Qatar leads the region in promoting PPPs in the power sector, but the government will need to increase private involvement in all fields if Doha is to be chosen as the location for an international PPP centre
The largest foreign investor in Qatar’s power is Japan’s Marubeni, with 800MW of equity capacity
Source: MEED Insight
With the notable exception of the power generation sector, public-private partnerships (PPPs) have not been extensively used in the Qatari infrastructure market. Even so, a number of government agencies are now looking at the model as awareness of its merits increase and the UN is even considering Doha as a possible location for an international PPP centre.
The launch of the PPP programme has allowed international developers to build up sizable capacity in the state
Qatar has been at the forefront of promoting the role of the private sector in regional power generation. In 1990, Qatar Electricity & Water Company (Qewc) was set up with some 57 per cent of its capital held by companies and private individuals. Qewc was originally formed to undertake one of the region’s first independent water and power projects (IWPPs) at Al-Wusail, although in the end, the project never materialised. However, in the late 1990s, it began taking over existing generating assets held by the Electricity & Water Ministry (MEW) and today is the largest generator in the state, wholly owning eight stations with combined capacity of over 2,500MW of power and 119 million gallons a day (g/d) of desalination.
Private involvement in Qatar projects
The drive to increase private-sector involvement stepped up in 2000, with the formation of Qatar General Electricity & Water Corporation (Kahramaa) to replace the MEW. Set up as part of a restructuring of the sector, the body wasted little time launching its first IWPP. In 2001, foreign developers were invited to bid for a 55 per cent stake in the Ras Laffan A IWPP, with the US’ AES Corporation the eventual winner.
The government is committed to increasing the role of the private sector in infrastructure delivery
Since then, three more PPP projects have been awarded. In 2005, the UK’s International Power (IP) and Japan’s Chubu Electric were selected as foreign partners on Ras Laffan B, while in 2007, another Japanese firm, Marubeni Corporation signed up for the Mesaieed independent power project (IPP). For the fourth and most recent project, France’s GDF Suez and a consortium of Japanese developers were brought on board.
|Qatar infrastructure market project financings, 2005-2010|
|Name||Sector||Financial close||Total value ($m)||Debt ($m)|
|Ras Laffan B IWPP||Power & water||28-Apr-05||1,014||719|
|Ras Abu Fontas B2 IWPP||Power & water||16-Jun-06||665||504|
|Mesaieed A IPP||Power & water||23-Aug-07||2,397||2,092|
|Qatar Aluminium||Mining & metals||23-Aug-07||4,850||2,400|
|Ras Abu Fontas A1 desalination plant||Power & water||13-Mar-08||576||432|
|Ras Laffan C IWPP||Power & water||4-Aug-08||3,889||1,664|
|IWPP=independent water and power project; IPP=independent power project. Source: MEED Insight|
The launch of the PPP programme has allowed international developers to build up sizeable capacity in the state. In terms of power, the largest foreign investor is Marubeni with 800MW of equity capacity, followed by GDF Suez with 546MW.
In total, Kahramaa has contracted 6,500MW of power and 163 million g/d of desalination capacity from the developer market in a programme that has required investment of $7.8bn. For each scheme, a new project company has been set up with the foreign partners owning a 40-55 per cent stake and the remainder normally split between Qewc and Qatar Petroleum (QP). The projects have tended to be structured as build-own-operate-transfer schemes, with the developer company signing a 25-year take-or-pay agreement with Kahramaa for the power and desalinated water.
The PPP is the established model for procuring new power and desalination capacity in the state. However, such has been the volume of new capacity procured in recent years, there will be a lull in new projects until demand catches up. Kahramaa estimates that it will only require 40 million g/d of additional desalination capacity and about 200MW of power by 2015.
Increasing participation from private sector
The generation sector was always considered as a first step for greater private involvement with the transmission and distribution sector earmarked as the next. In 2003, Kahramaa commissioned a detailed study looking into the possible privatisation of both the electricity and water networks. The government decided not to go ahead with the initiative, although it said it did not rule out doing so in future. In hindsight, postponing plans to privatise the networks was probably sensible, given the subsequent need to massively upgrade and expand the networks to meet soaring demand.
|QEWC wholly owned plants|
|Plant||Power capacity (MW)||Water capacity (million g/d)|
|Ras Abu Fontas A||477||55|
|Ras Abu Fontas B||609||33|
|Ras Abu Fontas B1||387||0|
|Ras Abu Fontas B2||567||29|
|Doha satellite stations||473||0|
|Dukhan desalination plant||0||2|
|g/d=Gallons a day. Source: QEWC|
Elsewhere in the Gulf, the wastewater sector has often followed the power and desalination industry in embracing the PPP model. Although so far the government has not attempted to undertake a build-operate wastewater plant, steps have been taken to increase the role of the private sector. In recent years, the Public Works Authority (Ashghal) has included a long-term operations and maintenance (O&M) component on all its major sewage treatment plant construction awards.
|Foreign direct investment Qatar|
For example on the biggest, Doha North, Singapore-based main contractor Keppel Seghers will operate and maintain the plant for a period of 10 years. As for existing facilities, Ashghal has started to take on O&M contractors: in 2009, France’s Veolia won a long-term contract for the Doha south plant.
Wastewater privatisation in Qatar
In early 2010, Ashghal signalled that it was looking to extend private sector participation. It tendered a feasibility study contract to look at outsourcing the O&M of its wastewater networks. Once the study is complete, and if the findings are approved, contractors will be asked to bid for several O&M contracts under a PPP model, covering 5,000 kilometres of wastewater, treated sewage effluent and rainwater networks.
|Foreign equity in Qatar’s water sector|
|Developer||Million gallons a day|
|IP=International Power; GIC=Gulf Investment Corporation. Source: MEED Insight|
Several local real-estate developers have also turned to the private sector to provide wastewater services. In 2006, Qatari Diar awarded a contract to France’s Degremont to design, build and operate a sewage transfer and treatment system to serve both The Pearl Qatar and Lusail residential projects. Two years later, it established Marafeq Qatar, a new multi-utility company, with its sister company Barwa Real Estate, GDF Suez and Suez Environment. In 2009, the new entity signed an outline agreement with Lusail Real Estate Development Company for the design, construction, financing, maintenance and operation of utilities of the Lusail project.
Slow progress in project outsourcing
Outside the utility sector, the biggest outsourcing project took place in late 2006, when the then Municipal Affairs & Agriculture Ministry awarded Keppel a $1.2bn contract to design, build and operate for 20 years the new Doha solid waste management facility. However, elsewhere activity has been limited. While there are private institutions in both the education and healthcare sectors, Doha has not followed in Abu Dhabi’s footsteps by awarding long-term management contracts to international companies to run schools and hospitals.
|Foreign equityin Qatar’s power sector|
|IP=International Power; GIC=Gulf Investment Corporation. Source: MEED Insight|
The government is committed to increasing the role of the private sector in infrastructure delivery, a point reflected in the fact that the Business & Trade Ministry has a PPP directorate. The ministry is playing a key role in Enterprise Qatar, which has been established to champion small and medium-sized enterprises (SMEs). The Qatar Chamber of Commerce & Industry has also been a strong advocate for greater PPP opportunities and has called for a comprehensive framework and legislation needs to be put in place. Assistance on this could be provided by the planned international PPP centre, for which Doha is one of the sites being looked at. One of the key roles of the centre will be to help governments in developing PPP models and projects.