Outline
Sumitomo Corporation, headed by President Motoyuki Oka, won the concession for the Al Hidd Independent Water and Power Project (IWPP) in the Kingdom of Bahrain jointly with U.K. power supplier International Power and Belgian energy infrastructure company Suez-Tractebel. The joint venture of the three firms incorporated a local firm at an investment proportion of 30% by Sumitomo, 40% by International Power, and 30% by Suez-Tractebel to implement the project. After a basic agreement was reached between the consortium and Ministry of Finance of Bahrain, the power and water purchase agreement (PWPA) was officially signed on January 22, 2006.

The project involves the purchase of a natural-gas-fired combined cycle power plant that produces about 1,000 MW of electricity and a desalination plant that produces 135,000 ton of water daily, both currently operated in Al Hidd, Bahrain, from Ministry of Finance of Bahrain; the construction of a new desalination plant with a daily capacity of 270,000 tons (to be constructed by Sidem France); the operation of an existing power plant with a total output of about 1,000 MW and existing and new desalination plants with a total daily desalination capacity of 405,000 tons; and the sale of electricity and water to Ministry of Electricity and Water of Bahrain for a duration of 20 years.

The total project cost is approximately $1.3 billion, including the cost of purchasing the existing facilities and constructing a new facility. Immediately after signing the power and waterpurchase agreement, the Japanese and European joint venture intend to commence the project by taking over the ownership of the facilities and begin negotiations with financial institutes to conclude the loan agreement. The completion of the new desalination plant is scheduled for November 2007. Of the total project cost, roughly $1 billion is to be financed by a syndication of international banks on project financebasis.

Background and Development
The Sumitomo Corporation consortium participated in the bidding on November 8 and won the bid with the highest quotation of $738 million for the existing plants at the opening of the bids on December 14. The concession was granted to the consortium after a series of negotiations with the Bahrain government. The plants are currently Bahrain's largest-class power generation and desalination facilities. When the new plant is completed, the complex will have a domestic share of about 20% for power generation and approximately 65% for water desalination. As one of the projectdevelopers, Sumitomo Corporation is and will be actively engaged in this project by playing its role in the management of the project as well as the operation and maintenance (O&M) of the facilities according to its corporate strategy for power and water projects.

The Bahrain government established a policy of privatizing the power and water sector to reduce power generation and water desalination costs as a solution to cope with the country's ever-rising demand for power and water. In line with this policy, the joint undertaking, which resulted in winning the project, was realized by the comprehensive capability of Sumitomo Corporation, which encompasses a wide range of expertise--from general trading house in the organization of a sponsor consortium to financing arrangements, participation and operation of power and water projects in other countries, and experience in construction in Bahrain. The project is the second independent power project (IPP) in Bahrain; the first IPP was bid in 2004. To be specific, it is the second power plant privatization project and the first desalination privatization project.

Sumitomo Corporation has continuously won power and water projects for Ministry of Electricity and Water of Bahrain since the 1970s, with this IWPP being added to its history of business in this country. We continue to actively participate in the development of or investments in power and water projects in Bahrain as well as its neighboring countries, including Saudi Arabia, Oman, the United Arab Emirates, and Kuwait. Other than the Middle East region, Sumitomo Corporation also actively participates in large power generation projects in the United States, Indonesia, Vietnam, Taiwan, Turkey, and the Philippines. To achieve our goal of increasing the net power generation capacity from the current 2,800 MW (including this project) to 6,300 MW or more by 2010, we continue to expand our involvement in IPP and IWPP investments.

Outline of International Power
Business: Power generation
Incorporation: 2000
Head office: London, U.K.
Sales: £ 768 million
CEO: Philip Cox

Outline of Suez-Tractebel
Business: Energy infrastructure business (electricity, gas, etc.)
Incorporation: 2003
Head office: Brussels, Belgium
Sales: €5,397 million
CEO: Daaku Bussato