Abu Dhabi National Oil Company (ADNOC)'s innovative sub-sea electricity transmission project sparks a move to sustainable energy infrastructure
Financial close for ADNOC's new sub-sea electricity transmission project was achieved on 22 September 2022 this year. ADNOC and Abu Dhabi National Energy Company PJSC (TAQA) are jointly procuring the development, known as Project Lightning.
The project involves the transmission of 3.2 gigawatts (GW) of electricity from ADNOC's onshore power plants to its offshore operations, through this US$3.8bn sub-sea electricity transmission project. Once completed, it will be the first of its kind in the Middle East and North Africa region and appears to be the start of a shift towards renewable infrastructure projects in the region over the coming years.
The development, which is facilitated by ADNOC's first greenfield project financing, is expected to reduce the carbon footprint of ADNOC's offshore operations by more than 30 per cent, replacing existing offshore gas turbine generators which are at their end-of-life with more sustainable power sources from the Abu Dhabi onshore power network. These consist of include two independent subsea HVDC transmission links of about 1,000MW and 600MW, together with onshore and offshore HVDC converter stations in Abu Dhabi
The two subsea interconnectors, measuring 140 km and 124 km, will supply electricity from Abu Dhabi’s mainland electricity grid to ADNOC’s oil and gas complexes on the islands of Das and Zakum. By decreasing the use of gas ADNOC will be able to sell that gas to the overseas markets at a time of increased pressure for them, while connecting the island complexes to the mainland grid will ensure that ADNOC is able to increase electricity capacity to the islands much more sustainably and easily as they continue to develop and expand.
Trowers recently acted as UAE counsel on the successful financial close, advising a lender group in relation to a successful bid by a consortium of Kyuden International Corporation, Korea Electric Power Corporation and Électricité de France S.A. The lender group included government financial institutions, Japan Bank for International Cooperation (JBIC) and the Export–Import Bank of Korea (KEXIM) and commercial banks BNP Paribas Fortis SA/NV, Mizuho Bank, Ltd., Standard Chartered Bank and Sumitomo Mitsui Banking Corporation, DIFC Branch – Dubai. Trowers worked with Milbank LLP who acted as lead counsel to lenders on the project.
More than half of the value of the project, which aims to strengthen ADNOC and TAQA's positions in supporting the UAE’s Net Zero by 2050 strategic initiative, will flow back into the UAE’s economy under ADNOC's In-Country Value (ICV) programme. The project appears to be a hallmark of future development in the UAE, with a new project for a 1,500MW solar farm at Al Abjan (PV3) entering its pre-qualification stage earlier this year and expected to circulate RFPs to prospective bidders in the coming months. It follows a senior Abu Dhabi government official's announcement in March that the UAE planned to expand its total solar power generation to 20GW by 2030. 19 companies have already qualified to bid for the PV3 project later this year.
ADNOC and TAQA will take 30% stakes each in Project Lightning's special project vehicle with the developer consortium holding the remaining 40% in the public-private partnership (PPP) funded structure. The project will be returned to ADNOC after 35 years of operation. As a result, Project Lightning is one of the first BOOT (buy; own; operate; transfer) structured energy projects in the UAE, signalling a shift away from the previously favoured BOO (buy; own; operate) model that has been prevalent in the region until now.
With construction starting earlier this year, commercial operations of the project are expected to start in 2025.