The states of the Middle East and North Africa offer stark contrasts in their approach to power sector development. Some states are well-provisioned and spoil consumers with low tariffs; others are scrambling to meet demand and are anxious to push more of the burden of investment into the private sector.

The huge funding requirement is a powerful agent for reform. Cash shortages are obliging even relatively rich countries to look at the merits of private projects as an alternative to provision by a monopoly state generator. In some instances there is mounting pressure from local investors to be given the opportunity to invest in the domestic utilities. To date, progress has been slow and only a few existing units have been offered for sale. More private proposals are being invited for new power plants and the concept of private power is gaining credibility in the area. Below, MEED writers monitor developments in 19 regional markets:

THE main problem is not lack of capacity, but under-utilisation of existing facilities. No large-scale maintenance work has been carried out since 1994 as contractors, in the present volatile situation, are reluctant to send staff to the northern areas, where most of the power stations are located. Capacity utilisation is now estimated at around 70 per cent at many of the large stations, contractors say. Algeria used to export substantial amounts of electricity to Tunisia and Morocco but this has become erratic due to falling output levels.

New projects have been frozen under the combined impact of security and financing problems. 'We are only prepared to work for cash at this stage, and the cash flow is extremely slow,' a European contractor says. However, Algeria's traditional suppliers are ready to start working again as soon as conditions improve, and some are still bidding for the occasional large- scale project which goes to tender.

It is the development of the gas sector, which is crucial to the government's financial plans, which lies behind the largest project to be bid this year. A 390-MW station is to be built at Hassi Messaoud, with three 130- MW gas turbines, as part of a plan to develop gas fields in the southeast of the country. The scheme has attracted three foreign bidders: the Zurich- based ABB Asea Brown Boveri, and Nuovo Pignone and Ansaldo Energia, both of Italy. Most of the cost will be covered by a loan from the Arab Fund for Economic & Social Development, but contractors have been asked to provide financing for the remainder. The client will be state-owned energy company Sonatrach, which has its own network with an estimated installed capacity of 2,600 MW.

Power utility Sonelgaz is now looking at a plan to build a 400-MW combined- cycle plant at Hama in Algiers. The aim is to make the capital self-sufficient. Consumers have been suffering black-outs since armed opposition groups started attacking power lines as part of a sabotage programme.

Other power station projects have been shelved for the moment. Sonelgaz has made little progress with a plan to build power stations in Djinet and Algiers, each with two 300-MW turbines. International contractors say they do not expect the scheme to go ahead until export credit cover is available again for Algeria.

THE elevation of former under-secretary Abdulla Mohammed Juma to the rank of minister at the restructured power and water ministry in the June cabinet reshuffle is expected to inject some new dynamism into Bahrain's power sector.

It is sorely needed if the power shortages that have developed in recent years are to be brought to an end. Some relief was provided when 250 MW of reserve capacity from the new Aluminium Bahrain (Alba) plant was made available in 1994 but there is still an urgent need for new generating capacity. The authorities do not want to rely on a supply which is a standby for Alba and over which it would have no claim in the event of a power failure at the aluminium plant.

Repairs and maintenance in the first six months of 1995 created further power shortages in April and May, despite a nominal capacity of 1,150 MW. The vandalising of several substations in the civil disturbances during the first half of the year was a further inconvenience for a system that was already under pressure. Peak demand is expected to reach 950 MW this summer.

To get new capacity installed, Bahrain has been exploring private sector options. These have centred on a proposal from British Gas to build a 360-MW power plant. Major differences between the two sides have been reduced significantly but it has proved impossible to reach an agreement on pricing, industry sources say. The ministry has said that it is still considering the project and is looking at all the available options.

The UK's Mott MacDonald is undertaking a 10-year masterplan for the ministry and is due to make its recommendations on future needs soon.

MAHER Abaza is one of the power industry's great enthusiasts. The veteran Egyptian electricity & energy minister has successfully managed the expansion of the domestic grid to meet rapid increases in demand. Now his attention is focused on new horizons: establishing Egypt as the focal point of a grid interconnection linking three continents.

He has moved a few steps closer to realising this vision, as power links with Jordan and Libya are under construction. These links will eventually lead to a grid loop going all the way round the Mediterranean. It will be augmented by a link to Zaire, where studies have identified potential for generating more than 20,000 MW from dams on the Zaire river and exporting it through Egypt or Morocco.

