LIBYA

LIBYA'S international isolation may be over, but a cramped fiscal situation brought on by the combined effect of depressed oil prices and seven years of UN sanctions has restricted development of a series of ambitious power projects for General Electric Company (GEC). A prominent contractor in Libya says that no major power contract has been initiated for the last two years. The option of allowing the private sector to drive expansion is regarded as premature in a country where free markets are in their infancy. Despite signs that Revolutionary Leader Muammar Gaddafi is preparing to give private companies a greater role, full-scale privatisation of state assets appears some way off.

GEC has yet to award the contract for turnkey execution of a 1,200-MW combined power and desalination plant at Sirte. The bidders include Zurich- based ABB Asea Brown Boveri, a joint bid from Siemens and Deutsche Babcock, both of Germany, and South Korea's Hyundai Engineering & Construction. France's Alstom also submitted a bid, before its power generation division was acquired by ABB. Contractors have long expressed doubts about the viability of the project, which will cost an estimated $1,600 million. They have also complained about the client's tendency to inflate the projected capacity of the plant, which has fluctuated between 1,200 MW and 1,800 MW since offers were first invited in 1997.

Bids are also under consideration for a 1,400-MW power plant to be located between Benghazi and Tripoli. The so-called Gulf power plant is scheduled to comprise four 350-MW turbines. The same group of bidders on the Sirte plant also submitted offers for this project, though project sources suggest that the Sirte venture may take precedence for political reasons. Both plants' future success is understood to be heavily dependent on oil prices remaining high for a sustained period.

Progress seems more likely on a planned upgrade of the Benghazi north power station which will increase capacity to 900 MW. Bidders for the addition of a fourth 150-MW gas turbine to complement the three existing 150-MW turbines are understood to include ABB Asea Brown Boveri, Deutsche Babcock and Siemens. At least three companies have bid for the second, combined cycle conversion portion of the project, which would add a further 450 MW. Project sources have questioned claims that South Korea's Daewoo Engineering & Construction had won the $300 million contract. Construction work was due to start in December 1999.

GEC's ambitious plans for a boost to the network of substations has proved another casualty of the oil price collapse of 1998. Aside from an award to Siemens and KEC International of India of contracts to install a 225- kV grid link between Libya and Tunisia in the first quarter of 2001, contractors do not expect further contract awards for the near future. One of GEC's few contract awards this year was a $16 million order for Egypt's Kahromica in May to rehabilitate a tank farm for six power plants.

OMAN

GOVERNMENT plans to restructure the power sector took a giant leap forward in June with the appointment of a financial adviser for the proposed privatisation of electricity. Oman was an early convert to private power provision, establishing the Gulf's first private power plant at Manah, but subsequent progress has been tardy. A second, 200-MW private power plant planned for Salalah has failed to make headway in the past year. Consultants on the scheme continue to scrutinise bidders' proposals for pricing, billing and fee collection. Shortlisted contractors will be hoping that the forthcoming review process leads to a swift implementation of the Salalah plant.

A group comprising ABN AMRO, legal consultant Denton Hall and technical advisers Mott McDonald was awarded the mandate to advise on the privatisation process. The work will involve a review of government objectives and existing legal and commercial documentation relating to the privatisation process and the Salalah and Manah independent power projects (IPPs). In later phases, there will be a broader sector vision, a proposed industry structure, a regulatory framework and a timeframe for the privatisation of existing assets. The adviser will also draw up criteria for the bid evaluation process, assess the final bidding list and assist in the ultimate evaluation of bids. The group will then advise on the formulation of an asset purchase agreement.

The review should reinforce international power companies' confidence in the way the Ministry of Electricity & Water (MEW) handles the power expansion process. Some questioned MEW's decision to set very tight bidding deadlines on two new IPPs, a 200-MW build-own-operate (BOO) power station at Sharqiyah and the 180-240 MW BOO Rusail B plant. The MEW also opted for BOO at a 400-MW combined power and desalination plant at Barqa, inviting consultancy bids in May for the project. As these projects will now come under the remit of the sectoral review, it is hoped that a more streamlined approach to expansion will emerge.

