(MENAFN- Khaleej Times) The Federal Electricity and Water Authority (Fewa), in a bid to provide a better service to the northern emirates, will pay the water supplier only upon consumption.
The move comes under the world's first purchase contract model which is compared to the previous model followed world over, where payment is not linked to usage.
Fewa has entered into a 10-year agreement with the UAE-based Utico, the Middle East's largest private utility, which announced that the agreement - which has a minimum consumption commitment of six million gallons per day (MIGD) - is already operational.
Fewa's daily consumption has already increased from eight to 10 MIGD with the rising water demand. Another additional nine MIGD contract has also been requested by Fewa, the company said.
Richard Menezes, Utico's managing director, 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 without a tariff increase, he added. "The tariff agreed also takes into account Utico laying transmission lines to connect Fewa network at six different locations 50km from the generation facility in Ras Al Khaimah."
He said that in line with the rising demand, Utico's investment in Transmission & Distribution (T & D) facilities have crossed Dh800 million. "We are also planning to invest in a 70km pipeline to serve unserved areas, particularly to support farms."
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.
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 kms of T & D assets.
Its customers includes many industrial parks, government owned entities like the sea ports and public institutions as well as real estate developers.
Staff Reporter
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