Although peak electricity demand in Bahrain almost doubled between 2003 and 2012, surging from 1,540MW to 2,967MW, generation capacity has so far managed to keep pace – largely thanks to the construction of the Al-Dur power and desalination plant, which came onstream two years ago, developed under a build-own-operate contract.

National generating capacity now stands at 4,000MW, which should be enough to satisfy projected demand for a further two years or so. But after that, the power system will come under renewed pressure.

To cater for the continuing upward trend in demand, the government has plans for further investment in infrastructure, including two 400KW transmission stations. Renewable energy is also starting to make a contribution, with the launch of a 5MW solar power and smart grid in Awali, and the addition of a further 5MW in solar and wind power.

GCC funding

Finance for these investments comes in part from a $10bn funding package put together in 2011 by Bahrain’s Gulf neighbours – Kuwait, Saudi Arabia, Qatar and the UAE. This is being disbursed over 10 years, and January 2014 saw the announcement of a first $4.43bn tranche of projects, including $2.2bn of investments in power and water infrastructure.

In the meantime, Al-Dur has played a crucial role in enabling Bahrain to keep pace with demand trends. It was in 2008 that the kingdom’s Electricity & Water Authority (EWA) awarded a 25-year power and water offtake contract for the project, whose key investors are the French/UK International Power-GDF Suez and Kuwait’s Gulf Investment Corporation (GIC), a major investor in independent utility projects in the Middle East.

The $2.1bn plant generates up to 1,234MW of electricity and desalinates 218,000 cubic metres a day of high-quality water. These are supplied at fixed prices of 14 fils a KW/hour and 350 fils a cubic metre of water.

Masterplan

EWA’s strategic roadmap is a masterplan for 2006-20, which analyses resources and environmental constraints and sets out the strategy for upgrading supply infrastructure; for example, there are plans to invest a further $1bn in water networks. The UAE’s Black & Veatch and Canada’s SNC-Lavalin have been responsible for updating the masterplan.

The authority knows that it must work on projections of continued growth of Bahrain’s population, which reached 1.3 million in 2010, according to UN data, and is on course to climb to 1.57 million by 2025 and, potentially, 1.8 million by 2050.

Solar power

In catering for the almost certain rise in demand, there is scope for solar power to play a much greater role. The Gulf Research Centre has estimated that Bahrain could generate 33 TWh a year from solar systems.

Water supply also poses considerable challenges and there has been discussion of whether privatisation might make sense. This could be seen as a tool for attracting extra capital and commercial acumen into the sector, to develop new infrastructure; France and the UAE are seen as likely sources of new investment.

Attracting investors

In some sectors, political tension is seen as a potential deterrent to foreign partners. But the water and power sectors are fundamental to living standards and may be less susceptible to such concerns; and once projects are up and running on a viable basis there might even be scope to broaden the pool of investors willing to become involved.

A precedent was set in 2012 when UK/France GDF Suez Energy International reduced its stake in the Al-Hidd independent water and power project from 70 per cent to 30 per cent; this brought Malaysia’s Malakoff into the project as a new 40 per cent shareholder. (Sumitomo holds the remaining 30 per cent.)

Infrastructure upgrades

Meanwhile, a number of more urgent infrastructure upgrades are already in the pipeline.

Earlier this year, the local Ahmed Mansoor al-Aali (AMA Group) won a $51.2m contract to build water distribution stations for the EWA, while South Korea’s Samsung Engineering has already completed a $325m sewage treatment plant in Muharraq. The Kuwait Fund for Development is also financing a $136m expansion of the Toblei wastewater treatment plant.