Published February 3, 2009

Sembcorp in Oman project funding talks

It's also understood to be reviewing costings of US$1b water and power project

By RONNIE LIM

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SEMBCORP Industries is discussing with several financial institutions funding for the US$1 billion-plus Salalah independent water and power project (IWPP) in Oman, for which it was recently named as the 'preferred bidder' by the Omani authorities.

'If a fresh commitment to the project cannot be secured from Standard Chartered, or its new potential backers, Sembcorp could lose out on the deal.' - MEED

Furthermore, the Singapore group is understood to be relooking its earlier costings as the economic outlook has changed drastically since it bid for the project early last year, sources said.

Sembcorp's business stance - as evident in its bids for the Singapore generation companies sold by Temasek Holdings last year - remains that 'the numbers have to make commercial sense', the sources add.

Specialist publication MEED, or the Middle East Business Intelligence, reported that Sembcorp, which is bidding for the Salalah IWPP in partnership with Oman Investment Corp (OIC), is in talks with export credit agency China Export Import Bank for funding for the project.

Sembcorp is also said to be seeking other commercial banks to join the financing group in the face of a tough funding market.

This follows the expiry of an earlier US$800 million underwriting agreement with the UK's Standard Chartered Bank due to delays in the project, MEED said.

'If a fresh commitment to the project cannot be secured from Standard Chartered, or its new potential backers, Sembcorp could lose out on the deal,' it added.

MEED also cited a source as saying that 'the financial markets have completely changed since this underwriting was agreed, so getting a quick approval for new commitments will be difficult'.

Sembcorp, when contacted, declined comment.

Sembcorp/OIC was named by Oman as the preferred bidder last month from the three shortlisted groups for the Salalah project.

OIC is a private equity company whose shareholders include Gulf Investment Corp (50 per cent), the Oman government (10 per cent), National Investment Funds Company (35 per cent) and BankMuscat (5 per cent).

If they manage to complete the project financing, the Salalah IWPP will be Sembcorp's second such project in the Middle East after its earlier US$1.7 billion Fujairah IWPP in the United Arab Emirates.

The Salalah project comprises a 400-megawatt power station and a desalination plant producing 15 million gallons of water per day.

It aims to help meet the growing demand for water and power in the south of Oman.