Much of Oman's expansion needs depend on the success of projected gas- based industries. If planned fertiliser, petrochemicals and aluminium plants at Sur and Sohar get the go-ahead, demand for extra capacity will outstrip the estimated 3,000 MW needed by 2006. The planned aluminium smelter at Sohar itself will include power generation capacity of 300- 400 MW. The outcome of the review is likely to lead to a recommendation to let the private sector spearhead expansion, an option that may prove attractive to policymakers given the government's current budgetary constraints.

Not all activity has ground to a halt. The local United Power Company (UPC) is returning to the original arrangers to secure finance for the 90-MW expansion of the Manah IPP. BankMuscat led the syndicate of local banks for the setting up of the 90-MW plant in 1994. ABN AMRO, Arab Bank and Banque Paribas were also involved. UPC was given the green light for the expansion in March of this year. Elsewhere, India's Bharat Heavy Electricals (BHEL) has been awarded the contract for the 120-MW expansion of the Rusail power plant. Iran's Mapna was the only other bidder on the project. BHEL was also awarded the contract for turnkey execution of the 90-MW power station at Hubara for Petroleum Development Oman in 1998.

In the transmission field, bids have been invited for the extension of the 132/133-kV Al-Wasit substation in Dhahirah and an extension of the 33-kV network at Dhahirah. Five local groups have bid for the turnkey supply of a 132- kV transmission line between Ghubrah and Madinat al-Sultan Qaboos. Bids have also been invited for construction of a 33-kV overhead line in Muscat.

PAKISTAN

LINE losses, theft and rampant corruption continue to haunt the power sector of Pakistan. The Water & Power Development Authority (WAPDA) has reported that it is making a loss of $350 million a year due to transmission and distribution losses and it had outstanding receivables of $737 million at the end of 1998. The situation is no different at the Karachi Electric Supply Corporation (KESC), the second largest state-run utility, which recorded a pre-tax loss of $121.5 million at the end of fiscal 1998-99.

WAPDA also remains at daggers drawn with the Hub Power Company (Hubco) over tariffs, a dispute that has delayed the commissioning of several other independent power projects (IPPs). To date, only six of the 19 IPPs have started operations and many others are considering abandoning their projects midway due to high run-up costs and the unfriendly attitude of the government. The government claims that it already has surplus power, even though more than 50,000 villages have no connection with the national grid. According to the latest figures published in the Pakistan Energy Yearbook, total installed capacity was 15,659 MW at the end of 1998, up 5.7 per cent from the previous year while demand is rising by 3.7 per cent a year.

The new power policy announced in July 1998 by the government has hardly had any impact on the quick development of new hydroelectric power projects. WAPDA had proposed 25 new hydro power projects in various parts of the country to raise capacity by another 889 MW by the end of 2003, but none of them has materialised so far.

The US' Synergics Hydro Power announced in January that it will invest more than $970 million in two hydropower projects including the 600-MW Kohala power station in Azad Jammu and Kashmir and the 84-MW Matiltan station in the Swat district of the Northwest Frontier Province (NWFP). However, progress has been slow on the build-operate-transfer (BOT) schemes and a final tariff agreement is still to be signed with WAPDA.

The dismal privatisation process also continues to face hurdles. The Privatisation Commission (PC) prequalified eight international consortia for the sale of up to 51 per cent and management control in KESC in mid- 1998 but has not been able to push the transaction any further. In order to cut line losses and ensure the payment of power bills, the government handed over KESC's operations to the army earlier this year. The army has been given the brief to clean up the mess and prepare the utility for privatisation. The PC now says that KESC will be privatised by the end of the year.

QATAR

FEW Gulf states find themselves in such a daunting position on the power front as Qatar. With the latest official forecasts indicating that demand will reach 2,400 MW in 2000 - some 500 MW above current installed capacity - the government is in a race against time to install new generating units.

Dire warnings about the state of the local power sector have become increasingly common over the past two years. The failure of the Ministry of Electricity & Water (MEW) to proceed with the planned Ras Abu Fontas C power and desalination complex fuelled fears that Doha would see widespread loadshedding this summer, as rising demand outstripped static supplies. So far, the nightmare scenario has failed to materialise, leading some in the industry to question the accuracy of existing power demand data. Others paint a more sombre picture, arguing that Qatar is living on borrowed time and that it will not be so lucky next year.

