RIYADH,(Reuters) – State-controlled Saudi Electricity Co (SEC) will soon award contracts to build a 2,400 megawatt power plant after it obtained a 15 billion riyal ($4 billion) soft loan from the government.
The cash-strapped firm has been struggling to meet pent up power demand — which grew by about 8 percent in 2009 — in the desert kingdom prompting King Abdullah to order in 2006 that government financial assistance be extended for the Gulf’s biggest utility by market value.
Saleh al-Barrak, the utility’s chief executive, said the bulk of the loan will finance the construction of a new power plant in Rabigh, on the western coast of Saudi Arabia, where the giant King Abdullah Economic City is under construction.
“The loan will finance expansion projects for power generation and mainly Rabigh’s 2,400 megawatt power plant. Contracts for Rabigh plant will be awarded this year, within a few weeks,” Barrak told Reuters by telephone.
The plant is expected to be completed in the summer of 2014.
Earlier on Monday, the Saudi cabinet said it has approved the 25-year loan to SEC.
Three international firms have made bids of between $3.94 and $4.34 billion to build the Rabigh plant, with South Korea’s Doosan Heavy Industries and Construction being the lowest bidder. Other bidders include Hyundai Heavy Industries and France’s Alstom.
The Saudi government — which holds a 74.3 percent stake in SEC — last year granted another 10-year reprieve on paying dividends to its largest shareholder, extending a similar arrangement the utility had in place for the 10 years to 2009.
The firm has been undergoing a deep restructuring since 2006 to enhance profitability including lowering its workforce, tapping the bond market and launching partnerships with private firms to reduce the financial burden of its expansion.
SEC said last year it would spend 80 billion riyals by 2012 to add 13,000 megawatts to its capacity which stood then at about 37,000 MW.