Preferred bidder for $1b Oman project acting on 3 fronts
By RONNIE LIM
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PREFERRED bidder Sembcorp Industries is pressing on with efforts to obtain finance for its US$1 billion-plus Salalah independent water and power project (IWPP) in Oman, sources said yesterday.
Middle East reports have suggested that the authorities there are preparing to reopen talks with the second and third-ranked bidders because Sembcorp has got bogged down.
But a source said yesterday that because of the amount of paperwork involved, Sembcorp has 'only recently put in its application to China Exim Bank'. The Singapore group is looking to the Chinese bank to provide one of three finance tranches.
The second tranche would be a syndicated loan led by Standard Chartered. Stanchart last year lined up an underwriting agreement for US$800 million for Sembcorp, but this has expired due to delays with the IWPP project.
Sembcorp was named preferred bidder for the Salalah IWPP in January this year after a process that started in early 2008, in which the Omani government whittled down eight pre-qualified international groups to three last July.
With the economic downturn, Sembcorp has had to review the project costings. 'It's more difficult now to get finance as fewer banks are willing to lend for the long-term, and those that are willing are charging higher margins, which changes the project economics and pricing,' a source explained.
That is why Sembcorp is now tackling the finance question on three fronts, including raising funds from equity.
Sembcorp's partner for the project is Oman Investment Corp, a private equity company whose shareholders include Gulf Investment Corporation (50 per cent), the Oman Government (10 per cent), National Investment Funds Company (35 per cent) and BankMuscat (5 per cent).
'China Exim is expected to provide quite a sizeable chunk,' the source said, implying that each of the three tranches could contribute about a third of the required finance.
Specialist Middle East business intelligence publication MEED has cited sources as saying that the Oman Power and Water Procurement Company is preparing to reopen talks with the second and third-ranked bidders.
The two parties are a Mitsui/Saudi Oger/WJ Towell consortium and UK's International Power/Mubadala, the latter being the state-owned investment fund of the United Arab Emirates.
The rival groups are reportedly trying to get finance ready should Sembcorp fail to.
The Salalah IWPP comprises a 400-megawatt power station and a desalination plant to produce 15 million gallons of water a day. If Sembcorp obtains finance, it will be the Singapore group's second IWPP win in the Gulf, after its US$1.7 billion Fujairah IWPP in the UAE.
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