The 200 MW (260 MWp) solar PV project was allotted to Saudi Arabia-based ACWA Power by Dubai Electricity & Water Authority (DEWA) earlier this year. The project was much discussed among several stakeholders around the world as ACWA Power quoted a tariff of 5.98 cents per kWh — the lowest tariff quoted for any solar power project in the world.
ACWA Power announced that it has secured debt financing worth $344 million loan for the project. The low-cost debt is the fundamental basis for the low tariff of the project.
The 27-year loan will be provided by Abu Dhabi’s First Gulf Bank and 2 Saudi banks — National Commercial Bank and Samba Financial Group. The loan, which will cover 86% of the total project cost, will be offered at 4% only. While such low rates are fairly common in major solar power markets like India, the high share of 86% of debt financing is quite unusual.
Paddy Padmanathan, Chief Executive Officer at ACWA Power, while speaking at a forum at the Abu Dhabi Sustainability Week 2015, explained how his company plans to make the project financially viable.
ACWA Power will look to optimise all available resources and supply chain elements in order to keep the capital costs in check and maximise the returns on the project, said Padmanathan, who repeatedly stated that the project will be profitable to his company.
Padmanathan further explained that the capital expenditure in a solar PV project includes 50% for the modules (which will be procured from First Solar) and other equipment, 15% for operation & maintenance (O&M), and 35% for debt financing. Debt financing will be secured at a very low cost while the company plans to optimise local resources to keep a check on the O&M costs.
ACWA Power is planning to set up several solar power projects across the developing markets in Asia and Africa. The company is expected to report profit of 15-20% for 2014. The company is also planning to launch an initial public offering soon.
Image Credit: Dubai Sunrise by Tatyana Vyc, via Shutterstock