Doha's power problems are the result of soaring demand and insufficient investment. Demand is estimated to be rising by over 10 per cent a year, as a result of the recent building explosion. With nationals paying nothing for electricity and expatriates only a nominal fee, per capita power consumption is now the second highest in the GCC after Kuwait.

At the same time, investment in new generating capacity has been on the wane. Not since December 1993 and the award of the $1,000 million Ras Abu Fontas B project has a major power station contract been let by MEW. The lack of investment has become a concern because of the age of much of the installed generating capacity. Both the 206-MW Ras Abu Abboud plant and the 618-MW Ras Abu Fontas A station are over 20 years old.

The government's response has been to propose a radical overhaul of the utility sector. The first step was taken last January, when MEW was merged into the Energy & Industry Ministry, headed by Abdulla Bin Hamad al-Attiya. A committee was subsequently formed to look into the abolition of MEW, replacing it with a new government entity known as Qatar Electricity Corporation (QEC). Under the plan, due to be finalised by the end of the year, QEC will be in charge of transmission and distribution.

An expanded role is also envisaged for the joint stock Qatar Electricity & Water Company (QEWC), which last year took over the running of the Ras Abu Fontas B plant from the government. Discussions have taken place about QEWC assuming responsibility for the neighbouring A station.

The third element of the restructuring strategy involves the construction of the state's first independent water and power project (IWPP) at Ras Laffan. Originally proposed by Norway's Norsk Hydro as part of an aluminium development, the IWPP was taken up by Qatar General Petroleum Corporation (QGPC) in late 1998, after the Norwegian company opted to build its smelter in Trinidad.

QGPC is planning to build in phases a new co-generation plant with initial capacity of 150 MW rising to 1,100 MW in 2007. Up to 435 MW of generated power will be fed through an existing 132-kV substation at Ras Laffan into the domestic grid. The remaining output will be used by new industry in Ras Laffan industrial city.

A new joint venture utility company is to be set up to implement the project, with an international developer being the largest shareholder with a stake of about 60 per cent. Initial proposals were submitted last December by at least five foreign companies. Following the mid-July appointment of Switzerland's Electrowatt Engineering Services as project consultant, a new request for proposals (RFP) is to be drawn up and handed to the shortlisted developers to bid. QGPC is aiming to select one by the end of 1999 for detailed negotiations.

The government is also looking to address the highly sensitive issue of electricity tariffs, as a means of reining in rampant consumption. Officials maintain that the principle of free electricity and water for nationals will remain. However, the government is proposing to set a monthly ceiling for household consumption, under which local consumers will be charged if their electricity and water use goes above the specified threshold.

SAUDI ARABIA

AFTER three years of study and consultation, plans are cranking into gear for a comprehensive reorganisation and reform of the Saudi power sector. Under plans now before the cabinet, 10 existing regional power suppliers will be merged into a new joint stock entity, the Saudi Electricity Company (SEC), which is intended to be self-supporting and independent of government. The aim is to make the sector commercially viable and capable of delivering the massive expansion identified as necessary in a 25-year development programme.

The most immediate challenge for Industry & Electricity Minister Hashim Yamani, reappointed in June for a second four-year term, is to secure the prompt approval of SEC's charter. Plans to set up a dedicated utilities company for the industrial cities of Jubail and Yanbu sat before the cabinet for almost two years in their final form before receiving the go-ahead in July and Yamani will be keen to ensure that his restructuring plan for the entire sector does not meet a similar fate. In March, when presenting plans for SEC, he said the company's incorporation would follow within weeks rather than months. Five months on, this final step to set the restructuring in motion has yet to be taken.

Once SEC is up and running, it will have to show that a new tariff structure gives it enough revenue to cover its costs and that it receives full and timely payments from its customers. Both are areas where its predecessors were conspicuous by their failure.

The main features of the new tariff structure, due to be put in place at the beginning of the month following SEC's incorporation, are a near doubling of charges for the heaviest consumers and an increase in the number of bands to 11 from seven to encourage more conservative use of power. The so-called halala fund, under which extra charges were imposed on heavy consumers from 1995 to pay for capital investment, is being cancelled.

