Dubai’s government-owned utility plans to double the size of a solar power project that it expects will produce some of the world’s cheapest electricity. Dubai Electricity & Water Authority awarded a contract to build the 200-megawatt plant to a group led by Saudi Arabia’s ACWA Power International. The 1.2 billion dirham ($330 million) generating station will be completed in April 2017, DEWA Chief Executive Officer Saeed Mohammed Al Tayer said yesterday at a news conference in the Persian Gulf emirate.

ACWA will sell electricity from the plant to DEWA at 5.85 cents per kilowatt-hour, a price that will be “the lowest by far” for solar power globally and among the cheapest from other sources, Paddy Padmanathan, the Riyadh-based company’s CEO, said in an interview. Dubai plans to build 1,000 megawatts of solar capacity by 2030, enough to meet 5 percent of its forecast electricity needs that year, as it seeks to reduce reliance on natural gas as its main source of energy for local use. Saudi Arabia and Abu Dhabi, the U.A.E.’s capital and largest emirate, are also developing renewable energy as oil producers in the Gulf try to reduce the burning of costlier fossil fuels to produce power.

Saudi Arabia is the biggest oil producer in the Organization of Petroleum Exporting Countries while the U.A.E. ranks fifth, data compiled by Bloomberg show. Dubai, the second-largest sheikhdom in the United Arab Emirates, holds little crude; much of it is in Abu Dhabi.

Bank Financing- The DEWA project will achieve “the lowest solar tariff in the world,” excluding some plants in the U.S. and elsewhere that receive tax incentives, Vahid Fotuhi, president of the Middle East Solar Industry Association, said in a phone interview. “DEWA jumped at the opportunity to get a lower tariff” when it decided to double the facility’s original planned capacity of 100 megawatts, said Fotuhi, who is also director of origination at Access Power MEA, a plant developer with headquarters in Dubai.

Saudi Arabia-based National Commercial Bank and First Gulf Bank PJSC of Abu Dhabi are in talks to finance 86 percent of the project’s cost, Al Tayer said. DEWA and its partners expect to finish financing arrangements in 60 days, he said. The group will borrow funds at about 160 basis points over the London Interbank Offered Rate for the first year, with an all-inclusive cost of funds averaging about 4 percent over LIBOR for the life of the loan, ACWA’s Padmanathan said. ACWA has a 25-year agreement to sell power to DEWA. ACWA’s technical partner is Spanish facility builder TSK.