ALGERIA NEEDS more capacity, more efficient power plants and more rural electrification schemes if it is to meet rising demand.

Some external financing is available, but several power schemes are stalled due to Algeria's economic and political crisis. The Arab Fund for Economic & Social Development and other Arab or Islamic agencies are providing support and the installation of power lines is continuing under the third power project which is co-financed by the World Bank and Japan.

Local companies are active even on larger contracts. For example, a group of state companies led by Batimetal is to install a 220-kV power line running 260 kilometres between Saida and Ain Safra.

But, plans by state power corporation Sonelgaz to build two new units have made little progress. In 1991, it was decided to shelve another long- awaited project, the 2-by-300-MW Skikda power plant, but to build two, 2-by-300-MW power stations at Ras Djinet and Algiers instead.

International companies are adopting a prudent attitude and the lack of export credits is deterring some of Algeria's most faithful suppliers. These include companies such as Italy's Ansaldo GIE, which has previously installed 1,460 MW of thermal and gas turbine power plants at seven locations including Mers el-Hadjadj, Annaba, Djendjen and Hassi Messaoud.

There is little building activity at present but some firms in the power industry are planning ahead. Major players, such as the US' General Electric Company (GE) and the Zurich-based ABB Asea Brown Boveri, have established strategic alliances with Sonelgaz and state energy company Sonatrach with a view to the opportunities Algeria will offer once present troubles are over.

THE COUNTRY is passing through a difficult period and will face growing strains on generating capacity for the foreseeable future. Demand has grown at rates of up to 15 per cent a year since the start of the decade. The Works, Power & Water Ministry expects the growth in demand to slow to about 5 per cent this year but it could still peak at 950 MW during the summer. If this projection is accurate demand will exceed official installed capacity of 925 MW.

The shortfall is being covered by a link to the generators at Aluminium Bahrain (Alba) which will provide an additional 250 MW of reserve capacity. 'It's not going to be very comfortable for the next few years. Alba needs energy. If they have a problem it could affect us,' says assistant undersecretary for electricity Abdulla Juma.

The UK's Mott McDonald is working on a 10-year masterplan for the ministry. Work on power demand projections has already been submitted and the consultant is now preparing a study on the implications for new generating capacity. In a paper presented to a London conference in February, the UK consultant Ewbank Preece said that the existing system could be improved by refurbishment of the plant at Sitra, and the desalination plant at Al-Dour, and the conversion of the Riffa plant to combined cycle.

Bahrain is looking for a private-sector solution to its power problem. This centres on plans for a new 300-MW power and desalination plant which is to be built by British Gas. Original plans called for a 500-MW combined-cycle plant and a reverse-osmosis desalination plant. It was priced at about $775 million and planned for completion by 1996. Despite the scaling back, the completion date remains very optimistic. The UK company submitted a detailed proposal in the spring and work is continuing on the preparation of financial provisions for the project. British Gas is expected to be the majority shareholder with local institutions taking the rest of the equity. If the project goes ahead, Bahrain's capacity will rise to about 1,500 MW later in the decade.

BIG CHANGES are occurring in the way Egypt is carrying out power projects. The main new development is the increased reliance on local manufacturers and banks to build and finance power stations and distribution equipment.

The next major power generation schemes will incorporate this local-oriented approach. A locally incorporated consultancy firm Pegisco, in which the US' Bechtel has a 40 per cent stake, is drawing up specifications for two 650-MW power stations to be built at Sidi Krier, west of Alexandria, and at Ayun Musa, on the Sinai coast of the Gulf of Suez.

The tender invitations will be sent to joint ventures including major power equipment manufacturers such as General Electric Company (GE) of the US, Zurich-based ABB Asea Brown Boveri, Siemens of Germany and Babcock & Wilcox of the US. At least 40 per cent of the equipment will be manufactured locally.

The financing for the project includes more than $200 million in loans pledged by local banks at competitive interest rates. Funds have also been provided by more traditional sources such as Gulf Arab development agencies and the African Development Bank.

The contracts for the two new schemes will be signed as work is well under way on the 1,200-MW Kureimat power station, south of Cairo. This scheme has been carried out on the previous lines of letting contracts by international tender, with all the financing secured from international and regional agencies. The competition for Kureimat was intense, resulting in extremely low prices. GE is supplying the two 600-MW turbines for around $85 million, and the boiler contract with Babcock & Wilcox is worth $115 million. The project is expected to be completed much less than its original $850 million budget.