Of more immediate concern is the task of building the next generation of power stations in Egypt itself. Work is well under way on the 1,200- MW Kureimat plant, and the Egyptian Electricity Authority (EEA) is preparing to award the main contracts for two 650-MW plants at Sidi Krier, near Alexandria, and Ayun Musa, in Sinai. These two plants will be built by joint ventures between international and local companies. Germany's Siemens, with the local Ferrometalco, is well placed for the $100 million contract to supply turbines for the two plants. The estimated $150 million boilers contract has resulted in a close contest between Babcock & Wilcox Canada and ABB Combustion Engineering of the US. The former is bidding with its local affiliate, Babcock & Wilcox Egypt, the latter with the state-owned Sugar & Integrated Industries Company.

The government is also considering build-operate-transfer projects. It has identified three schemes to offer to investors: a 200-MW wind-powered plant on the Gulf of Suez, a 600-MW pumped storage plant and a 325-MW thermal plant. The EEA is in the process of appointing a consultant to draw up the terms of reference.

The expansion of domestic generating capacity has been matched by extensions to the distribution system. New substations are to be built at Taba and East Qantara - both serving Sinai - at Zaafarana, on the Gulf of Suez, and at Mallawi, in Upper Egypt. Several smaller, 66-kV substations are being built in rural areas, almost entirely from equipment made in Egypt.

The development of a domestic power equipment industry has been one of Abaza's great achievements. But his dream is to make Egypt a power bourse, buying and selling electricity for customers from Kinshasa to Copenhagen.

WITH electricity demand in Gaza and the West Bank at about 550 MW, and rising by about 8 per cent a year, expanding generating capacity has become a clear priority for the Palestinian National Authority (PNA). However, immediate construction costs for power generation in the Gaza Strip alone are estimated at $200 million, and half of this will have to be found from the private sector.

The largest single project is the construction of a 160-MW power station in Gaza which could be fuelled by natural gas from Egypt. The Palestinian Development & Investment Company (Padico) received a mandate from the PNA in February to build the $160 million plant and in May it signed an agreement with the US' Allied Electrical Systems (AES) to co-operate on the construction and the operation of the plant.

A new $50 million private sector company is soon to be established with Padico expected to take a 25 per cent stake, AES taking a 34-39 per cent stake and the International Finance Corporation taking a 5-10 per cent share. However, the remaining financing for the plant still has to be secured from the donor community before work can begin. In an interview with MEED on 9 July, PNA Minister for Planning and Economic Co-operation Nabil Shaath, said there had been intense international interest in the project and that he had received 14 bids to build the plant (MEED 28:7:95).

Investment in the power sector has so far been limited to a three-year rehabilitation of the internal distribution network in Gaza which is being financed by a $22.5 million grant from the Norwegian government. The cost of rehabilitating the West Bank network will cost about $78 million, but funding still has to be secured.

IRAN'S power generation programme has picked up in 1995, with most of the activity concentrated on hydroelectric plants and a revived nuclear reactor. The overall capacity target for the rest of the decade has, however, shrunk.

Initial expectations of an installed generating capacity of 35,000 MW by 2000 have been revised to something like 30,000 MW, based on a lower annual demand growth rate of about 8 per cent. The overall cost of the extra 10,000 MW over the next five years has also been reduced, because of a shift of priorities to hydroelectricity, and a decision to make use of existing facilities for a nuclear reactor.

The planned nuclear reactor will add 1,000 MW to the national grid at what officials hope will be a cost of only $800 million. In an early 1995 agreement, Russia has undertaken to complete at least one of the two reactors started by Germany's Kraftwerk Union and abandoned after the revolution in 1979. Several hundred Russian technicians are already on the site in Bushehr.

Experts say the cost estimate may be optimistic and if all factors, including transmission lines to distant consumer centres, are taken into account, the final cost could exceed $1,500 million. Three other reactors from Russia are planned at a total cost of $4,000 million, including the cost of the Bushehr completion. China may build another two reactors of 300 MW each. However, escalating costs - as well as political pressure from the US, which says it is concerned about a secret Iranian programme to develop nuclear weapons - may ultimately curtail Iran's nuclear power generation ambitions.

The Energy Ministry has at the same time expanded and accelerated its programme for building dams. Construction is to start on 23 new dams between now and 2000, raising the total number of new dams since 1979 to 35.

Most of these facilities will be of modest size and will produce little or no electricity. However, there is a substantial number of hydroelectric dams which are among the biggest being built anywhere in the world. The three biggest now being built are Godar-e Landar, Karun-3 and Karkheh.

