7
2017
2024
2026
2026
2033
2028
Net DesalCapacity
(MIGD)-
20
20
-
24
36
100
Middle EastEBIT (£m)
2002 2003 2004
9
2329
8
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2002 2003 2004 2005 2006Al Kamil
Umm Al Narextension
Shuweihat
Tihama
650 MW retires at the end of 2008
285
2008
Ras Laffan B
(1)
2007
Al Hidd
Umm Al Nar
MW
870 870 870 650 650 650
1,500 1,5001,500 1,500 1,500
7001,550 1,550 1,550
1,075 1,075 1,075
1,025900600
910910 910
285 285 285 285 285 285
1,155
2,655
3,355
6,5706,870 6,995
(1)
285
The Middle East - a growing asset portfolio
9
The Middle East Team
• Abu Dhabi Development Office ~ project selection, bidding, negotiating, project
development and management
• Project companies ~ construction, asset management, client and
partner relationships, operations and maintenance
• Operating companies~ operations and maintenance, owner and partner
relationships
10
Key markets
Primary target markets:
• UAE
• Qatar
• Saudi Arabia
• Oman
• Bahrain
• Kuwait
11
Macro environment• Stable Governments, low country risk rankings and good credit
ratings
• Massive oil and gas reserves
• Petrodollar economies
• Strong economic growth driven by high oil prices and diversification away from oil
• Growth rates between 5% to > 10% pa
• Drivers for power and water demand~ infrastructure development / tourism~ replacement vs incremental demand
• GCC states becoming increasingly interconnected and interdependent
12
Regulatory overview
• Pragmatic regulation, primary method of control via long-term contracts
• Markets unlikely to liberalise in the short or medium term
• Environmental regulation~ most new plants gas-fired
13
Commercial structure
• Long-term contracts which set in stone all major revenues and costs
• Major risks laid off wherever possible
• PWPAs, PPAs, ECAs, NGSAs
• EPC costs fixed with LDs for delays in construction and poor performance
• Long term operations and maintenance service agreements with OEMs
• Interest rates and currencies hedged
14
Return on investment
• Return profile similar across the region
• UAE local shareholder return 13%
• Seek to enhance returns by O&M, success fees and TSAs
• Cash generation, use of Equity Bridge Loans
• Scope to increase return once project has been commissioned, for example by refinancing
15
Financial structuring
• Projects structured using project finance~ carried out in conjunction with London-based project
finance team
• Maximise use of senior debt
• Availability of local capital and international debt with international MLAs /JBIC
• High leverage is not a problem
16
Competitive environment
• Projects becoming increasingly competitive but IPR still winning regularly
• New players from Japan, Korea, Malaysia
• Traditional competitors (Suez/Tractebel, AES, Marubeni)
• Fewer EPC contractors tends to limit competition
• Competitors or partners (eg Mitsui)
17
Partnerships
• Partnering is a key element of risk diversification and gaining local knowledge
• ADWEA, CMS, Saudi Oger, QEWC, Mitsui, TEPCO, Sumitomo, Chubu, Suez
• We choose the right partners to help us win the deal
• Each partner brings something different to the table
18
Desalination
• Strong power demand and even stronger water demand
• Most Gulf projects are designed to offer both power and water
• Increases the overall efficiency of the plant
• Uses waste heat from the steam
• IPR has assets with the major thermal desalination processes
19
Agenda
Contract Structures David Wadham
Financing our Growth Peter Barlow
Desalination Jaideep Sandu
Coffee Break
Oman Tom Mackay & Kevin Cox
Abu Dhabi David Barlow & Ed Metcalfe
Saudi ArabiaDavid Barlow, Jeff Wright & Steve Pedrick
Qatar Tom Mackay
Coffee Break
Bahrain John HurstSummary Ranald Spiers
20
Contract structuresDavid Wadham
21
Similarities across contracts
• Part-owned in conjunction with other international or local partners
• Financed on a highly leveraged, project finance (limited-recourse) basis
• Operate with the security of a long-term power (and water) offtake contract for the plant’s available capacity and output
• Contract with sovereign/quasi-sovereign counterparty~ state’s single buyer of power and water
22
Differences across contracts
• PWPAs structured on an energy conversion basis (ECA) or fuel supply agreement (FSA)
• Most projects are BOO, some BOOT
• Sub-contracted O&M or combined owner/operator structures
• Government interest in some projects
23
PWPAs and PPAs
• Project company responsible for:~ design~ construction~ commissioning
• Offtaker obligation to provide connections to power and water grid and purchase available capacity and output
• Flat tariff with capacity charge to recover debt service, fixed O&M and equity return; pass-through output charge to cover variable O&M and fuel
• Payment is in local currency (except Tihama) but includes exchange rate protection
~ ownership~ operation~ maintenance
24
PWPAs and PPAs (cont.)
• Capacity or termination payments guaranteed by the host government
• Revenue protection for offtaker defaults and political force majeure (war, change in law, government action/inaction)
• Commercial documents subject to local law but international arbitration
• Finance and construction documents subject to English law
25
PWPAs and PPAs (cont.)