Local involvement is also increasing in the distribution sector. ABB has recently opened a high-voltage company alongside its highly successful low- and medium-voltage manufacturer, ABB Arabb. This means that ABB is able to source equipment of up to 66-kV locally in its bids for substation contracts. This has given the company a clear advantage, although other manufacturers such as Merlin Gerin of France and Siemens are also boosting their local operations.

For Egyptian consumers, the chief issue over the past 10 years has been the impact of government policies to eliminate energy subsidies. This has meant regular sharp increases in electricity tariffs. However, the government says that further increases will be minimal because prices are almost in line with production costs. This has been achieved through improved efficiency as well as through price increases. Natural gas covers about 75 per cent of Egypt's power needs and is sold according to a formula related to crude oil prices.

DEMAND FOR electricity in Gaza and the West Bank is now about 520 MW, with the West Bank accounting for 400 MW and the Gaza Strip accounting for 120 MW. This is expected to increase by 8 per cent a year over the next three years, and by a further 10 per cent over the following two years. These are the initial findings of studies carried out by the Palestinian Energy Research Centre.

The energy centre, which became fully operational at the start of May, was set up to tackle some of the chronic problems affecting electricity supply in the area. The priorities are to set up a unified grid in Gaza and tackle the problems of energy lost as a result of decrepit transmission systems and poor metering. It is estimated that about 40 per cent is lost at the moment. At present, the Gaza Strip is supplied by electricity from Israel via 11 separate transmission lines. The energy centre is now negotiating with the Norwegian government to fund a $12 million, 48-kilometre transmission line that will link all these separate grid systems

Israel is the main source of electricity, but many local firms generate their own power because the grid system is so unreliable and connection charges often far exceed the cost of buying and running a generator. As a result local generating capacity accounts for half the electricity used in many towns on the West Bank.

Setting up a local power station is not a top priority in plans to reconstruct and develop the self-rule areas, but the energy centre has examined a number of proposals. These include building a $50 million-60 million, 120-MW power plant with desalination capacity at Deir al-Balah in Gaza. The plan includes installing combined-cycle, oil-fired turbines, which could be converted to gas-fired if a proposed pipeline between Egypt and Israel materialises.

IRAN'S PLANS to have significant new power generation capacity installed by 2000 have been reactivated following a lengthy hiatus. However, the original programme appears to have been scaled down, stretching out the schedule into the next century.

Demand for electricity may grow annually by only about 10 per cent, rather than by the anticipated rate of nearly 15 per cent. The economy, which grew on average by 8 per cent a year in the early 1990s, slowed down in 1993 due to hard-currency shortages and growth will probably be about 4 per cent during the rest of the decade. As a result, the installed generating capacity target of 35,000 MW for 2000, is likely to be closer to 32,000 MW.

In reactivating its power projects, after the emergence of financing problems in 1993, the government has given priority to longer-term schemes such as hydro-electric dams and to projects that enjoy concessionary loans from abroad.

Other schemes that require commercial financing may not be activated until 1995 when foreign state export credit guarantee agencies resume at least partial cover for Iranian business.

In April 1994, the Tehran Regional Electricity company (TREC) activated a $165 million World Bank loan to award a $150 million contract for the Qom power plant to Zurich-based ABB Asea Brown Boveri. TREC and the Energy Ministry will be contributing $200 million toward the $414 million cost of the scheme which will convert the 400-MW plant to combined cycle, increasing its capacity to 600 MW, and will also upgrade the country's north-south network and TREC's performance.

A Japanese untied concessionary loan of $380 million, approved in 1993, has also allowed the Iran Water & Power Resources Development Company (Iwpco) to proceed with the Godar-e Landar dam on the Karun river, in the south.

In mid-1994, Iwpco was negotiating with Brazilian, German, Italian and other companies which had earlier submitted bids for the 1,000-MW dam. Construction is expected to start in late 1994 for completion within 54 months. Japan may approve further loans as the project progresses.

Its financial resources under pressure, the government is trying to reduce the hard currency element in power plant construction by making greater use of local companies.

