Oman Investment Corporation (OIC) announced that its JV with Sembcorp Utilities of Singapore has signed a 15-year contract to supply power and water to the state-owned Oman Power and Water Procurement Company.

The joint venture company, Sembcorp Salalah Power & Water Company, will be investing approximately $1 billion to develop, build, own and operate the Salalah Independent Water and Power Plant (Salalah IWPP) in Oman.

Sembcorp Salalah Power & Water Company is 60 per cent owned by Sembcorp, a wholly owned subsidiary of Sembcorp Industries and 40 per cent owned by OIC, whose shareholders are Gulf Investment Corporation, National Investment Funds Company, State General Reserve Fund of the Sultanate of Oman and Bank Muscat.

The project award to the OIC and Sembcorp consortium follows a competitive bidding process which involved other global utilities companies.

Targeted to begin full commercial operations in the first half of 2012, the Salalah IWPP will consist of a gas-fired power plant which will have a net capacity of 445 megawatts and a seawater desalination plant which will employ reverse osmosis technology to produce 15 million imperial gallons per day of water.

Set to be the largest and most energy-efficient power and water plant in the Governorate of Dhofar in Southern Oman, the entire electricity and water output from the facility will be sold under the 15-year power and water purchase agreement.

The new facility will increase the power capacity in the Dhofar region from 321 megawatts to 766 megawatts, where demand is expected to double over the next six years.

Given the power and water demand growth in the region, the plant is expected to continue providing power and water beyond this initial term of 15 years.

In addition, the facility will be operated and maintained by a joint venture company, Sembcorp Salalah O&M Company, which is 70 per cent owned by Sembcorp and 30 per cent by OIC, under a long-term O&M contract for the entire term of the power and water purchase agreement.

Sepco III Electric Power Construction Corporation (Sepco III) of China is the engineering, procurement and construction contractor under a fixed-price, date-certain turnkey contract and Hydrochem, a wholly-owned subsidiary of Hyflux, is the sub-contractor for the seawater desalination plant.

“This project will be creating business opportunities for the local contractors, via sub-contracts as well new employment opportunities during the construction phase and the long term operation and maintenance phase,” stated Kalat G Al Bulooshi, OIC chief.

“The award of the Salalah IWPP project is a major milestone for OIC. This investment is in line with our strategy to grow, diversify our portfolio and to invest in the infrastructure sector in Oman which is projected to have strong growth given the government plans for building new power plants in the country. This investment will provide our shareholders with stable and recurring income.”

The project cost of approximately $1 billion will be 75 per cent funded through 17-year non-recourse project finance loans, and 25 per cent by shareholder loans. The non-recourse project finance loans will be provided by Standard Chartered Bank (also the Financial Advisor), Bank of China, China Development Bank, BankMuscat, KfW, Sumitomo Mitsui Banking Corporation, National Bank of Oman and Bank Sohar.

The loans will be in US dollars, except for those from BankMuscat, National Bank of Oman and Bank Sohar, which will be in Omani Rials. Bank Dhofar and Oman International Bank provided equity bridge finance to OIC.-TradeArabia News Service