The $463 million civil works contract for Godar-e Landar, expected to produce 2,000 MW in 2000, was in 1995 awarded to Daelim Industrial Company of South Korea. Diversion tunnels have already been built by Austria's Ilbau. However, continuation of work on the facility depends on approval of the second tranche of an eventual loan of $1,500 million from Japan. A Japanese decision has been postponed for more than a year because of US pressure. Tokyo is inclined to make a positive decision in 1995, but much depends on the extent of pressure from Washington.

Construction work started in April 1995 on Karun-3, following the award of the main contract in 1994 to the local Sabir, with the possible participation of Brazil's Construtora Andrade Gutierrez. Karun-3 will produce 3,000 MW starting in 2002.

Highlighting the greater role of local companies in dam construction, the Energy Ministry in late 1994 awarded the IR 1.2 million million ($700 million) contract for the Karkheh dam to the Construction Corps of the Islamic Revolution Guards Corps. Karkheh will generate only 400 MW, but it will be the world's eleventh biggest earth-filled dam.

Work on new thermal power plants is limited, mainly because of hard currency financing problems. The most interesting activity is in connection with the national power plant upgrading programme for which the World Bank has extended a $165 million loan, and the addition of combined cycle units to existing plants. Canadian companies such as Monenco AGRA are completing work on a masterplan and are doing supervision and management work for the World Bank.

THE Hashemite kingdom recently became the latest Middle East country to open its power market to international private investors. In a statement on 29 May Energy & Mineral Resources Minister Samih Darwazeh said the government would approach private power companies to build a third power plant to supplement the main thermal power units at Zarka and Aqaba.

The existing electricity system is already being reformed. In April 1994, the cabinet decided that the Jordan Electricity Authority (JEA), a semi- autonomous government utility, would be converted into a government-owned shareholding company and thoroughly commercialised, in a move which could lead to its eventual privatisation. Jordan is fortunate to have a tradition of private investment in the sector as the two companies responsible for distribution - Jordan Electric Power Company (JEPCO) and the Irbid District Electricity Company (IDECO) - began life as private companies. JEPCO is still 63 per cent owned by individuals.

The JEA estimates that the electricity sector will need investment of about $700 million by 2000, of which $615 million will be in foreign currency. Current installed capacity is 1,090 MW of which 696 MW is steam. Peak load in 1994 was 794 MW and growth in consumption was 8.3 per cent. Similar increases in demand are forecast for this year and next, declining to 6.9 per cent in 1997. By 2000 the growth in demand is still expected to be 6.2 per cent a year. This implies maximum demand of 1,232 MW in 2000, according to JEA forecasts.

This year the JEA awarded a $145 million contract to Zurich-based ABB Asea Brown Boveri for turbines and boilers for the 260-MW expansion of the Aqaba thermal power plant. It has also awarded a $48 million contract for a 400-kV substation at Aqaba to the UK's Reyrolle, part of the Rolls- Royce Industrial Power Group. This will be part of the main Aqaba development and will provide power to Egypt via a subsea cable under the Gulf of Aqaba.

EXPANDING the country's generating capacity is no longer one of the government's most pressing concerns. The slight reduction in the resident population since the Iraqi invasion means that annual growth in demand is only about 5 per cent which is low by the standards of the region.

Installed capacity in Kuwait currently stands at 6,898 MW, well above the 1993 peak load of 4,200 MW, and work is under way on the Subiya power plant which will add another 2,400 MW of capacity. The energies of the Ministry of Electricity and Water (MEW) are more focused on completing repairs to the damage to the grid caused by the Iraqi invasion and enhancing the power supply to the oil sector.

Work is progressing steadily on the huge new station at Subiya, a project that was initially conceived before the Iraqi invasion and which is due for completion by 1999. Contracts to build the station were awarded last year. South Korea's Hyundai Engineering & Construction took the civils contract on 1 August 1994 and has now installed most of the substructures and foundations of the plant. Japan's Mitsubishi Heavy Industries, which has the $1,600-million boiler and turbine supply contract, is close to completing final designs and is in the process of awarding manufacturing and procurement contracts. The Athens-based Consolidated Contractors International Company (CCC), which has the $100 million fuel line contract, has almost completed the installation of the main fuel gas line for Subiya.

The plant's first 300-MW turbine is due to be commissioned in July 1997, and the project is due for completion in December 1999. The size of the Subiya project and sluggish growth in demand means that the government is unlikely to consider any plans for a new power station until after 2000.

The MEW is now starting a new phase in its development of the national grid. For the past four years, contracts have been directed at restoring the grid while the latest projects to be tendered have been to boost delivery to upstream oil installations.