The ministry calculates that the 93 per cent of household consumers using less than 5,000 kWh a month each will be little affected by the changes. These customers, predominantly low and middle-income households, will be billed five-13 halalas a kWh for their power. However, for those consuming more than 10,000 kWh a month, charges will rise from 20 halalas a kWh to 38 halalas a kWh. Major industrial consumers, buying power in bulk at high voltages, will be charged at a separate 12 halalas a kWh rate, which the ministry describes as 'favourable' though still 'economic' in view of the quantities and voltages involved.

For at least the first two years, the tariffs will be frozen. Following that, an independent regulator due to be set up within a year of SEC's creation may periodically review the tariffs and recommend changes. If SEC is serious about keeping up with the sector's immense capital investment requirements - an extra 50,000 MW or $117,000 million from 1995-2020, the ministry says - further tariff increases look all but certain.

Once SEC is shown to be commercially viable and electricity prices are seen to provide sufficient revenue for capital investment, there is likely to be some selling-down of the government's planned 85 per cent stake. The possibility of private power schemes will also be brought that much nearer.

One major independent power project (IPP) has been explored in recent years but stumbled, and eventually fell, as a secure legal and operating framework had yet to be established. Construction of the 1,100-MW Shuaiba power project is now going ahead on a turnkey basis following the award of a

$835 million contract to Zurich-based ABB Asea Brown Boveri late last year. The first 370-MW generating unit is scheduled for start-up in mid- 2001, with the second and third units to follow eight and 14 months later. Several subsidiary elements of the scheme, including construction of substations, overhead lines and fuel oil unloading facilities, have also come to the market in recent months.

Other major new generating projects are likely to wait until SEC has found its feet. One of the first on the agenda is a 1,800-MW expansion of the PP-9 power station outside Riyadh. International consultants are due to submit bids to provide design and engineering services in September. This contract is expected to take about two years to execute, after which a tender will be launched for construction work. Another long-awaited scheme is a 1,000-MW facility planned for Shuqaiq in the southern region, which has experienced long delays in the tendering process due to financing problems.

Bids for several smaller schemes are being evaluated. These include 50- MW expansions at the central power plants in each of Asir, Jizan and Najran and an estimated 35-MW expansion at Timah in the extreme north. Plans for a major substation building and upgrading programme in the Riyadh area are proceeding although the bid evaluation phase is proving to be a lengthy one. Proposals have also been submitted for converting two central region power plants, PP- 7 and PP-8, for firing with gas instead of distillate. Similar work is already proceeding at PP-9.

SYRIA

THANKS to generous aid programmes from the Gulf Arab states and Japan, Syria now has sufficient generating capacity to deal with demand.

In the next few months, work on the 1,000-MW Saudi-financed Aleppo power station will be complete. Next year the 600-MW Japanese-financed Al-Zara plant will also come on stream. The main contractor on both plants is Mitsubishi Heavy Industries of Japan. The government does not have any major new generating projects planned, but is continuing discussions about the country's first independent power project (IPP) and is due to invite bids in the next few months for two power station rehabilitation projects. Work is also going ahead on grid interconnections with Jordan and Turkey.

The local Sarakbi Group, which has formed a venture with Belgium's Tractebel to build a 600-MW IPP north of Damascus, says it is in detailed discussions with the government about tariffs. The company says the talks have been affected by the extremely low tariffs Egypt has agreed on its three IPPs. This has encouraged the Syrian authorities to drive a hard bargain in the pricing negotiations. Sarakbi says it is hoping to reach agreement in two-three months. 'The eventual price will be higher than in Egypt because of the extra costs in Syria, particularly on the financing,' says a Sarakbi executive.

For the rehabilitation projects, Enel of Italy is working on designs for the Banias plant, and Germany's Lahmeyer International is working on the Mhardeh plant. Both stations have four 170-MW units. At Banias, Italy has agreed to provide about $23 million for the first two units, and Japan is said to have agreed to provide $10 million for units three and four. Financing has yet to be finalised for Mhardeh.

The Kuwait-based Arab Fund for Economic & Social Development (AFESD) is providing finance for several transmission and distribution projects, including the grid interconnection. India's KEC International is building a 400-kV link between Damascus and Jordan, and a consortium of Turkey's Galkon and Germany's SAG is building the link from Damascus to the Turkish border. AFESD is also financing a $26 million contract awarded at the end of 1998 to Italy's Ansaldo Trasmissione & Distribuzione for the construction of two substations in the Damascus area. It has also agreed to finance a dispatching centre project, for which bids from four companies - three European, one Chinese - are under evaluation.

