Op­er­a­tions be­gin at Az­zour elec­tric­ity and wa­ter plant

First in­de­pen­dently-owned project to sell out­put to MEW

Kuwait Times - - FRONT PAGE - By Sara Ahmed

The first in­de­pen­dently-owned power and wa­ter plant in Kuwait, Az­zour North One, launched com­mer­cial op­er­a­tions yes­ter­day. Az­zour North One will gen­er­ate 10 per­cent of Kuwait’s power re­quire­ments (1,539 MW) and 20 per­cent of wa­ter needs (107 mil­lion gal­lons per day). The KD 519 mil­lion ($1.7 bil­lion) project was de­layed for years due to po­lit­i­cal in­fight­ing but fi­nally started con­struc­tion in Dec 2013.

The power and wa­ter plant marks the first stage in a lengthy ef­fort by the gov­ern­ment to meet the state’s grow­ing power and wa­ter needs. It also rep­re­sents the first suc­cess­ful test case for the im­ple­men­ta­tion of the gov­ern­ment’s mega in­fra­struc­ture de­vel­op­ment plan and the pub­lic-pri­vate part­ner­ship model. Az­zour North One will be fu­eled by a blend of lo­cal gas and im­ported LNG. In 2015, Kuwait im­ported 3.1 mil­lion met­ric tons of LNG and has awarded a con­sor­tium to build a KD 882 mil­lion ($2.9 bil­lion) LNG im­port and re­gasi­fi­ca­tion ter­mi­nal at Az­zour.

Fall­ing un­der the first phase of the In­de­pen­dent Wa­ter and Power Project (IWPP), Az­zour North One is owned and op­er­ated by Shamal Az­zour Al-Oula KSC, which is 40 per­cent owned by a pri­vate con­sor­tium com­pris­ing ENGIE (for­merly GDF SUEZ), Su­mit­omo Cor­po­ra­tion, and Kuwait-based AH Al Sa­gar & Brothers. The re­main­ing 60 per­cent is owned by the gov­ern­ment of Kuwait, through the Kuwait In­vest­ment Au­thor­ity (5 per­cent), the Pub­lic In­sti­tu­tion for So­cial Se­cu­rity (5 per­cent), and Kuwait Au­thor­ity for Part­ner­ship Projects (50 per­cent).

The gov­ern­ment is man­dated to sell 50 per­cent of the to­tal own­er­ship through an ini­tial pub­lic of­fer­ing (IPO) to Kuwaiti cit­i­zens af­ter con­struc­tion is com­pleted. The gov­ern­ment will re­tain a 10 per­cent stake fol­low­ing the IPO. All the power and treated wa­ter pro­duced from the plant will be bought by the Min­istry of Elec­tric­ity and Wa­ter (MEW) un­der a 40-year long-term deal.

KUWAIT: Shamal Az­zour Al-Oula KSC, the owner and op­er­a­tor of Az­zour North One power and wa­ter plant, yes­ter­day of­fi­cially marked com­ple­tion of the plant’s con­struc­tion phase and an­nounced the com­mence­ment of full com­mer­cial op­er­a­tion. The $1.7 bil­lion fa­cil­ity that started con­struc­tion in De­cem­ber 2013 is Kuwait’s first in­de­pen­dently owned power and wa­ter fa­cil­ity, and falls un­der the first phase of the coun­try’s IWPP project. The project was com­pleted on sched­ule and on bud­get.

As of yes­ter­day, the project has the ca­pac­ity to gen­er­ate 10 per­cent of Kuwait’s power re­quire­ments at peak ca­pac­ity (1,539MW) and 20 per­cent of wa­ter gen­er­a­tion (107 mil­lion gal­lons per day). The plant is fu­eled by a blend of lo­cal gas and im­ported LNG. The com­bined fa­cil­ity of power and wa­ter gen­er­a­tion is Kuwait’s clean­est and most ef­fi­cient source of elec­tric­ity.

Pri­vate con­sor­tium

Shamal Az­zour Al-Oula KSC is 40 per­cent owned by a pri­vate con­sor­tium com­pris­ing ENGIE (for­merly GDF SUEZ), Su­mit­omo Cor­po­ra­tion, and A H Al-Sa­gar and Brothers.

The re­main­ing 60 per­cent is owned by the Gov­ern­ment of Kuwait, through the Kuwait In­vest­ment Au­thor­ity (KIA: 5 per­cent), the Pub­lic In­sti­tu­tion for So­cial Se­cu­rity (PIFSS: 5 per­cent), and Kuwait Au­thor­ity for Part­ner­ship Projects (KAPP: 50 per­cent). The Gov­ern­ment of Kuwait is man­dated to sell 50 per­cent of the to­tal own­er­ship through an Ini­tial Pub­lic Of­fer­ing (IPO) to Kuwaiti cit­i­zens af­ter con­struc­tion is com­pleted. The gov­ern­ment will re­tain 10 per­cent stake fol­low­ing the IPO.

