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Facility E award jumpstarts Qatar’s utility projects

13 January 2025

 

A developer team led by Japan’s Sumitomo Corporation won the contract in November to develop and operate the Facility E independent water and power project (IWPP) in Qatar.

The project’s $2.8bn engineering, procurement and construction (EPC) contract drove the overall value of awarded contracts in the state’s utility sector to $3.9bn in 2024.

This makes 2024 the second-best year ever for Qatar’s utility sector, after 2015, when it let contracts worth over $7bn, including its last IWPP, Facility D in Umm Al-Houl, and other key utility projects.

Qatar General Electricity & Water Corporation (Kahramaa) awarded the Facility E IWPP contract, which has a total cost of $3.7bn, five years after it was initially tendered.

It marks a milestone following a slower pace in contract awards in recent years due to the completed delivery of infrastructure projects catering to the 2022 Fifa World and Covid-19 uncertainties.

Peak demand growth

Qatar’s total contracted electricity capacity, which stood at 10,573MW in 2023, increases to over 11,300MW when the capacity from the 800MW Al-Kharsaah solar plant is included.

This equates to a reserve margin of around 14% given the 2023 peak electricity demand of 9,805MW, as reported by the state utility.

A steady growth in peak electricity demand, up 4.3% in 2023 and 5.9% the year before, even when water demand remained stable at 425 million imperial gallons a day (MIGD), implies the state utility requires substantial additional capacity, which helped trigger the award of the Facility E IWPP contract last year.

The Facility E IWPP developer consortium includes Japanese utility developer Shikoku Electric, Seoul-headquartered Korea Overseas Infrastructure & Urban Development Corporation (Kind) and Korea Southern Power Company (Kospo).

The consortium and the strategic national investors, Qatar Electricity & Water Company (QEWC) and QatarEnergy (QE), will co-own the project company that is implementing the project.

The equity distribution between the project company shareholders is:

  • Sumitomo Corporation: 17%
  • Shikoku Electric: 11%
  • Kospo: 6%,
  • Kind: 6%
  • QEWC: 55%
  • QE: 5%

South Korea’s Samsung C&T is the project’s overall EPC contractor. Japan’s Mitsubishi Power is supplying advanced combined-cycle gas turbines for the power plant, and Spain’s Acciona is contracted to build the integrated plant’s $500m seawater reverse osmosis (SWRO) unit.

Unlike previous IWPPs, the Facility E IWPP tender attracted a single bid on both the initial and final rounds. This demonstrates increasing reticence among international utility developers when bidding for thermal assets as they grapple with their carbon neutrality targets by or before 2050.

The state utility and developer consortium had to contend with issues including the final capacity, costs and decarbonisation aspects of the project.

In the end, they agreed to develop a gas-fired power plant with a final electricity generation capacity of 2,415MW and a SWRO-based desalination plant with a capacity of 110MIGD.

The power and water purchase agreement for the Facility E IWPP is valid for 21 years, until 2049, a year shy of the developers’ target date for reaching carbon neutrality.

They also agreed to a levelised electricity cost of about QR190.71 a megawatt-hour, equivalent to $cents 5.239 a kilowatt-hour, and a levelised water cost of QR2,914 per 1,000 cubic metres, or about $cents 8.0 a cubic metre.

The tariffs exclude potential carbon capture, utilisation and storage (CCUS) costs.

Expanding capacity 

Following the award of the Facility E IWPP contract, QEWC said it is cooperating with Kahramaa to explore a build, own and operate peak power unit project with a production capacity of 500MW. 

A peak power unit typically refers to an open-cycle gas turbine plant, which can help increase the electricity grid’s flexibility to meet peak demand. The planned 500MW power plant will be located in Qatar’s Ras Abu Fontas, the same area where the Facility E IWPP will be built.

Qatar has been expanding its renewable energy capacity following the completion of its first utility-scale solar photovoltaic (PV) project in Al-Kharsaah in 2023. This is in line with its long-term objective to have a renewable energy installed capacity of 5,000MW by 2035.

Samsung C&T is constructing two solar PV plants in the Gulf state, costing $632m and with a combined capacity of 875MW.

One of the solar plants, located in Ras Laffan, has a capacity of 458MW. The other plant, located in Mesaieed, will have a capacity of 417MW.

The electricity generated by the two plants will be partly used for QatarEnergy’s liquefied natural gas production expansion.

In September 2024, Minister of State for Energy Affairs Saad Sherida Al-Kaabi also confirmed plans to build a 2,000MW solar power plant in Dukhan, 80 kilometres west of Doha.

The planned Dukhan solar PV plant will help to “lower carbon emissions in the framework of a realistic energy transition”. Once completed, it will increase Qatar’s solar PV capacity to close to 4,000MW by 2030.

Grid stability

Qatar’s efforts to expand its thermal and solar power generation capacity have led to the expansion of its transmission and distribution network.

Last year, Kahramaa awarded Elsewedy Cables Qatar two EPC contracts with a total combined value of QR2.2bn ($604m).

The first contract involves supplying low- and medium-voltage cables catering to a planned new underground extra-high-voltage/high-voltage cable network.

The second contract involves providing EPC services, including supplying and installing 132-kilovolt (kV) power cables for strategic projects across the state.

In October, Kahramaa tendered two contracts to upgrade segments of its electricity grid. The first contract calls for upgrading Ras Laffan C’s existing 220kV and 400kV substations and adding 220kV gas-insulated switchgear bays and an 800-megavolt amps transformer.

Kahramaa also invited firms to submit their proposals for a contract to supply and install power transmission and distribution equipment, including providing and connecting substation main earth and equipment earthing, commissioning fitted substations and pre-commissioning protection testing for 11kV switchgear panels.

Future projects

As of January 2025, more than $4bn-worth of utility projects are under execution in Qatar, excluding the Facility IWPP, which has yet to reach financial close.

The largest scheme under execution is the $720m Wakra and Wukair independent sewage treatment plant project. It will have a capacity of 150,000 cubic metres a day (cm/d), which can be extended to 600,000 cm/d at a later stage. The project reached financial close last year.

An estimated $4bn of power and $5.8bn of water infrastructure contracts are planned and unawarded in Qatar at the beginning of 2025.

QatarEnergy’s 2,000MW Dukhan solar PV, the Public Works Authority’s (Ashghal) New District of Doha and South of Wakrah marine pump station and outfall facilities, and the 500MW Ras Abu Fontas open-cycle power plant are some of the key projects expected to come onto the market over the next 12 to 18 months.

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Jennifer Aguinaldo

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