For example, in mid-1994, Iwpco cancelled a two-year-old contract with a consortium led by ABB for the Karun-3 dam and awarded it to the local Sabir. Half the necessary equipment is to be manufactured locally and costs have been cut by 40 per cent. Brazil's Construtora Andrade Gutierrez, a key member of the consortium and prepared to bring in finance, will now reportedly act as partner to Sabir. Karun-3 will be the country's biggest dam when it is finished in 2001, producing 2,000 MW, eventually rising to 3,000 MW.

Work continues on several plants in Guilan, Hamadan, Qazvin, Shahryar, Shiraz and elsewhere, which will add about 5,000 MW to the national grid in the mid-1990s. Another 2,000 MW in capacity is being designed or prepared for tendering in Ahwaz, Tabriz and Naishapour. Talks appear to be progressing with India on the 1,000-MW Kerman scheme, but the 1,100-MW Arak project contracted out to the Canadian/European Ontario Group has been put aside until someone comes up with the necessary finance.

IRAQ'S GENERATING capacity is estimated to be about 5,000 MW, which is half the pre-Kuwait crisis installed capacity of 9,552 MW. The government had previously claimed to have restored 75 per cent of its capacity but, after almost four years of UN sanctions, spare parts are in short supply and several of the country's power stations are not functioning.

Tthe government is regularly reported to be petitioning international firms that had been involved in building Iraq's power stations to request that they lobby their respective governments to lift the embargo, specifically in relation to the power sector. A reliable supply of electricity could be considered a humanitarian requirement, particularly in Baghdad, where the sewerage system operates by electrical pumps rather than gravity. Much of the sewerage system in the capital is seized up.

However, the pleading has received little international support, except from Italian industry. Representatives from more than 20 Italian firms visited the country at the end of April in a high-profile business mission that included two power-sector specialists, Fochi and Ansaldo Energia.

THE KINGDOM has expansion plans that will boost its generating capacity by around 50 per cent to 1,438 MW from 928 MW by the end of the century. If the expansion goes ahead as planned 380 MW of new capacity will be in place by 1997.

The country's main power stations are the 363-MW Zarqa plant and the 260-MW installation at Aqaba. Contract awards for two additional 130-MW units at Aqaba are expected before 1995, with work to be completed by mid-1977. The UK's Merz and McLellan is consultant for the project.

Smaller expansions to install more gas turbines are under way at the Rihab substation in northern Jordan, which will reinforce the supply to Irbid, and at the Amman south substation. The two projects will provide additional capacity of 60 MW at a cost of about $60 million.

Distribution networks already reach around 99 per cent of the population and extensions will be needed in connection with the Aqaba project and to link up with the regional grid which is under construction. The Jordan Electricity Authority (JEA) will upgrade a 322-kilometre direct line between Aqaba and Amman which was built with a 400-kV capacity but is now operating as a 132-kV line. Tender invitations have been issued for the $75 million upgrading of the Aqaba substation and in September bids will be invited for the $55 million Amman south substation upgrading.

A regional link between Egypt, Jordan, Syria, Iraq and Turkey is going ahead and an award is close for the $70 million contract for a submarine cable linking the Jordanian and Egyptian grids. Invitations to bid have also been issued for the supply of switchgear, transformers and reactors for the scheme. The full regional link is due to be completed by mid-1997.

The government has announced its intention to link the Jordanian and Israeli grids and an EC-initiated study to extend the linkage to Egypt and Palestine has been prepared by Lahmeyer of Germany and Austria's Verband Plan.

Jordan's indigenous fossil fuel resources are limited, but gas reserves at Al-Risha in the northwest feed three 30-MW turbines. The addition of a fourth 30-MW turbine by mid-1995 will boost the share of gas as a source of electricity to 17 per cent.

Existing programmes for the use of renewable energy are small scale. They include a 320-KW wind farm in northern Jordan, linked to the national grid, and experimental wind and solar energy projects in isolated villages. A new project for a 30-MW solar plant should boost this small sector significantly. The German-led Phoebus group, with Fichtner Development Engineering as managing partner, initiated the estimated $180 million project and has successfully tested a 2.5-MW model in Spain with JEA participation.

The consortium hopes to demonstrate the commercial viability of the central receiver solar panels and a Phoebus team began talks in Amman on 27 July on Jordanian financial participation, power purchasing agreements and other technical issues.