However, a tender for six substations country-wide, for which technical bids have been evaluated, appears to have stalled because of the government's failure to conclude an agreement with Saudi Arabia over financing conditions. Some $70 million in Saudi finance left over from the Aleppo project had been initially allocated for the substations.

UAE

THE UAE power sector promises to be one of the most active in the Gulf over the next 12 months. With demand rising by as much as 15 per cent a year in some areas of the federation, contracts are due to be let for over 2,000 MW of new capacity. Abu Dhabi, the leader in the Gulf's utility privatisation process, will be at the forefront of the capacity additions. Dubai is also accelerating its investment plans after a surge in power consumption in the summer of 1998 saw demand rise by 14 per cent.

Having achieved financial close in mid-April on the pioneering 710-MW, 50 million-gallon-a-day (g/d) Taweelah A-2 project, Abu Dhabi Water & Electricity Authority (ADWEA) has wasted little time in pushing ahead with its next independent water and power project (IWPP). In mid-July, it issued the request for proposals (RFP) to six shortlisted international developers for the Taweelah A-1 project. Companies have been given until mid-November to prepare offers.

The project involves a foreign partner taking a minority interest in a new utility company, which will develop, own and operate the existing 255-MW, 28.5 million-g/d plant and expand its capacity. The expansion calls for 600 MW of new generating capacity to be installed along with 20 million g/d of desalination. Also included in the RFP is a major refurbishment of the A-1 station, which was first commissioned in 1989.

The privatisation of A-1 will be followed by an even more ambitious development. About six international consultants are preparing to submit bids on 1 September for a grassroots IWPP at Shuweihat near Jebel Dhanna in the western region. The plant's initial capacity will be 1,500 MW and 100 million g/d, although it will later be doubled in size. ADWEA is expected to draw up a new prequalification list, with shortlisted developers being invited to bid for the work in late 1999/early 2000.

The level of activity underlines the urgent need for new capacity in Abu Dhabi emirate, which is experiencing growth in annual demand of at least 10 per cent. Concerns that the emirate could experience a power shortage this summer have been averted with the recent commissioning of two gas turbines, rated at about 120 MW each, on the Taweelah B station expansion project. With the new units, Abu Dhabi's installed generating capacity is now at about 3,500 MW, just ahead of peak summer demand.

ADWEA and its newly created subsidiaries, Al-Ain Distribution Company, Abu Dhabi Distribution Company and Abu Dhabi Transmission, are also planning a major expansion of the transmission and distribution networks. Reinforcement of the 132-kV and 220-kV systems in Abu Dhabi city and around Al-Ain is under design. Construction bids are also under evaluation for an estimated 70 million project involving the expansion of the 33-kV network in the Al-Ain area.

Dubai has ruled out privatisation of its electricity sector, although it has considered commercial financing for the estimated $250 million upgrade of the Jebel Ali D station. Awarded to South Korea's Hyundai Engineering & Construction Company in mid-July, the contract involves refurbishment of the station, the oldest in the Jebel Ali complex, and the installation of 360 MW of new gas turbine capacity and three waste heat recovery boilers.

The next project planned by Dubai Electricity & Water Authority (DEWA) is phase two of the Jebel Ali K station. Expected to be issued for tender in September, it calls for the construction of about 500 MW of new generating capacity and 20 million g/d of desalination. The consultant is Germany's Fichtner. Following the full commissioning of the 600-MW Al-Awir station, Dubai's installed capacity now stands at about 2,400 MW. A further 300 MW is also available as emergency standby. However, with peak summer demand reaching 2,000 MW last year, DEWA cannot afford any delays to its investment plans.

Elsewhere in the UAE, activity has been more subdued with both Sharjah Electricity & Water Authority (SEWA) and the federal Ministry of Electricity & Water (MEW) concentrating on expanding the distribution network. MEW is also studying the creation of a new public electricity authority, which would set tariffs and look into the question of allowing private investors to participate in the northern emirates power and water sector. Over the past three years, several IWPPs have been discussed by governments in the poorer emirates, although not one has so far proceeded beyond a memorandum of

information.