Construction of Abu Dhabi’s largest solar power plant began on Wednesday after a financing package, totalling Dh3.2 billion, was secured.

The 1.17 gigawatt plant, which will produce enough electricity to power about 200,000 homes, will be built by Japan’s Marubeni and JinkoSolar of China. The Asian consortium submitted the lowest bid to provide electricity at a non-weighted cost of 2.94 cents per kWh, making it one of the cheapest solar projects in the world.

Sheikh Hazza bin Zayed, the vice chairman of the Abu Dhabi Executive Council, attended the launch of the solar photovoltaic (PV) power plant in Sweihan, about 100 kilometres south-east of the capital.

Sheikh Hazza said that this plant established Abu Dhabi as the capital for economic, environmental and technological practices. “This project must be associated with the creation of advanced research centres to drive the economic and technological journey, placing the UAE on the world map of knowledge-based economies,” he tweeted.

The emirate’s state-owned utility, the Abu Dhabi Water and Electricity Authority (Adwea), originally targeted that financial close, execution of the land lease and engineering contract to be reached by March 30, according to the project’s request for proposal (RFP). However, the 25-year power purchase agreement was not signed until the beginning of March.

Adwea’s director general, Saif Saleh Al Sayari, said it raised US$620 million in debt with the remaining $222m raised in equity. “The financing which is completed is a $650m project finance from local and international commercial banks,” said Mr Al Sayari, according to Reuters. He said the 25-year loan is structured in a way that will allow refinancing after five years.

While Adwea will handle the equity, the Bank of Tokyo Mitsubishi is the leading arranger of the loan, committing at least $100m in funding. Other Japanese lenders joined including Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ Trust and Norinchukin Bank followed by France’s BNP Paribas Credit Agricole, Natixis and the First Abu Dhabi Bank.

Abu Dhabi has a 100MW concentrated solar power plant operated by clean energy company Masdar and France’s Total, but this is Adwea’s first venture into renewable energy power production. However, the utility has vast experience in independent power producer projects as it initiated the model in the UAE dating back to 1998.

The RFP said that earliest that the plant will be connected to the grid will be in the fourth quarter of next year and the latest date will be in March 2019.

This project falls in line with the UAE Energy Plan 2050, which aims to increase clean energy use by 50 per cent and improve energy efficiency by 40 per cent, resulting in savings worth Dh700bn.

lgraves@thenational.ae

Follow The National’s Business section on Twitter