Both the state and private sector have played a decisive part in driving change in the Middle East and North Africa (Mena) regions strategically critical power and water industry. Some of these long-standing entities remain pivotal agents of change to this day, yet new players are also emerging as advances in technology, rising demand and shifting costs reshape the foundations of the regions utilities sector.
Inevitably given its size, Saudi Arabia has played host to some of the main actors. In 1961, the government formed a Department of Electricity Affairs within the Ministry of Commerce, which eventually evolved into the Ministry of Industry & Electricity. That in turn then gave rise to four regional Saudi Consolidated Electricity Companies (Scecos), which oversaw the rollout of electricity from the 1970s to the 1990s.
Water is equally important. The kingdoms Saline Water Conversion Corporation was established in 1974. This rapidly became a regional pioneer in desalination, and is now the worlds largest producer of desalinated water. Its governor, Abdulrahman al-Ibrahim, is also the CEO of National Water Company, which is responsible for water distribution and wastewater services.
While the private sector has been a dynamic influence across the region, governments and state bodies have pushed change from the top.
In the UAE, for example, the Dubai Supreme Council of Energy was formed in 2010 with a mission to draw up and oversee the implementation of a domestic energy strategy with specific targets for efficiency and diversification of the energy mix. This was a decisive step towards establishing cost-reflective pricing in the emirates.
The Gulf has played a leading role in driving reform. In 2000, Riyadh reorganised its electricity sector, establishing Saudi Electricity Company (SEC) from the merged Scecos.
A transmission company National Grid SA was established in 2012 to operate the national grid. SEC, chaired since 2010 by Saleh bin Hussein al-Awaji, a former deputy minister of water and electricity, is now in the midst of an ambitious programme to expand power generation capacity from 60GW to 91GW by 2020, and to more than double capacity over the long term. Plans are also moving forward to sell off some of SECs generation assets as well as increasing private sector involvement in the water sector.
Additional power capacity required by 2020
The Gulfs utilities sector boasts other prominent agents of change. Qatar Electricity & Water Corporation (Kahramaa) was created in 2000 as a single buyer of electricity and water from independent power plants under 25-year contracts. The company has garnered a reputation for generating solid cash flow from its long-term power purchase agreements (PPAs). Its close relationship with its gas provider Qatar Petroleum has enabled it to ramp up supply and keep well ahead of demand. Kahramaa manages all of Qatars power and water generating assets, benefiting from a sovereign decree that it will be allocated at least 60 per cent of any future power and water projects in the country. With profits of QR1.54bn ($423m) in 2016, its strong margins have stayed above 50 per cent in the past five years.
Set up in 1998, Adwea has embraced the IWPP delivery model
Abu Dhabi Water & Electricity Authority (Adwea) and its Dubai counterpart, Dubai Electricity & Water Authority (Dewa), have played a crucial role in rolling out new power and water capacity, with a growing focus on diversity of supply as the UAE eyes a leadership position in renewables, nuclear, coal and gas-fired generation.
Set up in 1998, Adwea has also embraced the independent water and power project (IWPP) delivery model. Headed by director-general Saif Saleh al-Sayari, the state-owned utility delivers electricity and potable water to a population of more than 2 million in Abu Dhabi, with an installed power generating capacity of 14.5GW. Emirates Nuclear Energy Corporation, a UAE federal body, is building the regions first nuclear power plant, which will have an installed capacity of 5.6GW by 2020.
These powerful utility companies have also forged influential affiliates. One such is Adweas Abu Dhabi Water & Electricity Company (Adwec), which is the single buyer of power and water in the UAE capital, operating under a PPA model.
Meanwhile, Dewa is looking to help the emirate become a hub for clean energy. Under the leadership of Saeed Mohammed al-Tayer, its managing director and CEO since 1991, its mandate is to ensure the Dubai Clean Energy Strategy 2050 is a success. This calls for 25 per cent of Dubais power to come from solar energy by 2030.
While both Qatar and the UAE have backed private power and water, it is Oman that can lay claim to being the Middle Easts true pioneer in this area. The GCCs first independent power project (IPP) was completed at Manah in 1996, with its 270MW procured by the countys single buyer, Oman Power & Water Procurement Company. Another Omani first came in 2006, when Al-Rusail Power Company was privatised through a 100 per cent share sale the first such sale of an operational generation asset in the Middle East. Today, nine power companies are listed on the Oman stock exchange. Bahrain and Kuwait also use the IPP/IWPP model. In 2017, Kuwait plans to award the Al-Khiran 2 IPP, with 1,500MW of capacity, and the Al-Zour 3 IWPP, with 1,800MW of capacity.
Alongside these state-led agents of change, the Mena power and water sector has also seen certain private sector firms come to the fore.
The most successful developer of IPPs and IWPPs in the GCC is Frances Engie, which has the largest power equity capacity.
The Middle Easts diverse group of power and water sector champions are now expanding their horizons
As for local firms, Saudi Arabias Acwa Power, under the energetic leadership of its president and CEO Paddy Padmanathan, has emerged as a dominant player. Acwa Power won 90 per cent of the projects it bid on in 2015 and gained further ground as an investor, co-owner and operator of an expanding portfolio of power stations and desalination plants, with a presence in 11 countries across the Middle East, Africa and Southeast Asia.
The Saudi developer gained further ground in the first half of 2016 with the signing of contracts for the GCCs first coal plant in Dubai and the 3,219MW split-site Ibri/Sohar 3 IPP in Oman.
The Middle Easts diverse group of power and water sector champions are now expanding their horizons. SEC is moving ahead with plans to develop at least three integrated solar combined-cycle power plants, following in the footsteps of Dewa, managing the development of the Sheikh Mohammed bin Rashid al-Maktoum solar park, which will have a capacity of 5,000MW upon completion in 2030. Adwea is also in the vanguard, signing in February 2017 a deal for a 1.1GW photovoltaic project.
SWCC, which now produces 18 per cent of the worlds desalinated water, is moving into new areas, with plans for a solar powered, reverse osmosis desalination plant to process 15.9 million gallons a day of seawater for the city of Al-Khafji in the northeast of Saudi Arabia. This will be the worlds first utility scale, solar desalination plant.
It is not just the Gulf states that have made renewables their mission. Some of the regions most pioneering work has been laid down in Egypt. There, the New & Renewable Energy Authority was set up in 1986, accelerating efforts to develop and introduce renewable energy technologies. It is responsible for the plan to meet 20 per cent of power demand from renewable resources by 2022. To achieve this, Cairo is planning to increase its wind power capacity to 7,200MW.
As time evolves, new agents of change will doubtless emerge. The advent of nuclear energy in the Gulf underscores the rapid pace of development in the region.
? 1961: Riyadh forms Department of Electricity Affairs
? 1974: Saudi Arabias Saline Water Conversion Corporation established
? 1986: Egypt launches New & Renewable Energy Authority
? 1996: GCCs first independent power project completed in Oman
? 1998: Abu Dhabi Water & Electricity Authority set up
? May 2000: Riyadh establishes Saudi Electricity Company
? July 2000: Qatar Electricity & Water Corporation (Kahramaa) set up
? December 2009: Abu Dhabi signs a $20bn deal with a consortium led by Korea Electric Power Corporation to build four nuclear reactors
? February 2016: Dewa signs a contract with Acwa Power and Chinas Harbin Electric to develop a 2,400MW coal-fired power plant