• Energy conversion (Abu Dhabi, Tihama) or separate fuel supply arrangements (Oman, Qatar, Bahrain)
• BOO (Abu Dhabi, Oman, Bahrain), BOOT (Tihama and Qatar), with a transfer to the offtaker
• Accounting treatment: always an operating or finance lease
• Terms vary from 15 years (Oman), through 20-23 years (Tihama, Abu Dhabi and Bahrain) to 25 years (Qatar), but without market liberalisation renegotiation clauses
26
Operation and maintenance
Abu Dhabi
• Requires a separate operator owned by foreign investors
• Payment on a fixed price basis
• Ability to generate Operator fees and bonuses against a lower equity stake (e.g. Umm Al Nar, 20% stake in the generator, but a 70% stake in the operator)
Others
• More flexibility (e.g. Al Kamil, Ras Laffan)
• Advantages of a combined owner/operator
27
Gas turbine maintenance
• Long-term arrangements with the OEM (Al Kamil, Umm Al Nar, Tihama with GE and Shuweihat and Ras Laffan with Siemens)
• For one or two maintenance cycles
The benefits of an LTSA include:
• All scheduled maintenance sub-contracted for a fixed price, with a degree of unscheduled outage cover provided within the price
• Based on a term warranty concept, i.e. OEM guarantees to replace all program parts as needed
28
Shareholding structure
• Abu Dhabi IWPPs have 60% holding retained by the government
• Al Kamil initially 100% owned by IPR, now 65% owned following a mandatory IPO on the Muscat Stock Market
• Ras Laffan has no direct state involvement, although QEWC holds 55% and is in turn listed on the DSM
• Tihama and Bahrain owned entirely by private investors
The advantages of a government shareholding and the need to generate local investment opportunities
29
Umm Al Nar Shareholders’ Agreement
• Foreign shareholder has the ability to manage the projectand enjoys significant minority protection~ coupled with government partner with shared goals as an
investor
• Board of 7 directors (4 ADWEA and 3 foreign investors)
• Foreign investor appoints the Executive Managing Director~ Ed Metcalfe
• Voting on all significant matters at board and shareholder level requires approval of both ADWEA and the foreign investor
• Government IPO provisions (Taqa was listed on the ADSM in July 2005)
30
Conclusion• Long-term off take arrangements with single state buyers, guaranteed
by sovereigns with investment grade ratings and a strong economic future
• Robust contractual terms offering secure future returns with revenue protection for supplier and offtaker defaults and for political force majeure events
• Projects are embedded in the region, with governments participating as co-investors or encouraging direct public ownership
• Key cost risks (financing and gas turbine parts and maintenance) well mitigated through long-term hedging and supply arrangements
• Upside remains through refinancing opportunities, the ability to reduce costs over time and merchant tail on BOO projects
31
Financing our growthPeter Barlow
32
Project finance
• Fundamental part of IPR’s financial strategy
• Objective is to finance on a non-recourse basis at the asset level
33
Structure of Middle East IPPs/IWPPs
• Assets backed by long-term (20yrs+) Power (and Water) Purchase Agreements (PPAs/PWPAs)
• Contractual Structure designed specifically for non-recourse financing
• Clients’ obligations backed by Government guarantees
• Predictable, long-term cashflows allow high leverage without sponsors’ support
34
Lenders’ view on IPP/IWPP risk/country risk
• No merchant risk
• Excellent track record of project financed IPPs/IWPPs: ‘success stories’ / accepted model in the banking market
• Loan syndication allows diversification of lending across different projects/countries: lower risk
• Project financed IPPs/IWPPs include security on assets and stricter covenants than corporate loans
• ME countries hydrocarbon-rich, financially sound and politically stable: country risk acceptable to most international PF lenders
35
International and regional debt providers • IPR’s approach: mix international and regional lenders’
expertise
• International lenders particularly active in most countries in the region: UAE, Oman, Qatar and Bahrain
• Predominantly regional lenders in the Kingdom of Saudi Arabia (KSA) so far
• Recent improvements in KSA (e.g. entry in WTO) suggests increased role of int’l lenders there
• Islamic financing further source of liquidity, of which IPR has experience through Umm Al Nar and Shuweihat
• Export Credit Agencies being increasingly used
36
IPR capabilities in debt capital raising
• Core skill - IPR takes lead role in every project financing
• To date 5 IPPs/IWPPs project financed in the region
• Raised $3.9 billion in non-recourse bank debt
• IPR successfully financed first large scale IPP in Saudi Arabia
• Financing also achieved in potentially adverse market conditions(e.g. Shuweihat syndication launched on 12 Sept.2001; Umm Al Nar financing arranged at start of 2nd Iraq war)
• In 2004 successful IPO of Al Kamil on Omani stock exchange
37
IPR capabilities in debt capital raising Non recourse long-term debt
• Al Kamil: $100m
• Shuweihat: $1.2 billion (of which $100m Islamic Tranche)
• Umm Al Naar: $1.1 billion (of which $250m Islamic Tranche)
• Tihama: $510m
• Ras Laffan: $663m
• Al Hidd $1.0 billion (in negotiation)
38
Lenders appetite for future deals
• Competitive pricing and increasing level of interest suggest large appetite for future IPP/IWPP deals in the region
• Virtually all major international project finance lenders present in the region and display appetite for more deals
• More regional players are becoming familiar with project finance through participation in loan syndications
39
Case study: Umm Al Nar
• Largest IWPP in the world: ~ existing net capacity: 870 MW (power) + 162 MIGD (water)~ after construction net capacity: 1,550 MW (2,200 MW for 2 years during
construction) + 95 MIGD • 23 year PWPA with ADWEA: proven contractual structure (4th such deal in
Abu Dhabi, but longest tenor to date);• Largest ever project finance deal at the time, when lenders appetite in the
region was limited;
• Financing plan structured to maximise liquidity and included use of Islamic financing, short and long term conventional debt;
• Long-term debt tenor: 20 years;• Optimal utilisation of operating cash flow for project funding
40
Case study: Umm Al Nar
Debt FacilitiesAmounts
US$ million Main Features1) Equity Bridge Facility 441 Tenor / Repayment: Bullet repayment on July 2008Of which: Islamic Tranche 291Of which: Conventional Tranche 150 Other: 100% guaranteed by Shareholders
2) Short Term Facility 232 Tenor / Repayment: July 2006 to July 2008Of which: Islamic Tranche NilOf which: Conventional Tranche 232 Other: Ranking Pari-Passu with Long Term F.
