UAE-based Utico, the Middle East’s largest private utility, has signed a 10-year agreement with the Federal Water and Electricity Authority (Fewa) to serve the Northern Emirates, under a world’s first purchase contract model, a report said.
The agreement which allows the federal utility to pay only when it consumes water compared to the model followed world over where payment is not linked to usage.
In a statement, Utico said the agreement which has a minimum consumption commitment of 6 million gallons per day, MIGD, is already operational and the daily consumption by Fewa has already increased 8 to 10 MIGD with the rising water demand. Another additional 9 MIGD contract has also been requested by Fewa, the company said.
"The agreement sets a new benchmark in the world for such contracts. Usually utility agreements are `take or pay’ contracts wherein the buyer ends up paying the supplier even if there is no consumption. Other unique features of the Utico-Fewa agreement includes fixed pricing during the tenure and no power tariff increase pass through during this period," said Richard Menezes, managing director, Utico.
The tariff agreed by Utico and Fewa also takes into account Utico laying transmission lines to connect Fewa network at six different locations 50kms from the generation facility in Ras al-Khaimah, Richard said.
He said that in line with the rising demand, Utico’s investment in Transmission and Distribution, T&D, facilities have crossed Dh800 million ($218 million).
"We are also planning to invest in a 70 kilometre pipeline to unserved areas, particularly to support farms," Richard said.
Utico has also closed a sovereign funding deal of $147 million with the Bahrain-based ASMA Capital owned by Islamic Development Bank, IDB, Saudi Arabia’s Public Investment Fund, PIF, and Public Pension Agency, PPA, Ministry of Finance of Bahrain and Ministry of Finance of Brunei. The fund will be deployed for expansion and to enhance Utico’s unique business model that helps reduce subsidies for the government and lower consumer tariffs.
On the Fewa contract, Richard thanked Mohammed Mohammed Saleh, Director General of Fewa, for supporting Utico’s innovative business model.
Utico currently serves over 650 industries and owns generation capacity of 31 MIGD per day with additional 22 MIGD under construction. It also owns 120 MW of power generation facilities and over 450 km of T&D assets, making it the largest private full service utility in the UAE. Its customers include many industrial parks, government owned entities like the sea ports and public institutions as well as real estate developers.
In April 2017, Utico became the first company from the Middle East to be awarded the Desalination Company of the Year 2017, voted by worldwide industry peers in Madrid.