The JEA is also participating in a $1 million 1,000-KW pilot wind power plant being set up under a German government programme for the promotion of wind energy which should be operating by 1995. No precise targets have been set but renewable energy sources could be meeting 2-5 per cent of power generation requirements within 10 years.

IN TERMS of supply, the Kuwaiti power sector is in an enviable position. Installed generating capacity stands at 6,898 MW, comfortably above the 1993 peak load of 4,200 MW. The 30 per cent reduction in the post-invasion population also means that annual growth in demand is a manageable 4-5 per cent a year.

The Ministry of Electricity & Water (MEW) can look back on the past three years as a very successful period, having tackled the $1,000 million of damage to its power and water installations caused by the Iraqi invasion. Today, installed generating capacity is only 2.9 per cent below the pre- invasion figure of 7,100 MW. Only one of the five power stations - the 300-MW Shuaiba north plant - is still out of action.

MEW has since revived its pre-invasion plan to build a 2,400-MW station at Subiya. Since last October and the re-engagement of UK consultant Merz & McLellan, a series of major construction contracts has been awarded.

In March, Japan's Mitsubishi Heavy Industries (MHI) agreed to resume its boiler and turbine supply contract at a cost of $1,600 million. In late April, the Athens-based Consolidated Contractors International Company (CCC) was awarded the $100 million fuel line contract. In August, South Korea's Hyundai Engineering & Construction Company signed the $450 million civils package. The local Gulf Dredging Company will carry out the project's marine works.

Subiya will take six years to complete, with the first 300-MW turbine due to be commissioned in the first half of 1997.

The size of the project has convinced many contractors that Kuwait will not need to initiate another major power project until 2000. Government plans to rebuild the Shuaiba north station on a build-operate basis are now very unlikely to be realised: two groups, one US and one German, submitted proposals for the work in early 1993. Nevertheless, the authorities are still looking to increase private-sector involvement in the industry, as part of its overall privatisation programme.

RESTORING THE power network has been one of the top priorities of Lebanon's reconstruction programme. Installed capacity is 1,350 MW, but as reconstruction got seriously under way in 1993, there was barely 500 MW of available capacity and the distribution network was in tatters. Now international contractors are working on a $263 million rehabilitation programme that is due for completion by May 1995. Bids have also been submitted for the construction of two 450-MW combined-cycle power stations.

The rehabilitation contracts have gone to Italy's Ansaldo for power stations, South Korea's Hyundai Corporation for substations and to Clemessy, Bouygues and M Elec, all of France, for distribution work. The projects are being financed by Italy, the Arab Fund for Economic & Social Development, the Kuwait Fund for Arab Economic Development, the World Bank, France and the European Investment Bank.

International companies are also playing a prominent role in consultancy services. The Electricity Supply Board of Ireland is setting up a sector implementation unit for power in the Council for Development & Reconstruction, and Electricite de France has three contracts, to supervise rehabilitation work, to reorganise Electricite du Liban and for work on the combined- cycle projects.

Bids for the combined-cycle plants, to be built in Zahrani and Beddawi, are now under evaluation. The five bidders that quoted for both plants are UK/French GEC Alsthom, Zurich-based ABB Asea Brown Boveri, Mitsubishi Heavy Industries of Japan, a consortium of Ansaldo and Germany's Siemens, and a consortium of John Brown Engineering of the UK and General Electric Company (GE) of the US. Westinghouse Electric Corporation of the US has bid in partnership with the UK's Rolls Royce for Beddawi alone, and GE has teamed up with Italy's Turbotecnica to bid for just Zahrani.

The evaluation of technical proposals and the financing packages required from all the bidders are nearing completion, and commercial bids are due to be opened by the end of August.

The quick work on the power network has already meant that power is available for at least 12 hours a day. By the end of next summer a 24-hour service should be in place, and work will be well under way on the two new plants.

IT HAS been a year of mixed fortunes for international power contractors in Libya. Despite the introduction of tighter UN sanctions against Tripoli last December, the Zurich-based ABB Asea Brown Boveri has made rapid progress on its 1993 contract to install more than 1,000 MW of new capacity at four separate sites around the country. In contrast, construction work has yet to begin on Libya's largest planned power plant at Sirte.

ABB's contract originally called for the installation of a range of gas turbines of up to 130 MW at existing plants in Tripoli, Homs, Zuweitina and Sirte. However, European contractors say that the Sirte expansion was subsequently deleted from the programme and replaced by one at Benghazi.

