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Sepco 3 to undertake Al-Zour North 2 & 3 EPC

6 May 2025

 

A utility developer team comprising Saudi Arabia's Acwa Power and the local Gulf Investment Company (GIC) is understood to have partnered with China-headquartered Shandong Tiejun Electric Power Company (Sepco 3) in its bid to develop Kuwait's second independent water and power project (IWPP).

The Al-Zour North 2 & 3 IWPP will have a power generation capacity of 2,700MW and a desalination capacity of 120 million imperial gallons a day (MIGD).

On 5 May, Kuwait's Ministry of Electricity, Water & Renewable Energy (MEWRE), through the Kuwait Authority for Partnership Projects (Kapp), opened the financial envelopes submitted for the contract by the lone bidder, the Acwa Power-GIC team.

The procurement authority said it opened the financial envelopes in the presence of qualified investors that had previously obtained the project's proposal request.

MEED understands that the financial envelopes contain the annual equivalent payment (AEP) value offer and the share price (SHP) offer.

Based on an uploaded picture on the Kapp website, the AEP value is about KD522.38m ($1.7bn).

The signing of the power and water purchase agreement by the Acwa Power team and MEWRE is expected to take place at a later date, an industry source said.

The project company will sign a 25-year energy conversion and water purchase agreement with MEWRE starting from the project’s commercial operation date.

The Al-Zour North 2 & 3 IWPP will use liquefied natural gas and high-pressure natural gas, with gas oil as a backup fuel, and will connect to the national grid via a 400-kilovolt transmission substation.

According to industry sources, Sepco 3 will be undertaking the project's engineering, procurement and construction (EPC) contract.

Unlike in most GCC states, where bidders submit separate levelised electricity and water costs – expressed in $cents a kilowatt-hour and per cubic metre – for IWPP tenders, Kuwait has two bid evaluation parameters.

The AEP value is a combination of average power and water costs within a year, while the SHP, or equivalent share price, is the amount of equity divided by the number of shares.

Separate tariffs for the power and water desalination plants may have been submitted but will not likely be disclosed publicly, one of the sources said.

Located about 100 kilometres south of Kuwait City, the Al-Zour North 2 & 3 IWPP will be adjacent to the western border of the first Al-Zour North facility for electric power generation and water desalination, which is currently in operation, and on the northern border of the Al-Zour South station.

The project struggled to take off partly due to stakeholder indecision, with the government undergoing several changes and transitions in the past few years.

The plan to develop Kuwait's second IWPP was first announced in 2016-17, following the commissioning of its first IWPP, Al-Zour North 1, in late 2016.

Following a series of delays and scope changes, Kapp finally tendered the contract to develop the Al-Zour North 2 & 3 IWPP in March last year. The tender was issued three years after Kapp had selected a team comprising three UK-headquartered firms – EY, Atkins and Addleshaw Goddard – as transaction advisers for this project, along with another planned IWPP in Al-Khiran, in April 2021.

First IWPP

Kuwait's erstwhile Partnerships Technical Bureau selected the winning consortium of UK/French company GDF Suez, now Engie; Japan's Sumitomo; and Kuwait's AH Sagar & Brothers Group as the preferred bidder for the Al-Zour North 1 IWPP in February 2012.

According to MEED archives, the successful consortium submitted the lowest bid to build the project, with an AEP value of KD127.1m ($453m) at the time.

The project company, Shamal Az-Zour Al-Oula, awarded South Korea’s Hyundai Heavy Industries and France’s Sidem the EPC contract to build the plant.

The combined-cycle power plant produces 1,539.2MW in net contracted power capacity from five General Electric GTG 9F-3 turbines generating 225.8MW each, and two General Electric STG D1 turbines generating 251MW each.

The integrated facility has a multiple-effect distillation unit capable of producing 107 MIGD, the equivalent of 486,400 cubic metres a day of desalinated water.

Public trading of shares

In line with Kuwait's Public-Private Partnership Law, Shamal Az-Zour Al-Oula began trading shares on the Kuwait stock exchange in 2020, after Kapp distributed 50% of its total shares to individual Kuwaiti investors in the last quarter of 2019.

Several public and private entities own the remaining 50% of the company's shares. They are:

  • Azour North One Holding Company, owned by a consortium comprising Engie, Sumitomo Corporation and Abdullah Hama Al-Sagar & Brothers (40%);
  • Kuwait Investment Authority (5%);
  • Public Institution for Social Security (5%).
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Jennifer Aguinaldo

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