Three major contracts have been awarded in the power sector in the past year to complete the repairs. In April, Hungary's Transelektro won two major transmission contracts worth a total of KD 23.7 million ($80 million). The first contract, worth KD 15 million ($50 million) was for the supply of a new 132/11-Kv substation and the repair of a second which had been out of service since the Iraqi invasion. The second contract, worth KD 8.7 million ($30 million), was to install 132-kV and 33-kV overhead lines across the country.

In the oil sector, the central tenders committee awarded a KD 27.4 million ($93.7 million) contract to France's Cogelex in May to supply and install a 132/11-kV substation at the new Equate petrochemicals complex at Shuaiba. Industry sources say that the contract to supply and install three 132/11- kV substations at Rawdatain B and Minagish A and B oil fields is to be split between Germany's AEG, which will complete the Minagish work, and the Zurich-based ABB Asea Brown Boveri, which will complete the Rawdatain substation. AEG was the lowest bidder at KD 38.4 million ($128 million) for the whole package when bids were opened in December. ABB was the second lowest bidder at KD 39.4 million ($132 million). Contacts are expected to be signed by the end of August.

After a flurry of tenders at the end of last year, precious few new contracts have been tendered in 1995. Industry sources say that the MEW is currently waiting to see its allocation of funds in the 1995-96 budget before committing itself to any new projects.

THE roar of a thousand diesel generators will soon no longer disturb the gloom of a Beirut evening. That at least is what the government is promising as it gets to the end of its emergency recovery programme and restores the electricity grid to full capacity.

The deadline for the 1,350 MW of capacity to be back on line was August. This will allow for 900 MW of firm supply capacity, sufficient to make electricity available for 18 hours a day. Though still short of a round the clock service, this will be a significant improvement on the six hours a day provision that has been the norm for the past three-four years.

The grid will be boosted early next year with the start-up of four 33.5- MW turbine generators being installed by European Gas Turbines in Baalbek and Tyre. There should be a further significant improvement in 1997, when the first units of the two 430-MW combined cycle plants being built in Tripoli and Sidon by Italy's Ansaldo Energia will come on stream.

The next major project on the agenda for international firms is a contract for the supply of nine 220-kV substations and the installation of some 300 kilometres of overhead transmission lines. Bids were submitted at the end of July.

THE biggest source of power work in the past year has been the Great Manmade River Authority (GMRA). The government has been reluctant to spend on anything outside the priority hydrocarbon sector and most power projects which are not part of the great manmade river (GMR) project have been frozen.

Contracts worth more than $400 million have been let by GMRA in the past 12 months in the transmission sector, and a generation project is to follow. Hyundai Engineering & Construction Company of South Korea has won much of the work, with two contracts worth almost $200 million in total on the GMR phase 2 section. Its most recent contract, awarded in June, involves engineering and building 66/33-kV substations. Hyundai is also to supply and install 370 kilometres of 220-kV double-circuit transmission line between the Bani Walid substation and the wellfields in the Sebha area.

The substations at the wellfields will be built by Germany's Siemens under a $126 million contract awarded in late 1994, involving two gas- insulated 220/66-kV substations. Italy's Compagnia Elettrotecnica Italiana (CEI) has completed the designs of a 1,400-kilometre transmission line to bring power to the GMR pumping stations. However, the client is understood to be considering transferring the contract to another company following discussions with CEI about the performance bond.

CEI's contract, which also includes 11 substations, will provide enough transmission capacity for a new power station planned by GMRA. International contractors, including Siemens and Zurich-based ABB Asea Brown Boveri, have submitted bids for a 450-MW gas-fired station with three turbines. Capacity will be sufficient to provide supplies for the national grid.

Additional capacity will come on stream in the autumn, when ABB completes a power station expansion programme which will add 1,000 MW. It is installing gas turbines of up to 130 MW in Tripoli, Homs, Zuwaitina and Sirte. A project for a 1,260-MW station in Sirte has been frozen. Hyundai was awarded a letter of intent for the project in March 1993.

EFFORTS to attract private capital to the power sector bore fruit this year with letters of intent for the first two private power projects. The government is also keen to make two more schemes available to private investors as soon as possible.

The Jorf Lasfar project went to Zurich-based ABB Asea Brown Boveri and CMS Power of the US. They received a letter of intent in February for a concession which entails building and operating two 330-MW thermal power units for 25 years. They will also take over the management of two existing units at Jorf Lasfar which are the same size. Negotiations with power utility Office National de l'Electricite (ONE) to finalise the power purchase agreement and other arrangements are to be concluded this summer. The project is worth $1,350 million in total.