3) Long Term Facility 1,105 Tenor / Repayment: Of which: Islamic Tranche 250Of which: Conventional Tranche 855 Other:
Total Debt Facilities 1,778
Door-to-door 20 years; Profiled repayments: Jan 2009 to Jul 2023"True-Up Advance": Drawdown at end of availability period to repay part of
EBF and achieve 80:20 gearing (subject to cover ratio covenants)
41
Case study: Umm Al Nar
Capital Structure Amounts US$ million
Total Funding Requirements: 2,116Of which: Acquisition Purchase Price 1,000
Of which: EPC Contract 736
Sources of Funds
US$m % US$m %Short Term Facility 231 10.9% 0 0.0%Long Term Facility 978 46.2% 1,102 52.1%Equity Bridge Facility 440 20.8% 0 0.0%Equity Injection 0 0.0% 315 14.9%
Cash Flow From Operations 468 22.1% 698 33.0%Total Sources of Funds: 2,116 2,116 2,116
Before "Refinance"
After "Refinance"
42
DesalinationJaideep Sandhu
43
Introduction
• Removal of salts from seawater ~ suitable for human consumption, agriculture or
industrial use
• Desalination Processes~ Thermal Distillation Processes
- Multi Stage Flash (MSF) - Multi Effect Distillation (MED)
~ Membrane Processes - Reverse Osmosis - Electro Dialysis
~ Hybrid Plant (Thermal with RO)
44
100
181.5
-
30
311.5
52.5
IPR Middle East Desalination portfolio
Shuweihat S1 IWPPMSF (Fisia)
Umm Al NarMSF & MED (Fisia, IHI, Sidem, Doosan, Hitachi Zosen)*
Ras Laffan Facility B
MSF (Doosan)
Al Hidd, BahrainMSF & MED (Fisia, Sidem)
Total Desalination capacity
Potential opportunity:Abu Dhabi Reverse Osmosis Plant
100
95
60
90
345
Assumeconstruction
2006 2008
45
Typical Power/Water Revenue Split
• Dependant on power and water capacities and load factors
• Power/Water capacity ratio of 15:1 (1,500 MW/100 MIGD) ~ e.g. Shuweihat, water contributes around 40% of the
revenue and profit
• Power/Water capacity ratio of 5:1 (1,000 MW/100 MIGD) ~ e.g. UAN, water contributes around 68% of the revenue
and profit
46
Multi Stage Flash Technology - 1
Steam
Condensing
Brine
Vapour &Brine Droplets
Vapour
DesalinatedWater
Vapour &Brine Droplets
Vapour
Brinerecirculation
Power
RejectBrine
Seawater
Vacuum
47
Multi Stage Flash Technology - 2
• Well proven track record
• Large capacity units
• Low O&M cost
• High quality product water
• Used in IWPPs where adequate steam and power is available
• Technology - Doosan, Hitachi Zosen, HHI/Sasakura and Fisia
48
Multi Effect Distillation Technology - 1Seawater
Reject Brine
Steam
Condensate
1St EffectVapour
2nd Effect
Vapour
Condenser
DesalinatedWater
DesalinatedWater
Vacuum
49
Multi Effect Distillation Technology - 2
• Well proven track record
• Mid-size units
• Low O&M cost
• High quality product water
• Used in IWPPs where adequate steam is available but may be some constraints on power
• Technology - Sidem, Weir Techna, IDE and Doosan
50
Reverse Osmosis Process - 1
Reject Brine
Chemicals
PotableWater
Posttreatment system
MembraneRacks
DesalinationWater
Pre treatmentsystem
Chemicals
Highpressure
pump
51
Reverse Osmosis Process - 2
• Preferred option for stand alone water plants
• Low capacity units
• Easy O&M
• Lower installation cost
• Higher O&M Cost
• Standardisation of membranes
52
Integrated Power and Water Plant
Combined Power and Water Plant
G
GasGas/Oil/Oil
AirAir
G
Gas TurbinesGas TurbinesGas TurbinesGas Turbines
HRSGsHRSGsHRSGsHRSGs
Steam TurbinesSteam TurbinesSteam TurbinesSteam Turbines
MSFMSF/MED/MED distillersdistillers
MSFMSF/MED/MED distillersdistillers S/W IntakeS/W IntakeS/W IntakeS/W Intake
Brine Return
53
Growth potential
• Driven by increasing scarcity of fresh water resources coupled with increases in population, urbanisation, and industrial development
• In parts of the region and around the world, development of desalination plants essential for survival
• Currently 75% of Global Desalination capacity in 10 countries, mainly focussed in Saudi Arabia 17.5%, UAE 16.5%, USA 16%, Kuwait 6.5%
• The efficient Integrated Power and Water Projects becoming a standard in the Middle East IPP process~ sets a good precedent for development elsewhere
