Chinese, Saudi firms team on global desal, power projects

Chinese electric power giant Shanghai Electric Power Generation Group and Saudi Arabia's ACWA Power International said they plan to team up to develop power and desalination projects around the globe.

Shanghai Electric Power Group, a division of Shanghai Electric (SHA:601727), manufactures power generation equipment. Shares of Shanghai Electric closed up 10 percent today.

ACWA Power International, short for International Company for Water and Power Projects, launched in October with initial capital of SR2.92 billion ($780 million) to develop, own and operate seawater desalination and power generation projects in Asia, Middle East and Africa.

The company is majority owned by privately held ACWA Power Development, which has a portfolio of six desalination and power plants that by 2010 are expected to have 4,855 MW of power-generating capacity and generate 2.23 million cubic meters of water per day in Saudi Arabia (see Veolia awarded huge desalination contract in Saudi Arabia).

Saudi Arabia is the world's largest producer of desalinated water, which makes up half the country's drinking supply (see Saudi Arabia adds to desal strategy).

Shanghai Electric and ACWA Power International said they already have two projects under development, declining to release details except that one is in Saudi Arabia and the other is in the Gulf region.

The companies said the involvement of Shanghai Electric could bring significant cost savings and advanced technologies.

"The agreement to cooperate with the Chinese is to take advantage of their considerable expertise in the implementation of water desalination and electric power generation projects," said ACWA CEO Mohammed Abunayyan in a news release.

The announcement came during Chinese President Hu Jintao's three-day visit to Saudi Arabia to promote more cooperation on energy projects. In recent days, companies have announced plans to collaborate on oil, gas, mining, and a $1.7 billion monorail project to link Makkah and Madina.

The Saudis are China's largest oil provider, and China is one of Saudi Arabia's biggest customers, importing an estimated 36 million tons of Saudi crude in 2008.

In 2007, Shanghai Electric announced plans to collaborate with Canadian power inverter maker Xantrex (TSX: XTX) to make and sell solar and wind power inverters to the renewable energy market in China (see Xantrex and Shanghai Electric form joint venture).