Abstract One of the main targets in the design stage of a dual-purpose steam power and large MSF desalination plants of known outputs is the determination of the lowest performance ratio of the desalination plant to ensure lower capital as well as running cost after preselection of system based on thermodynamic and economical comparison. For dual-purpose plants there are different methodologies for calculating the production cost of both Electricity and Water. The chosen methodology is described in the paper. However, the main objective is to calculate the cost of heat exergy from power plant and the electric power cost to the desalination plant for different sizes of unit and different performance ratio in order to determine the optimum performance ratio. The cost of water production can be determined accordingly. After determining the best size and performance ratio of the desalination units, and for the calculation of the water production cost the following elements are considered: 1. Capital cost of the plant including civil work. 2. Cost of heat to the plant. 3. Cost of electricity consumed by the plant. 4. Cost of chemicals to the feed water. 5. Life of the plant. 6. Interest rate. 7. Utilization factor of the plant. The other elements of cost, such as: cost of distillate treatment, operation and maintenance, …, etc., are not included as they are function of the total capacity of the plant only. For heat cost, both direct value and present day value are considered in the calculation for the optimization. Also different heat cost is introduced as sensitivity against production cost for comparison. The paper shall cover a recent preliminary study carried out for 400 MW steam power and 48 MIGD distillate water production plant.