UPDATE 2-Saudi cuts Ras Azzour cost estimate by 20-25 pct

(Adds details, Maaden CEO comments)

JUBAIL, Saudi Arabia Oct 19 (Reuters) - Saudi Arabia expects the cost of a giant power and water desalination project to be 20-25 percent below initial estimates partly because the price of materials have fallen, the project's head said.

The project, in Ras Azzour on the Gulf coast, had been estimated to cost $6 billion when Japan's Sumitomo Corp (8053.T) led a consortium to build and operate the plant. Sumitomo said in May it had put on hold plans for the plant. [ID:nT65103]

"We expect the price to be less than the contractor's projections back then ... 20 percent ... maybe more..., the average is between 20 and 25 percent," Fuhaid bin Fahd al-Sharif told reporters on the sidelines of an industry meeting in the industrial city of Jubail on Monday.

Sharif declined to give figures but said the lower cost estimate was due to a drop in the price of materials and because the project description had changed. He is the top executive of the Saline Water Conversion Corp (SWCC), the state-run company behind the project.

The Ras Azzour power and water plant will produce 2,400 megawatts of electricity, more than under the original plan.

SWCC said on Saturday it would invite bids in mid-November for the project and that it signed an agreement with Saudi mining firm Maaden 1211.SE and Saudi Electricity Co 5110.SE to share the power and water production. [ID:nLH502909]

Under the deal, Maaden would merge its own planned power plant with the mega-project. Maaden will use the electricity for an aluminium smelter it plans to build in Ras Azzour.

The merging of the two power projects will save electricity costs in the production of aluminium and increase profitability, Maaden's CEO, Abdullah al-Dabbagh, told Al Arabiya television on Monday.

"Now, there's no turning back ... In fact, now is the real start of the execution of the aluminium smelter project," he said.

Meanwhile, the cabinet mandated the Royal Commission for Jubail and Yanbu to manage the mining industry in Ras Azzour and provide services to the mining and other industries, state news agency SPA reported.

Dabbagh said the cabinet decision would have a positive impact on his company by reducing infrastructure costs. (Reporting by Reem Shamseddine; Editing by Marguerita Choy)