The UK/French GDF Suez Energy International has consolidated its position as the GCC’s largest private power and water developer in MEED’s annual survey of the developer market, following its success in winning Kuwait’s first independent water and power project (IWPP), Al-Zour North.

The developer still has a total power equity capacity of more than double its nearest competitor, although the gap has narrowed slightly, with Saudi Arabia’s Acwa Power International overtaking Japan’s Sumitomo Corporation to move in to second place in the table, largely due to securing the kingdom’s Rabigh 2 independent power project (IPP) at the close of 2013.

GDF Suez’s Al-Zour North win also further enhanced the group’s lead in the GCC’s desalination sector, moving its total capacity up to 1,236,506 cubic metres a day (cm/d), 52 per cent more than the 644,740-cm/d capacity of the second-placed Acwa Power.

Maiden IWPP

GDF Suez established its dominant position in the GCC private power and water market following the merger of the non-European assets of the UK’s International Power and France’s GDF Suez in early 2011. The award of Kuwait’s maiden IWPP scheme late last year has given the group further optimism for future growth in the rapidly expanding Gulf developer market.

The developer market is hoping Al-Zour North will spur on the other major IWPP schemes planned in Kuwait

The much-delayed Al-Zour North IWPP procurement process was completed in December with the signing of the power purchase agreements (PPAs) for the scheme. The first Al-Zour North plant will have a power capacity of 1,500MW and a desalination capacity of 102-107 million imperial gallons a day (MIGD). The developer market is hoping that the scheme will spur on the other major IWPPs planned in Kuwait, with an additional 3,300MW and 200MIGD proposed for the next phases of Al-Zour, and 4,500MW and 125MIGD proposed for the three phases of the Al-Khiran IWPP.

Sumitomo, a member of the GDF Suez consortium, was also boosted by the Al-Zour North project, with its total power and water equity capacity increasing by 262.5MW and 18.4MIGD respectively, as a result of its 17.5 per cent stake in the project company. The win moved the Japanese firm into fourth place in the desalination ranking, ahead of Malaysia’s Malakoff.

While the Kuwait IWPP ensured that GDF Suez’s share of the Gulf power market has increased in the past 12 months, its equity capacity declined in Oman as it sold shares in Al-Suwaidi and Batinah Power, the project firms for the Barka 3 and Sohar 2 IPPs. Its share was reduced from 46 to 30 per cent in both companies as part of Oman’s IPP regulations, which stipulate that developers must launch an initial public offering within four years of a PPA being signed.

The only other Gulf state to conclude a power or water PPA in the past 12 months was Saudi Arabia, where a consortium led by Acwa Power signed the final project agreements to develop the 2,060MW Rabigh 2 IPP. Like Al-Zour North in Kuwait, the Rabigh 2 IPP was severely delayed. But while in Kuwait the delay was mainly due to teething problems with implementing the country’s first public-private partnership (PPP) venture, the Rabigh 2 IPP was delayed due to the client, Saudi Electricity Company (SEC), switching the plant’s planned feedstock from oil to gas. This was to fit with state oil major Saudi Aramco’s wish to cut back on crude supply for domestic power generation.

The signing of the Rabigh PPA has further entrenched Acwa Power’s dominance in its domestic market, where it has won eight out of the past nine private power and desalination projects tendered. Acwa Power further boosted its capacity holding in March, when it increased its shareholding in the Shuqaiq Water & Electricity Company, following the purchase of a further 6 per cent in the project company behind the kingdom’s Shuqaiq IWPP from Japan’s Mitsubishi. It is also expecting to finalise by the end of November a deal to increase the Barka 1 IWPP by 57,000 cm/d.

PetroRabigh concession

Another success for Acwa Power in 2014 has been maintaining its concession on the PetroRabigh IPP on the Red Sea coast. The Acwa Power-led Rabigh Arabian Water & Electricity Company (Rawec) had received notification from the client in September 2013 that it intended to terminate the company’s PPA due to disruptions to the power and steam supply between December 2012 and September 2013.

However, following negotiations and a reported compensation agreement with the client, the PPA remains valid and Acwa Power will remain the main operator of the plant. This not only preserves Acwa Power’s position in the power developer ranking, but will also maintain confidence in its ability to run and operate major power and desalination schemes.

