On Saturday, July 11, Korea Electric Power Corporation, or KEPCO (KEP), signed a contract with the state-run Saudi Electricity Company (SEC) to build a power plant in western Saudi Arabia.  The 1,200 MW fuel-oil fired power plant deal in Rabigh was signed between KEPCO in consortium with a Saudi Arabian company, ACWA Power International.   The consortium had been selected on March 17, 2009 as the top bidder for the contract.
 
KEPCO is an integrated electric utility with an annual capacity of 63,529 MW.  The company owns 87.6% of the total electricity generating capacity in South Korea.
 
Korea Electric Power will invest $200 million in the $2.5 billion Rabigh project.  The rest of the funding will be provided by a consortium of banks led by Alinma Bank, which expects to contribute about $500 million, with other banks like HSBC (HBC), Standard Chartered, etc. chipping in the rest.
 
Under a power purchase agreement, KEPCO will run the fuel oil plant between 2012 and 2032, or for 20 years post-construction.  The company will deliver electricity to SEC who will have a 20% stake in the project.  The 1,200 MW plant will be built in two equal phases.  The first phase will become operational in 2012 and the second in 2013.  We continue to maintain our market neutral HOLD position on KEPCO.
Read the full analyst report on “KEP”
Read the full analyst report on “HBC”
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