The emirate of Fujairah, in the UAE, has selected Japan''s Marubeni Corporation to build, own and operate the Fujairah-2 power and water project. The 20-year power and water purchase agreement was officially signed with Abu Dhabi Water & Electricity Authority (ADWEA) on 1 August, 2007.

Marubeni had formed a consortium with International Power plc to participate in the global competitive bidding process in April 2007, emerging as the successful bidder.

With a total project cost of $2.8 billon, inclusive of the costs of constructing power generation and seawater desalination plant, it is the largest newly constructed independent water and power projects in the UAE.

After the signing of the PWPA, a new project company will be set up with the Marubeni-IPR consortium holding a 40-per cent stake and ADWEA retaining the majority 60 per cent.

The new project company will finalise negotiations for loan agreements, with $2.2 billion of the total financing requirement coming from a project finance loan. Commercial operations are due in 2010.

The Marubeni-IPR consortium is negotiating with international commercial banks including Sumitomo Mitsui Banking Corporation of Japan, Calyon of France and Citibank N A. of the US. In addition, Japan Bank for International Cooperation is also expected to support this project.

The project includes the construction of 2,000 MW power and 130 MIGPD seawater desalination plant to be supplied by Alstom of France and Switzerland and Societe International de Dessalement of France respectively.

All production capacity will be sold under the 20-year PWPA to the Abu Dhabi Water and Electricity Company. Marubeni-IPR consortium will also carry out the operation and maintenance of the plant.

The plant will utilize the latest combined cycle power technology and hybrid water desalination technology, which combines multiple, effect distillation system and reverse osmosis system to maximise efficiency and minimise gas consumption and emission of CO2.

The United Arab Emirates is one of the most resource-rich countries in the world. It boasts the world''s third-largest deposits of crude oil and the world''s fifth-largest deposits of natural gas, much of which is exported to Japan. It maintains a high investment rating of Aa2 assigned by Moody''s.

Since the 1990s, the UAE has been actively promoting private capital projects. Its foreign-backed power and water projects are regarded as ground-breaking transactions in the Middle East. A large number of similar private capital projects are expected to be launched in this region in order to correspond to increasing demand for power and water.