54
0
500
1000
1500
2000
2500
MIGD
AbuDhabi
Oman Qatar Bahrain SaudiArabia
20052015
Middle East IWPP Desalination markets
Anticipated Integrated Powerand Water Plant Investment
Abu DhabiOmanQatarSaudi ArabiaBahrain
$4 bn$2 bn$3 bn
$12 bn$2 bn
55
OmanTom Mackay & Kevin Cox
56
Macro environment
• Ruled by Sultan Qaboos since 1970
• GDP in 2004: US $24.4 billion
• Currency: Omani Rial pegged to US$
• Codified legal system, existing alongside a Sha’ria system
• Oil dominated economy - proven reserves of 5.5bbl
• Recent diversification utilising gas reserves of 29TCF - mainly LNG sales
DOE/EIA database 2005
MEED Dec 2005
S&P
GDP growth rate
Credit rating
Inflation
Population growth
3.3%
BBB+
1.6%
2.5%
(1)
(3)
(2)
(2)
(1)
(2)
(3)
57
Market structure
• Electricity and Water Sector deregulated in 2003~ separation of generation, transmission and distribution/supply
• Independent Regulator overseas power and water sector
• Transmission Company (Transco) dispatches plant based on economic merit order and system requirements
• Government owned Power and Water Procurer (PWP) is sole purchaser of power and water - then onsells to Distribution companies
• Government owned Electricity Holding Company (EHC) - holds shares in 100% government owned companies pending privatisation
• Real commitment to privatisation with Government completely divesting its interests in privatised entities
58
Power and Water Sector • Peak demand 2,500 MW
in 2005 growing at 6% in both power and water
• Market shares :
953,326Total
PSEG0200Gas/OilSalalah
Suez Energy33585Gas/OilSohar (in construction)
AES20427Gas/OilBarka 1
IPR285Gas/OilAl Kamil
Suez Energy0280Gas/OilAl Manah
EHC334Gas/OilWadi Al Jizzi
EHC0688Gas/OilRusayl
EHC42527Gas/OilGhubrah
OwnerWaterMIGD
PowerMW
FuelType
Facility(2004 figures)
PWP estimates 2004
ElectricityHoldingCompany46%
13%
Suez Energy
IPR5%
6%Dhofar
Other smallerinvestments
6%
AES
24%
59
Al Kamil asset overview
Location: Sharquiya region
Gross capacity: 285 MW OCGT
Fuel: Gas with oil back-up
Employees: 30 plant and 7 Muscat office
Configuration: Dual fuel plant using GEframe 9E turbines (3 units)
Operational: Q4 2002
UAE
SaudiArabia
Oman
Al Kamil
60
Al Kamil commercial overview• Publicly listed on Muscat Securities Exchange
• IPR own 65%, balance held by local shareholders
• 15 year PPA and GSA expiring April 2017 ~ backed by Oman Government
guarantees
• PPA is US$ and PPI linked with capacity payments based on availability
• Original investment of $133m, funded 80/20 debt/equity
• O&M subcontracted to an IPR subsidiary backed by 9 yr GE LTSA
61
Al Kamil performance
• Commercial availability of 99.9%
• No lost time accidents
• Excellent maintenance and inspection record with 3 inspections carried out on time and within budget
• Fully compliant with all environmental requirements
• Successful in exceeding Omanisation targets with 45% Omani staff
• Excellent relations with all relevant Governmental agencies
62
Al Kamil creating valueOperation• Maintenance of high availability and control of direct costsFinancing• IPO in August 2004 of 35% of equity at 1.7x par value• Renegotiated Senior Debt in November 2005, extending
maturity, lowering margins and back-ending repayment profile
Medium term • Expansion of plant as local load grows • Extension of PPA or exploitation of merchant tail• Use of non-OEM parts or renegotiation of LTSA terms • Further potential for future refinancing
63
Future prospects / outlook
• Regional and international finance available for Omani Power deals
• New project opportunities:~ 685 MW Rusayl / 550-700 MW, 30 MIGD Barka II IWPP,
bid due 27th March 2006~ future privatisation of Ghubrah (527 MW and 42 MGD)
and Wadi Al Jizzi (334 MW)~ expansion of Al Kamil~ standalone IWP programme in Oman
64
Summary
• Economically and politically stable
• Committed to privatisation programme
• Well structured, low risk business at Al Kamil