This was followed by a letter of intent for a 50-MW wind power plant in Tetouan in June. France's Tramontana and Denmark's Vestas Wind Systems are negotiating to finalise a build-operate-transfer (BOT) agreement with ONE. ONE has received funds from Germany's Kreditanstalt fur Wiederaufbau to gain expertise in renewable energy resources, a field it says it wants to develop. The transmission work associated with the project is being carried out by local companies.

Next in line for private investors is a planned grassroots station at Mohammedia. ONE is to invite investors and contractors to bid for the project as soon as the Jorf Lasfar deal is finalised, contractors say. The plant will be combined-cycle, using Algerian gas supplied through the Europe-Maghreb pipeline which is now under construction. Planned capacity will be between 300 MW and 650 MW. A further combined-cycle power plant is to be built by private investors at Kenitra, with a capacity of between 300 MW and 500 MW. With the planned completion of the private plants by 1999, total installed capacity is expected to just keep pace with the projected growth in demand.

Demand is also high in the distribution sector. While 85 per cent of urban households are connected to the grid, only 31 per cent of rural households have access to mains electricity. ONE is restructuring its rural electrification programme to make more funds available to speed up the expansion of its distribution network. It is to invest $110 million a year with the aim of providing all rural households with power by the year 2010.

THE 90-MW Manah power station, due for completion in 1997, has paved the way for other independent power projects (IPPs) in Oman. In early 1995, the government confirmed that it would proceed with a large-scale power and desalination project at Barqa, to the north-west of Muscat, which is a far more ambitious scheme than Manah. Barqa is to be built in stages with the ultimate ambition of adding an extra 1,880 MW of power and 56 million gallons-a-day (mg/d) of desalination capacity by 2010.

It will be an IPP to be let as a long-term concession. Oman's current installed capacity of 1,400 MW will more than double if the Barqa schemes succeeds. Current capacity is set for a boost of 190 MW when the Ghubrah power station expansion comes on stream later this year.

The first phase of the Barqa project is to involve building a 388-MW power plant and a 14 mg/d desalination plant. Invitations to private consortiums to bid for the concession are expected to go out before the end of the year

Private investors are also chasing a 150-200-MW power scheme in Salalah. Potentially, this is an even more ambitious scheme in that it will involve the complete privatisation of the entire power sector in Dhofar. The final proposal for the scheme is expected to include taking responsibility for the complete Salalah electricity transmission and distribution network. If it works, the pattern could be repeated for future schemes that will be offered to private investors.

To co-ordinate the privatisation plans as part of a national strategy, the power and water ministry has invited bids from consultants for a new five-year masterplan for the power sector.

The other significant project that the ministry has in-hand is the Wadi al-Jizzi to Um al-Inah 132-kV transmission system. Seven bids are currently being evaluated by the ministry (MEED 23:6:95). Once the Manah scheme comes on stream, providing power to the area around Nizwa, several small diesel-powered units which currently serve the region will be relocated to more remote areas as part of the government's long-term ambition to electrify the entire country.

PAKISTAN has pioneered private sector investment in the power sector in the Middle East and south Asian region. The state has made unprecedented efforts to eliminate red tape, offer an attractive bulk tariff formula, and provide guarantees and fiscal incentives to promote inward investment in the sector. Their reward has been a deluge of proposals from international consortia.

The spur for all the activity was the massive Hub river scheme, which is something of a legend in the independent power project (IPP) industry, having been brought to fruition against the odds. Hub, Pakistan's first private power project, is now under construction and will provide an additional 1,292 MW by early 1997. The next major milestone is the 584-MW privately financed gas-fired plant at Uch in Baluchistan, which has been granted an extension to bring to financial close.

Pakistan's power needs are acute. Demand growth is between 8-9 per cent a year and the country needs an additional 7,000 MW by 1998 if it is to eliminate load-shedding. According to the Private Power and Infrastructure Board (PPIB), this translates into an investment of nearly $7,000 million in 1994 prices. There is 2,400 MW already under construction by the public sector, leaving a further 4,600 MW to be built by the private sector before 1998. Completion of the Hub river project will leave 3,000 MW to be provided by the private sector, at a likely cost of $3,000 million-3,500 million, according to PPIB.

Several new projects are being assembled to meet this requirement. They include:

p Two fast-track energy projects, the 120-MW Gul Ahmad diesel power scheme in Karachi and the 120-MW Kohinoor Energy project near Lahore (MEED 2:6:95).

p The 450-MW Rupali oil-fired power project near Lahore.

p A 362-MW oil/steam power project in Muzaffargarh. The first phase of financing was completed in April. The IFC is to put up a 10 per cent equity stake in the development company, AES Lal Pir, with the US' AES Corporation taking the remainder.