South Korea’s Samsung C&T, part of the Acwa Power-led Rabigh 2 IPP consortium, was the only other company to climb in the power developer rankings. Its 12.3 per cent share in the Rabigh 2 project company moved the firm into fourth place, ahead of Korea Electric Power Corporation (Kepco).

Despite no PPAs having been signed in the calendar year to date, the GCC power market continues to offer exciting opportunities for developers, with a number of major projects in various phases of the bidding stage.

Two of the GCC’s smaller utility markets in terms of capacity, Qatar and Oman are increasingly becoming attractive markets for international developers.

Facility D

In May, Qatar General Electricity & Water Corporation (Kahramaa) received bids for its Facility D IWPP, which will have a power capacity of 2,400MW and a desalination capacity of 130MIGD. The IWPP offers the opportunity for GDF Suez to further increase its dominance of the Gulf’s power sector, with the UK/French group seeking to see off the competition from the Japanese, with Marubeni, Mitsubishi and Sumitomo completing the bid list.

Doha is also currently tendering the region’s largest standalone reverse-osmosis independent water project (IWP) at Ras Laffan. Kahramaa has invited prequalified groups to submit prices for the initial and final capacities by 6 January 2015. The initial phase of the desalination scheme will have a capacity of about 42MIGD, with the final size expected to be 114MIGD.

Oman is pushing ahead with plans to attract the private sector to deliver several major power and water projects, as the sultanate deals with some of the fastest demand growth rates for electricity and water in the region. In early September, six consortiums submitted prices for the 44MIGD Qurayyat IWP, located just south of Muscat, and three prequalifed consortiums are preparing to submit bids before the end of October for the 300-400MW Salalah IPP in the southern Dhofar governorate.

“The projects in Oman are generally not as big in size, but there is real demand and OPWP [Oman Power & Water Procurement Company] is proving it is a good client to work for. It delivers on its promises,” says a regional source at a major power developer.

While the sultanate’s projects are generally smaller in size than most of its GCC neighbours, its next major IPP will be one of the region’s largest. In August, OPWP received prequalification entries from 11 developer groups to build 2,600MW of new capacity over two sites in the Muscat area.

Saudi Arabia, unsurprisingly, will continue to offer large capacity projects for the developer market. Saudi Aramco and SEC are jointly planning to develop a cogeneration IPP at the Fadhili oil field in the Eastern Province of the kingdom. The IPP will have a power generation capacity of about 1,300-1,500MW and will have a steam production capacity of about 2.25 million pounds an hour.

Nine companies have been shortlisted to bid for the project, and the client is expected to issue tender documents before the end of October. The water market, by contrast, is less lucrative, with Saline Water Conversion Corporation pushing ahead with the majority of its current projects as standard engineering, procurement and construction contracts.

Alternative energy

As GCC governments begin to look to utilise alternative energy sources to provide electricity in order to preserve lucrative natural resources for export, it will offer increasing opportunities for the developer market.

Dubai is showing the most potential in this area, with Dubai Electricity & Water Authority (Dewa) pushing ahead with its first ever IPPs as alternative energy schemes. The utility has invited 24 prequalified groups to submit bids in late October to develop the 100MW second phase of its Mohammed bin Rashid al-Maktoum Solar Park as an IPP, and has set a submission date of 26 January for eight prequalified groups to bid for the 1,200MW coal-fired Hassyan IPP. Both schemes are unprecedented for the region’s private power market, and will provide an interesting test case for the appetite and ability of clients and developers to deliver such projects in the future.

Kuwait is planning to develop a 280MW integrated solar combined-cycle plant at Al-Abdaliyah, west of Kuwait City, as part of its PPP programme. The Partnerships Technical Bureau invited developers to submit expressions of interest in July this year, but no further progress has been made as yet.

“We are starting to see a shift towards alternative energy in the Middle East and North Africa,” says a source at a major developer based in Dubai. “Whether it will really kick off we are waiting to see, but we are ready to participate in whatever technology is selected.”

While GDF Suez’s position at the top of the rankings will remain unassailable for the foreseeable future, Acwa Power’s impressive rise since its formation in 2004 is evidence of the potential for utility developers to grow in the region. And with estimates that GCC electricity capacity will need to be doubled and water capacity increased by 37 per cent by 2020, the Gulf will offer significant opportunities for developers to boost their equity capacity in the coming years.