• Excellent technical and commercial performance
• Real potential to enhance returns of existing business and add additional projects
65
Abu DhabiDavid Barlow & Ed Metcalfe
66
Macro environment
• UAE - federation of 7 Emirates ~ political power Abu Dhabi
• GDP in 2004: $103bn
• Currency: UAE Dirham pegged to US$
• Oil: 98 bbls proven reserves ~ 8% of proven world reserves
• Gas - 212 TCF proven reserves- 5th largest in world
• Codified legal system~ existing alongside a Sha’ria system
Source: MEED, 2004
Moody’s, Dec 2004
Oil & Gas Journal, 2005
GDP growth rate
Credit rating
Inflation
Population growth
6.4%
A1
3.4%
6.0%
(1)
(2)
(1)
(1)
(1)
(2)
(3)
(3)
(3)
67
Abu Dhabi Power & Water Sector
• Abu Dhabi Water & Electricity Authority (ADWEA)
• Regulation & Supervision Bureau
• Abu Dhabi Water & Electricity Company (ADWEC)~ single procurer and seller of electricity and water
• Abu Dhabi Transmission Company ~ transmission of both power and water
• Abu Dhabi Distribution Company and Al Ain Distribution Company
• Generation of IWPPs and ADWEA owned Companies
68
Abu Dhabi IWPPs
• Middle East’s most successful privatization programme ~ six projects ~ in excess of US$ 5 billion invested
• Contractual structure ~ 60% government ownership guarantees stability
and fair treatment for the project company
• Long-term off-take arrangements backed by~ robust demand growth for power and water~ significant oil reserves and a strong economy
69
Demand growth
Abu Dhabi Power Demand 1993 - 2004
0
1000
2000
3000
4000
5000
6000
7000
8000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Year
Po
wer
, M
W
Installed Power Capacity Peak Power Demand
Abu Dhabi Power Demand Forecast 2005-2015
0
2000
4000
6000
8000
10000
12000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Year
Po
wer
, M
W
Installed Power Capacity Required Power Capacity
70
Demand growth
Abu Dhabi Water Demand Forecast 2005 - 2015
0
100
200
300
400
500
600
700
800
900
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Year
Wat
er,
MIG
D
Installed Water Capacity Required Water Capacity
Abu Dhabi Water Demand 1993 - 2004
0
100
200
300
400
500
600
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Wat
er,
MIG
D
Water Capacity Water Demand
71
Location: Emirate of Abu Dhabi
Net capacity: Present 873 MW,
162 MIGD: Final 1,550 MW, 95 MIGD
Fuel: Gas (CCGT)/desalination
Employees: Present 500: Final 160
Configuration (final): 5 GE 9FA gas turbines; 2 x295 MW Toshiba steam turbines; 2x12.5 MIGD Hitachi Zosen, 5x12.5 MIGD Doosan MSF, 2x3.5 MIGD Sidem MED desalination units
Umm Al Nar asset overview
OmanSaudiArabia
UAE UmmAl Nar
72
Umm Al Nar
73
Umm Al Nar commercial overview
• IPR 20%, ADWEA 60%, TEPCO 14%, Mitsui 6%
• 23 year PWPA with ADWEC
• $2.1 billion investment (80% debt and 20% equity)
• Financing - $1,100m 20yr loan, $230m 5yr loan, $440m equity bridge facility: balance from existing plant revenues
• O&M ownership - 70% IPR and 30% TEPCO
74
Arabian Power Company; $2.1 billion project
• Purchase and operation of current Umm Al Nar, Old Existing Assets and New Existing Assets
• Construction of Umm Al Nar New Plant Extension and integration with New Existing Assets
• Closure of old existing assets in 2008
75
Old Existing Assets
• Capacity payments - generous availability targets
• UAN East Station (commissioned in 1979-84);~ 4 Gas Turbines, total 250 MW~ 6 MSF Desalination units, total 41.7 MIGD
• UAN West Station (commissioned in 1981-86) consists of;~ 10 Steam Turbines, total 790 MW ~ 10 MSF Desalination units, total 53.2 MIGD
• Decommissioned 2008
76
New Existing Assets
• UAN West B Station (commissioned in 2002/3);~ 5 x 12.5 MIGD Desalination plant (MSF) ~ 2 x 3.5 MIGD Desalination plant (MED)
77
UAN New Plant Extension
• Net capacity~ 1,500 MW Power~ 25 MIGD Water ~ Integration of New Existing Assets
• Full commercial operation 2006
78
Contractor for UAN Plant Extension
• Mitsui single EPC Contractor
• Toshiba power plant (Toshiba main sub-contractor)
• Hitachi Zosen Desalination Plant
