SembUtilities acquires 40% interest in Fujairah Independent Water and Power

July 5, 2006

SembCorp Industries (SembCorp) is pleased to announce that its wholly-owned subsidiary, SembCorp Utilities (SembUtilities), has entered into a joint venture with the Abu Dhabi Water and Electricity Authority (ADWEA) to acquire the Fujairah-based Independent Water and Power Plant (IWPP). The joint venture company, Emirates SembCorp Water & Power Company is 60 per cent owned by ADWEA through its subsidiary Taqa and 40 per cent owned by SembUtilities through its subsidiary SembCorp Gulf Holding Co.

The project involves the acquisition of the existing Fujairah power and water facility which has a net generation capacity of 535 megawatts and desalination capacity of 100 million imperial gallons per day (MIGD) and an expansion of the generation capacity of the facility by a further 225 megawatts. The new-build expansion is expected to be operational in the first quarter of 2009.

The electricity and water output from the facility will be sold to the Abu Dhabi Water and Electricity Company (ADWEC) under a 22-year Power and Water Purchase Agreement (PWPA). The plant will be operated and maintained by SembCorp Gulf O&M Co Ltd, a wholly owned subsidiary of SembUtilities, under a long-term operation and maintenance contract for the entire term of the PWPA.

Mr Tang Kin Fei, Group President & CEO of SembCorp, said: “We are pleased to have been selected by ADWEA to be its partner in the Fujairah IWPP. This success is recognition of our strong operating track record and reflects our ability to capitalise on our technical expertise in managing power and water facilities. Our partner ADWEA has an established track record in power and water projects and we look forward to working closely with them on this project.”

SembUtilities’ participation in the project follows a competitive bidding process that began in July 2005 and which involved other global utilities players companies. Mr Tang added further: “This acquisition is a major milestone for SembCorp. It is our first power and water investment in the Middle East as well as our largest utilities investment overseas to-date. The project is in line with our strategy to focus on businesses that provide stable and recurring income. It also gains us entry into the booming economies in the UAE and enables us to start a base from which to grow our integrated utilities business in Abu Dhabi and the Gulf region.”

Financial information

The total project cost (including the acquisition price of the existing asset and the cost of expanding the plant) is estimated to be US$1,726 million and it will be funded through a non-recourse project finance loan, an equity bridge loan as well as the operating cash flows from the existing plant. Both the long-term non-recourse loan and equity bridge loan have been jointly underwritten by Societé Generale and Barclays Capital.

The financial close of the project is expected to be in October 2006 and the project is expected to contribute earnings to SembCorp from the last quarter of 2006. However, the impact on SembCorp’s NTA and EPS for the financial year ending 2006 is not expected to be material.

None of the directors or controlling shareholders of SembCorp has any interest, direct or indirect, in the acquisition.

The Fujairah IWPP

The Fujairah IWPP is the sixth power and water project in the UAE to be privatised by ADWEA.

The two-year old facility consists of a gas-fired power plant which has a net capacity of 535 megawatts (gross capacity of 662 megawatts) and a hybrid seawater desalination plant employing a combination of multi-stage flash and reverse osmosis technology to produce 100 MIGD of water, equivalent to roughly a third of Singapore’s water demand a day.

A further 225 megawatts of power generation capacity will be added to the facility. Construction of the new plant, to be situated adjacent to the existing plant, will commence immediately and commercial operation is expected by the first quarter of 2009. Upon completion, the plant’s total generation capacity will reach 760 megawatts.

The Power and Water Purchase Agreement (PWPA)

The PWPA with ADWEC will take effect on completion of the acquisition. ADWEC will purchase the existing power and water output of 535 MW and 100 MIGD for the initial two years. Upon commercial operation of the new extension, ADWEC will purchase the entire output of the plant for another 20 years. Under the terms of the PWPA, fuel will be procured and paid for by ADWEC.