Sembcorp expands seawater desalination capacity in Fujairah, UAE

ESC is a joint venture between Sembcorp Gulf Holding Co and Union Power Holding Company, subsidiaries of Sembcorp Utilities and the Abu Dhabi Water and Electricity Authority (ADWEA) respectively.

Sembcorp Utilities is a wholly-owned subsidiary of Sembcorp. Sembcorp holds an effective 40% stake in ESC.

ESC owns and operates the Fujairah 1 Independent Water and Power Plant (IWPP), one of the world's largest operating hybrid desalination plants, in the UAE. The expansion, which is expected to be completed in the first half of 2015, will increase the Fujairah 1 IWPP's seawater desalination capacity by 30 million imperial gallons per day (MiGD). This additional output will be produced using reverse osmosis.

The expansion will enhance Sembcorp's total seawater desalination capacity in the UAE from 100 MiGD to 130 MiGD, of which 67.5 MiGD will be produced using reverse osmosis. The remaining 62.5 MiGD is produced using multi-stage flash. This combined reverse osmosis desalination capacity will make the Fujairah 1 IWPP the largest reverse osmosis desalination facility in the Middle East.

Under the water purchase agreement, the 30 MiGD water output from the expansion will be sold to ADWEC for a period of 20 years, starting from its operational date. This is in addition to the existing 22-year power and water purchase agreement for the current water and electricity output from the Fujairah 1 IWPP to ADWEC. The expansion is expected to cost approximately $200m. Sembcorp's equity investment of $80m will be funded through internal resources.

At the same time, a contract has been awarded to Acciona Agua and Acciona Infraestructuras, members of the Acciona Group, to design, build and provide seven years' operation and maintenance services for the expansion project. Acciona is a Spanish multinational corporation and a leader in the infrastructure, renewable energy and water treatment sectors.

Tang Kin Fei, Group President & CEO of Sembcorp, said, "We are pleased to have secured this water purchase agreement and look forward to working closely with our partner ADWEA on this project. The expansion of our seawater desalination capacity in strategically-located Fujairah will play an important role in meeting the increasing water demand in the UAE."

William Chang, Executive Managing Director of ESC, said, "One of the most innovative aspects of this expansion project is its ability to recover seawater discharge from the existing multi-stage flash facility for reuse as part of the seawater feed for the entire Fujairah 1 IWPP. The expansion will also include the installation of a new Dissolved Air Floatation system, which will improve the quality of the seawater feed. This system will enhance the reliability and availability of the reverse osmosis facility."

Elsewhere in the Middle East, Sembcorp also successfully completed its $1bn Salalah Independent Water and Power Plant in Oman in May 2012, achieving another key milestone in the region. Sembcorp's energy and water operations in the Middle East now have a gross capacity reaching 1,383 megawatts of power and 145 MiGD of water, and amount to $2.9bn in total project costs.

The transaction is not expected to have a material impact on the earnings per share and net asset value per share of Sembcorp Industries for the current financial year.