• TM T&D 400kV switchyard
• COD expected Q3 2006
79
O&M Agreement
• IPR/TEPCO experienced management team
• Existing highly skilled staff
• IT infrastructure implemented to IPR standards
• Environmental standard ISO 14001
• 12 year Contractual Service Agreement with GE
80
Location: Emirate of Abu Dhabi
Gross Capacity: 1,500 MW, 100 MIGD
Fuel: Gas (CCGT)/desalination
Employees: 130 staff
Configuration:
5 x Siemens V94.3A2 Gas Turbines
2 Siemens steam turbines
6 x 16.7 MIGD Fisia Italimpianti desalination units
Shuweihat asset overview
OmanSaudiArabia
UAEShuweihat
81
Shuweihat
82
Shuweihat commercial overview
• IPR 20%, CMS 20%, ADWEA 60%
• 20 year PWPA with ADWEC
• $1.6 billion investment - 80% debt and 20% equity
• Financed $950m 20 yr commercial tranche, $250m 20 yr Islamic tranche, $350m equity bridge loan
• O&M IPR/CMS JV (50:50 ownership)
83
Abu Dhabi - new projects
ADWEA Planned Projects
• 52.5 MIGD reverse osmosis desalination plant~ IPR and Mitsui in discussion with ADWEA
• 1,500 MW, 100 MIGD Shuweihat S2 IWPP
Potential Projects
• New Abu Dhabi Island developments ~ potential demand of 4,000 - 7,000 MW
• IWPP to supply Aluminium smelter - up to 2,000 MW
• Fujairah F2 IWPP 1,000 MW + 70 MIGD
84
Saudi ArabiaDavid Barlow, Jeff Wright& Steve Pedrick
85
Macro environment
• Saudi ruled by the Al-Saud family
• GDP $251bn
• Oil dominated economy: 262 bbls oil reserves, 25% of proven world total
• Gas reserves: 235 TCF proven, world’s 4th largest
Source: MEED, 2004
S&P / Moody’s
Oil & Gas Journal, 2005
GDP growth rate
Credit rating
Inflation
Population growth
5.3%
A/Baa2
0.2%
2.7%
(1)
(2)
(1)
(1)
(1)
(2)
(3)
(1)
(3)
(3)
86
Power and water industry
• Ministry of Water and Electricity
• Saudi Electricity and Cogeneration Regulatory Authority
• Saudi Electricity Company ~ existing power generation, transmission and
distribution~ responsible for new build IPPs
• Saline Water Conversion Company~ existing desalination capacity
• Water & Electricity Company~ jointly owned by SEC and SWCC~ responsible for new build IWPPs
87
Power and water industry
• Country installed capacity (2001, MWE figures)~ diesel fuel: 450 MW~ gas fuel: 15,500 MW~ oil (HFO/crude): 10,000 MW~ 1,470 MIGD
• Demand growth~ 6% forecast growth rate for power, 8% forecast for
water~ peak demand 24.5 GW in 2001, installed capacity 26
GW~ growth from population increase and industrial
diversification
88
Tihama Power asset overview
Location: Eastern Province
Gross capacity: 4 plants under construction, total capacity 1,085 MW, 4,400,000 lbs/hr steam
Fuel: Gas (Cogen) supplied FOC by Saudi Aramco
Employees: 140 total
Configuration:
3 sites each: 2 x GE 7FA 1 site: 2 x GE 7EA
TihamaUAESaudi
ArabiaOman
89
Tihama Power commercial overview
• Owner / operator structure 60% IPR, 40% Saudi Oger
• 20 year ECAs with Saudi Aramco
• $612m investment (80% debt and 20% equity)
• Lenders~ Bank Saudi Fransi~ Samba~ Arab Bank~ Riyadh Bank~ International Banks
90
Saudi Aramco
• The client, off-taker and fuel supplier
• Owned 100% by Saudi Government
• Number of employees 52,500
• World’s leading producer and exporter of oil~ circa 3 billion barrels per annum
• World’s top exporter of natural gas liquids~ circa 6.7 billion cu.ft./day
• Established in 1978 Saudi Oger is an international construction company based in Saudi Arabia
• Background in construction but business diversification strategy into power and telecoms well underway
• Turnover $1.8 billion per annum
• Number of employees 26,000
Saudi Oger
91
General Electric
Sponsors
International Power 60%
Saudi Oger 40%
Tihama Saudi Aramco
Mitsui
BanksOwner’s Engineer PB Power
Contractual Services Agreement
Shareholder’s Agreement
Usufruct Agreements
Energy Conversion Agreements
Ancillary Services Agreements
EPC ContractHHI Main
ContractorFacility Agreement
Sub-Contract Packages
Civil
Mechanical
Electrical
C&I
Fire ProtectionBanque Saudi Fransi
SAMBA
Arab Bank
Riyadh Bank
Saudi Hollandi
Etc.