The power and treated wa­ter pro­duced from the plant will be en­tirely supplied to the coun­try’s na­tional power and wa­ter grid op­er­ated by the Kuwait Min­istry of Elec­tric­ity and Wa­ter (MEW) un­der a 40year long-term En­ergy Con­ver­sion and Wa­ter Pur­chase Agree­ment (ECWPA). ENGIE and Su­mit­omo will un­der­take the op­er­a­tion and main­te­nance (OandM) of the plant on an equal share ba­sis.

The plant is the first stage of the coun­try’s plan to sig­nif­i­cantly in­crease ca­pac­ity over the com­ing years, and falls within a larger ef­fort to meet an an­tic­i­pated peak de­mand of 25 gi­gawatts (GW) by 2025. It was awarded un­der the IWPP law and im­ple­mented through a process man­aged by the Kuwait Au­thor­ity for Part­ner­ship Projects. The Plant is part of an over­all IWPP lo­cated in the Az­zour area. The over­all IWPP is ex­pected to be de­vel­oped over five phases, for a to­tal ca­pac­ity of 4,800 MW of elec­tric­ity and ap­prox­i­mately 280 MIGD of de­sali­nated wa­ter to be ten­dered over a pe­riod of four to six years to meet a pro­jected rapid in­crease in elec­tric­ity de­mand, which is ex­pected to in­crease at a high rate of 7.6 per­cent per an­num un­til 2020 against the back­drop of fast eco­nomic growth.

KAAP Gen­eral Man­ager Mut­laq Al-Sane said, “Az­zour North One project was our first PPP project to be ten­dered and the first to be com­pleted. All of us at KAAP are ex­tremely proud of this achieve­ment and the trans­par­ent and ef­fi­cient ten­der­ing process it in­volved.

Shamal Az­zour KSC is liv­ing proof of the ben­e­fits of PPP model and how the pri­vate sec­tor, in­ter­na­tional part­ners, and the State can all work to­gether on de­liv­er­ing ma­jor in­fra­struc­ture projects on sched­ule and on bud­get for the ben­e­fit of the peo­ple.” Shamal Az­zour KSC Chair­man Yousef Al Ha­jri said, “On be­half our part­ners, our in­vestors, and ev­ery­one work­ing on the project, it gives me great plea­sure to an­nounce that as of yes­ter­day Az­zour North One is fully op­er­a­tional, with a pro­duc­tion ca­pac­ity of 1,539.2 MW and 107MIGD.

The plant is a tes­ta­ment to the coun­try’s vi­sion and the pri­vate sec­tor’s ca­pa­bil­ity in ma­te­ri­al­iz­ing the vi­sion. All of us in­volved in the project are ex­tremely proud of this achieve­ment.”

Shamal Az­zour KSC CEO Andy Bif­fen said, “I would like to thank MEW, KAAP, our EPC con­trac­tors Hyundai Heavy In­dus­tries (HHI) and So­ci­ete In­ter­na­tionale De Des­sale­ment (SIDEM), Gen­eral Elec­tric, our staff, our share­hold­ers, and ev­ery­one who had role in de­liv­er­ing a project of this mag­ni­tude on sched­ule and on bud­get; re­flect­ing the skills, ef­fi­cient or­ga­ni­za­tion and ex­per­tise of all those in­volved. Yes­ter­day, as we cel­e­brate the 100 per­cent com­mer­cial op­er­a­tion of the plant, we look for­ward to pro­vid­ing the coun­try with the clean­est and most ef­fi­cient power in the grid, to ex­tend­ing more op­por­tu­ni­ties for Kuwaitis, and to op­er­at­ing a safe, ef­fi­cient en­vi­ron­ment for our em­ploy­ees.”

Shamal Az­zour KSC CFO, Quentin des Cres­son­nieres said, “Shamal Az­zour achieve­ments of the past three years would not have been pos­si­ble with­out the Project Fi­nance in place, and the strong sup­port from our Lenders (NBK, JBIC, NEXI, SMBC, Standard Char­tered and BTMU) and our Share­hold­ers (ENGIE, Su­mit­omo, Al Sa­gar, KAPP, KIA, PIFSS). We also look for­ward to start the IPO process of 50 per­cent of the Shares to Kuwaiti Cit­i­zens in the com­ing months (Mid 2017)”.

• Kuwait’s first PPP project com­mences 100 per­cent com­mer­cial op­er­a­tions

• Adds 1,539MW and 107MIGD to the na­tional grid to­day • The com­bined fa­cil­ity of power and wa­ter gen­er­a­tion rep­re­sents Kuwait’s most ef­fi­cient source of elec­tric­ity

KUWAIT: The Az­zour North One power and wa­ter plant is seen.

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