A letter of intent for the Sirte power station was issued to South Korea's Hyundai Engineering & Construction Company in March 1993. But, Hyundai is still negotiating with the Public Electricity Company about starting on the 1,260-MW project.

Interest in the Libyan market is now moving from generation to distribution. The authorities are expected to implement a series of projects, including the construction of four 220-kV substations, to feed the additional power from the ABB stations into the grid. They are also expected to install an energy management system. In mid-July, bids were submitted by ABB and Germany's Siemens for the construction of two load dispatch centres (LDCs) at Tripoli south and Benghazi. The project is seen as the first phase of an LDC programme that will eventually cover the whole country.

The Great Manmade River Authority also invited two sets of bids in early July for the installation of the power distribution grid as part of the second phase of the great manmade river. The first, worth around $100 million, calls for the construction of up to 11 66/11-kV substations on a lumpsum turnkey basis. The other entails the supply and erection of 320-kilometres of 220-kV transmission line.

THE KINGDOM is attracting foreign investors to most sectors of the economy and electricity is no exception. Political stability and a strong economic reform programme are pulling in the curious and Morocco could become the testing ground for North Africa's first privately financed independent power projects.

Private-sector solutions have also been boosted by Morocco's over-dependence on hydropower, which provides more than 20 per cent of total generation. Drought in the early 1990s caused costly brown-outs in Casablanca and other centres in 1993 when Office National de l'Electricite (ONE) found it could not meet demand. This was known locally as the 'great electricity shock' and caused the government considerable embarrassment.

Personnel changes at ONE are one way to make the state power company's management more outward-looking and efficiency oriented. ONE's new director- general, Driss Benhima, comes from the local/French commercial joint-venture SMOA-Air Liquide. New finance director Amar Drissi has joined from another state enterprise, Les Charbonnages du Maroc, which has been turned around financially.

ONE now plans to bring in foreign operators to develop new power plants on a private basis. Inevitably, this will be a slow process, requiring changes in Moroccan legislation before private projects can be implemented.

In mid-1993, plans were released for the first two private power schemes: a 350-MW gas-fired plant at Kenitra and an estimated 600-MW oil-fired unit at Mohammedia. New plants could use gas from the Europe-Maghreb pipeline, running from Algeria through Morocco to Spain, which will come on stream in 1996-97.

Initially, it was announced that the plants would be built, respectively, by groupings of Electricite de France and Spain's Endesa, and the US' AES Corporation advised by Belgium's Tractebel Industrie. Subsequently, it was decided that the schemes should go out to full international tender. More than 70 companies have since bought prequalification documents and ONE expects to draw up a shortlist in the coming months, prior to issuing tenders.

For all the talk of private power, ONE's perspectives remain those of a state-owned services company, with an annual turnover of more than MD 7,000 million ($730 million).

'Independent production consists of opening the way for private operators able to invest in power stations whose production will be resold exclusively to ONE within the framework of a long-term contract,' Benhima said in late June. 'The primary, essential and strategic mission of ONE is to ensure power supply across the kingdom at the least cost...and this will undergo absolutely no change because of power production by private operators,' he said.

ONE may also turn to international capital markets on its own account. The corporation needs working capital but its plans, including a possible $50 million Euroloan, have yet to be confirmed.

Major projects under way include 100-MW plants at Tit Mellal and Casablanca, built by France's Schneider and Technip, respectively; the three-by-35- MW Tetouan plant, where Italy's Ansaldo-GIE and the UK's John Brown Engineers & Constructors are working; a 330-MW expansion at Jorf Lasfar; and the ongoing 240-MW Matmata hydropower scheme.

Rural electrification is also a costly aspect of ONE's operations. Tender invitations have been issued for the next phase of World Bank-funded electrification work, involving 1,640 kilometres of medium-tension lines, 900 kilometres of low-tension lines and equipment installation for 180 villages.

Cross-border power links are also being increased, linking Morocco to the Algerian, Spanish and other grids. By the end of 1995, Morocco could have access to a further 650 MW through a 26-kilometre power line under the Strait of Gibraltar. This project is part-funded by France, Italy, Spain and the European Investment Bank.

There is also demand for much smaller generating units from local industries and public buildings, especially since the government eased regulations covering their import.