Saudi Aramco 3rd party cogen programProject contractual structure
92
Tihama Power O&M arrangements
• IPR / Saudi Oger Management
• Experienced staff recruited from Middle East and Asia
• Extensive staff training
• IT infrastructure and systems implemented to IPR standards
• 20 year technical services agreement with IPR
• 12 year contractual services agreement with General Electric
93
Uthmaniyah - GE 7FA
94
Shedgum - GE 7FA
95
Ras Tanura - GE7EA
96
Ju’aymah - GE 7FA
97
Tihama Power Generation Company Ltd.Saudi Aramco 3rd Party Cogeneration Project
NTP
Feb 26 2004 Q1 06 Q2 04Uthmaniyah 311 MWe
Gross
Q2 06Q3 04 Shedgum 311 MWe Gross
Q3 06Q4 04 Ras Tanura 152 MWe Gross
Q4 06 Q1 05 Ju’aymah 312 MWe Gross
21 months
22 months
22 months
22 months
98
IWPP structure
99
Closed Dec 2005 Launched Dec 2005
IWPP and IPP programme
SEC
SEC
SEC
SEC
SEC
SEC
SEC
WEC
WEC
WEC
WEC
Sponsor
195 MIGD900 MWShoaiba
24 MIGD700 MWShuqaiq
176 MIGD2,500 MWRas Al Zour
75 MIGD1,100 MWAl Jubail
150 MIGD2,400 MWYanbu II
150 MIGD2,400 MWRabigh II
3,600 MWQurayyah II
23 MIGD600 MWShuqaiq III
1,725 MWSubukh
1,725 MWRiyadh PP10 (extn)
WaterPowerProject
1,725 MWMuzahimiyah
(1)
(2)
(1) (2)
MuzahimiyahRiyadhPP10
SubukhRabigh II
Yanbu II
Qurayyah II
Shuqaiq III
Shoaiba
Shuqaiq
Al Jubail
Ras Al Zour
UAE
SaudiArabia
Oman
100
Saudi Arabia - other opportunities• Marafiq
~ 2,500 MW + 176 MIGD at Jubail (bids due in April 2006)~ 600 MW Yanbu
• Aramco ~ possible expansion of existing Tihama assets~ other cogeneration opportunities
• Ma’aden~ IWPP supply for Aluminium smelter, mining extraction
projects
• Saline Water Conversion Company~ new build desalination driven projects
• Privatisation of existing SEC and SWCC assets
101
QatarTom Mackay
102
Macro environment
• Country ruled by the Al-Thani family following independence from UK protectorate in 1971
• GDP in 2004: US $28.4 billion
• Currency: Qatari Rial pegged to US$
• Codified legal system alongside a Sha’ria system
• Oil related economy: 15.2 bbls reserves
• Gas dominated economy: proven reserves of 910 TCF - 3rd largest proven reserves in the world
DOE/EIA 2005
MEED, 2005
S&P
GDP growth rate
Credit rating
Inflation
Population growth
7.0%
A+
4.7%
2.6%
(1)
(3)
(2)
(2)
(1)
(2)
(3)
103
Installed capacity
Current market share is as follows:
2174304Total
QEWC/IPR/Chubu Electric
601025Gas
Ras Laffan B
AES/QEWC/QP/GIC
40756GasRas Laffan A
QEWC29567GasRAF B2
QEWC0376.5GasRAF B1
QEWC33609GasRAF B
QEWC55970Gas
RAFASATOwner
WaterMIGD
Power MW
FuelTypeFacility
2005 figures from Kahramaa Under Construction
(1)
(1)
(1)
• QEWC at 76% Power
• IPR at 9.5 % Power
• AES at 9.6% Power
• Other smaller shareholders 4.9% Power
104
Power and water sector
• Installed capacity of some 2,712 MW and 128 MIGD ~ additional 1,592 MW and 89 MIGD under construction
• Qatar Electricity & Water Company (QEWC) historically developed all power generation and water projects
• KAHRAMAA sole purchaser and distributor of all power and water in country
• Electricity/water demand has growth historically 6-8% per annum
105
Attractiveness
• Projected demand for Electricity and Water in 2006 and 2007 is over 20% and 10% respectively
• Major Industrial developments in Ras Laffan and Mesaieed in the Petro-chemical, LNG expansions and Aluminium Smelter
• New developments worth US$10 billion plus in 2005~ fuelling new expansion in the electricity and water
sector
• Two IWPP’s in Qatar~ Ras Laffan A (AES +EMP) 750 MW, 40 MIGD ~ Q Power (QEWC/IPR/Chubu Electric) 1,025 MW, 60 MIGD
106
Ras Laffan B asset overview
Location: Ras Laffan Industrial City
Gross Capacity: 1,025 MW, 60 MIGD
Fuel: Gas(CCGT)/Desalination
Employees: 86 - 6 IPR, 4 QEWC, 2 Chubu, and during construction around 4,000
Configuration: V94.3 Siemens Gas Turbines and 15 MIGD Doosan Desalination Units
Operational from: 2006
UAE
UAEOman
SaudiArabia
Qatar
RasLaffan B
107
Ras Laffan B commercial overview
• Q Power (the project company) is owned 55% by Qatar Electricity & Water company, 40% by IPR and 5% by Chubu Electric
• Power and water capacity and output sold to KAHRAMAA (state-owned single buyer of power and water) ~ under 25 year “BOOT” Power and Water Purchase
Agreement
• Plant scheduled to enter commercial operation in three phases between 2006 - 2008
• $900 investment - 80% debt and 20% equity
• Long Term LTSA signed with Siemens for Gas Turbine Maintenance
108
Ras Laffan B construction progress
• All three Siemens Gas Turbines are on site and are being installed.
