Dubai's state utility is confident bidders will flock to its first venture into privatisation with a US$1.5 billion (Dh5.5bn) power and water plant.
The Hassyan 1 project calls for investors to take on 49 per cent ownership of the proposed 1600-megawatt plant in exchange for building the plant and lining up the finance. Yesterday the chief executive of the Dubai Electricity and Water Authority (Dewa) said economic turmoil in the rest of the world would not dampen Hassyan's prospects.
"We are not worried about this," said Saeed Al Tayer. "Of course there are crises there, but in Dubai [it is] business as usual. We don't have any problems."
Dewa's success in finding a partner for its first private water and power project is critical to helping the emirate meet its growing energy needs. Hassyan 1 is to be the first of up to six gas-fired power and desalination plants near Jebel Ali, which altogether are expected to produce up to 9,000 megawatts of power and desalinate as much as 720 million gallons (3,275 litres) of water a day.
Abu Dhabi pioneered the privatisation model in 1998, launching nine power plants in the years since. Under the model, the emirate agrees to buy power and water from the plant over a set period.
The Hassyan complex has been in the planning since 2008.
"One of the issues was the creditworthiness of Dubai and whether the backing of Dubai was going to be sufficient to raise debt financing," said Bob Bryniak, the chief executive of Golden Sands, a regional utilities consultancy. "Today's not the ideal time to go out raising project financing - but there's never a good time."
Last week HSBC and Emirates NBD said they would provide a loan of up to $200 million to the winning bidder. The local support, which is optional for bidders to use, is meant to inspire confidence in potential backers, said Duncan Allison, the director of project finance for HSBC in Dubai.
"It's designed to send a signal to the markets," said Mr Allison. "For the right project and a strong project, there is still appetite."
Mr Al Tayer put it another way. "It's an incentive," he said.
"We try to help the developer and we try to assist the developer to attract them in order to bid … If they have some difficulty in obtaining a line facility with the bank, then we try in Dubai to help the investors. It's a small amount."
Dewa executives have travelled as far as Japan in recent months to drum up interest in Hassyan.
As many as 18 companies have expressed interest, according to Mr Al Tayer. Dewa extended the deadline for bids from this month to December to allow time to answer questions from potential bidders, he said.
"The bidders are all there, and they're watching and waiting. It is a big ask," said Karim Nassif, a credit analyst at Standard & Poor's in Dubai.
The winning consortium may need to secure financing under less favorable terms in a cautious economic climate, he said.
"It'll be an interesting test to see whether the sponsors are happy to take also a potentially more aggressive price," Mr Nassif said. "They may have to accept a wider margin."