ITOCHU and Sasakura to Receive Order for Project on Rehabilitation of the Shoaiba Phase 1 MSF Seawater Desalination Plant

April 6, 2011

ITOCHU Corporation (headquartered in Minato-ku, Tokyo; Masahiro Okafuji, President & CEO; hereinafter “ITOCHU”) and Sasakura Engineering Co., Ltd. (headquartered in Osaka, Osaka Prefecture; Toshihiko Sasakura, President; hereinafter “Sasakura”) announced today that it was confirmed that they would receive an order for a project to rehabilitate the Shoaiba Phase 1 Seawater Desalination Plant from Saline Water Conversion Corporation (hereinafter “SWCC”) of the Kingdom of Saudi Arabia. A letter of intent concerning the order worth 4.9 billion yen, which is considered to be large for a rehabilitation of a seawater desalination plant, was received through the Arabian Company and Sasakura for Water & Power (headquartered in Riyadh, Saudi Arabia; hereinafter “APS”), a joint venture with local capital in the Kingdom.,.

ITOCHU and Sasakura worked with APS to propose to SWCC the rehabilitation of the seawater desalination plant to address the deterioration of its functions with age. Consequently, SWCC called for bids for the rehabilitation of the plant in December 2009. Sasakura’s excellence in engineering and its track record in technology transfer through localization were highly regarded, which led APS to win the contract.

The rehabilitation will prolong the service life of the plant, which is normally 20 to 25 years, by 15 years or more at just 20-30% the cost of building a new plant. Constructed by Mitsubishi Heavy Industries, Ltd. in 1988, the Shoaiba Phase 1 Seawater Desalination Plant is a multi-stage flash (MSF) desalination plant consisting of 10 units with a daily capacity of 22,000 metric tons each. Expected to last three years, the project mainly involves the replacement of heat exchanger tubes and other corroded components and the modification of the venting system in the evaporator.

In the Kingdom of Saudi Arabia, a large majority of water demand for household use is met through desalination plants. The construction of these plants in the Kingdom commenced late in the 1960s and reached its peak early in the 1980s. Saudi Arabia has one of the world’s largest seawater desalination capacities in the world, but today it has a number of aged units and rehabilitation is needed urgently. In addition, water supply in the Kingdom is tightening with rapid population growth and industrialization. The Kingdom is planning to construct a large plant worth hundreds of billions of yen, as well as medium- and small-sized units in provincial cities, to meet an expected need to increase total desalination capacity from the existing 4.1 million metric tons a day to 7.5 million metric tons a day by 2019. Sasakura and ITOCHU will contribute to the stable supply of water through their business, and aims to boost orders for rehabilitation as well as to win orders for new plant construction through APS.

ITOCHU sees the water business as one of its priority areas and is intends to focus on its business development .
For the Kingdom of Saudi Arabia, in particular, ITOCHU has supplied a large number of seawater desalination plants since the 1970s in collaboration with Sasakura. In the 2000s, it took positive actions, including the establishment of APS and participation in IWSPP (Independent Water, Steam and Power Projects). Last year, it set up a joint venture firm for the production of reverse osmosis membrane elements for seawater desalination plants. ITOCHU will continue to endeavor to win orders for new plant construction and rehabilitation projects being planned in the Kingdom of Saudi Arabia and elsewhere in the Middle East, and to expand its business by joining I(W)PP/IWP projects.

Project for Rehabilitation of the Shoaiba Phase 1 Seawater Desalination Plant

Client Saline Water Conversion Corporation
Principal Contractor Arabian Company and Sasakura for Water & Power (“APS”)
Amount 4.9 billion yen
Project Overview

Rehabilitation of the existing seawater desalination plant for functional restoration and prolongation of its service life
(including replacement of heat exchanger tubes, modification of the steam bleeding structure in the evaporator and repair and replacement of other devices)

Period 36 months

Profile of the Shoaiba Phase 1 Plant

Location Shoaiba, the Kingdom of Saudi Arabia (approx. 100 km to the south of the Red Sea coast city of Jeddah)
Type A multi-stage flash (MSF) seawater desalination plant
Water desalination capacity 22,000 m3 per day per unit x 10 units
Year of construction 1988
Constructor Mitsubishi Heavy Industries, Ltd.

Profile of the Joint Venture Business

Corporate name Arabian Company and Sasakura for Water & Power (“APS”)
Capital SR 2,000,000 (2 million Saudi riyals, equivalent to approx. 44 million yen)
Head office Riyadh, the Kingdom of Saudi Arabia

Arabian Company for Water & Power Development 50%

(“ACWA Power”)

Sasakura Engineering Co., Ltd. 25%

ITOCHU Corporation 25%