• 220kV switchgear for all gas turbines completed
• First Doosan Desalination Unit installed and work is progressing well on its associated pumps and pipe work
• First HRSG with its associated equipment being erected
• Progress on connecting to the Seawater intake and outfall pipework in advanced stage of completion
109
Ras Laffan B
110
Ras Laffan B
111
Ras Laffan B
112
Potential future projects
• Mesaieed ~ 2,000 MW, 40 MIGD currently in development ~ bids to be in by 15 March 2006
• Dukhan 1 & 2 ~ 3,000 MW, 60 MIGD
• Availability of regional and international finance~ eg Ras Gas LNG train 2 needed US $1.5 billion
received US$3 billion in offers
113
BahrainJohn Hurst
114
Macro environment
• Political~ stable, liberal, and the
most democratic of the Gulf States
• Currency pegged to the US$
• Legal structure very similar to that of the UAE
S&P
GDP growth rate
Credit rating
Inflation
Population growth
7%
A-
4.9%
1.5%
(1)
(1)
115
Power and Water industry
• Regulatory framework~ transmission and distribution is solely Government-
owned~ MEW is the sole offtaker for power and water backed by
Government of Bahrain Guarantee
• International Power and Suez Energy key players in the market
• Demand growth 8% power, 10% water
• Installed capacity ~2,000 MW (excluding Alba aluminum smelter)
116
Location: Manama
Gross Capacity: 910 MW and 30 MIGD, 60 MIGD under construction
Fuel: Natural gas
Employees: 2 IPR, 1 Suez, 1 Sumitomo, 198 Seconded from MEW
Configuration: Phase I - 2 x 13E2 + 30 MIGD water Phase II - 3 x 13E2
Al Hidd asset overview
UAE
UAEOman
SaudiArabia
Qatar
BahrainBahrain
Al HiddAl Hidd
117
Al Hidd
118
Al Hidd commercial overview
• Hidd Power Company : IPR 40%, Suez 30%, Sumitomo 30%
• 22-year PWPA with Ministry of Electricity and Water; 22-year NGSA with Bahrain Petroleum Company (BAPCO)
• $1.25 billion investment - 85% debt, 15% equity
• Lenders - JBIC, 6 MLAs led by Royal Bank of Scotland
• Combined Owner/O&M structure
119
Prospects / outlook
• IPR consortium has been operating Hidd plant from 23 Jan 2006
• Financial close expected in July 2006~ payment of purchase price in July
• Immediate earnings
• MEW / MOF are both pragmatic and fair clients
• 2,000 MW IPP to be released by Government of Bahrain shortly
120
SummaryRanald Spiers
121
6%5,000 MW4,000 MWKuwait
8%2,000 MW2,000 MWBahrain
9%5,000 MW2,700 MWQatar
8%30,000 MW26,000 MWSaudi Arabia
6%2,000 MW3,000 MWOman
7%8,000 MW8,000 MWUAE
Demand growth %(per year)
New capacityrequired by 2014
Capacity2004Country
Middle East Regional IWPP markets
122
Al Manah, Salalah, Al Kamil, Barka (Oman)Taweelah A2, Taweelah A1 (UAE)TOTAL PROJECT COSTS: $3bn
SADAF (Saudi Arabia); Shuweihat, Umm Al Nar (UAE); Ras Laffan A (Qatar); Sohar (Oman); Al Ezzel (Bahrain)TOTAL PROJECT COSTS: $6bn
Taweelah B, Taweelah RO, Fujairah, Shuweihat S2 (UAE); Ras Laffan B, Mesaieed, (Qatar), Barka 2, Ghubrah, Rusayl (Oman); Shoaiba, MARAFIQ , Rabigh, Shuqaiq, Raz Al Zhor (SaudiArabia) + ?TOTAL PROJECT COSTS: $15bn+
1994 - 2000
2001 - 2004
2005 - 2008
Middle East Region - growth in IPP projects
123
UAE• Shuweihat S2 new build
1,500 MW +100 MIGD• Fujairah F2 1000MW + 70 MIGD• New Abu Dhabi island
development 4,000 MW - 7,000 MW
Oman• Barka 2 new build 700 MW +
30 MIGD• Rusayl 685 MW existing• Ghubrah sale of existing 527 MW
+ 42 MIGD• Wadi Al Jizzi 334 MW
Bahrain• 2,000 MW IPPQatar• Mesaieed 2,000 MW, 40 MIGD• Dukhan 1&2 3,000 MW, 60
MIGDSaudi Arabia• Shuqaiq 700 MW, 70 MIGD• Marafiq 2,500 MW, 176 MIGD• Ras Al Zour 2,500 MW, 175
MIGD
Middle East Region - short term prospects
124
0
500
1000
1500
2000
2500MIGD
AbuDhabi
Oman Qatar Bahrain SaudiArabia
2005
2015
Desalination - growth potential
Anticipated integrated powerand water plant investment
Abu DhabiOmanQatarSaudi ArabiaBahrain
$4 bn$2 bn$3 bn
$12 bn$2 bn
• Scope for further desalination projects in the Middle East
• Operating desalination plants - a key skill for IPR
• Ability to capitalise on the ME experience elsewhere (Australia, USA)
125
Strategic focus
• Extract maximum value from current projects
• Maintain geographic focus on Gulf States and Saudi Arabia
• Seek selective opportunities in North Africa (Morocco/Egypt etc) markets with similar commercial and risk profile
• Target to win one project each year over the next four/five years
126
Success factors
• Best-in-class operation~ assets performing in accordance with contracts
• World class project finance capabilities
• High quality people to implement and run new projects
• Excellent reputation~ delivered assets on time and within budget
• Robust relationships with key clients, partners and contractors
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