If 2004 was considered the best yet for the Gulf's independent power project (IPP), this year is shaping up to be even better. While last year saw four private power projects tendered, potentially five IPPs will hit the market in the next 12 months.

From Morocco to Iran, almost every country in the region has designs on outsourcing its power generation needs to the private sector. If all planned schemes proceed as scheduled, the next five years will see the number of IPPs and independent water and power projects (IWPPs) in the region more than double, and the amount of capacity contracted from the private sector exceed more than 20,000 MW (see table, page 30).

The glut of private projects shows just how far the IPP concept has come over the past two years. From just one IWPP delivered in 2003 - Abu Dhabi's Umm al-Nar - interest in the model has increased exponentially.

There are a number of factors behind the growing acceptance of IPPs. The region's average annual national population growth rate of 3 per cent means that states need to seek alternative ways of meeting their rapidly expanding power generation requirements. The annual growth rate in peak power demand is rising at about 7 per cent across the region, and in some places, such as Dubai, by 12.5 per cent. As a result, the Middle East & North Africa (MENA) region will require more than 74,000 MW of additional capacity by 2010.

Governments are warming to private power - at least on the generation side - recognising that precious public funds can be reallocated to other priority sectors. Pricing on IPPs is also becoming more competitive. The price per kilowatt hour submitted last year by Belgium's Tractebel and Kuwait-based Gulf Investment Corporation (GIC) for the Al-Ezzal IPP in Bahrain was judged the most competitive ever offered in the region.

The savings are not only financial. In light of their increasingly urgent power generation requirements, states are growing to appreciate the significant time savings the IPP model can offer, provided a robust legal and structural framework is in place and the political will is there. 'Basically, if you make the [state-owned] utility responsible for a power project that should have been built yesterday, you'll have to wait at least two years for anything to happen,' says one international developer. 'It's a sad fact of life. Projects take a long time when utilities do them.'

Internationally, appetite is also increasing for regional assets. An improvement in global economic conditions coupled with the attractive long-term nature of the power and water offtake agreements on offer has swelled the pool of potential developers.

'Long-term contracts, creditworthy offtakers, clarity and transparency of government policy and a history of honoured contracts makes the region very attractive,' says another developer. 'It is easy to see why there is increased interest in IPPs here.'

The list of established developers remains relatively small - Tractebel, AES Corporation and CMS Energy, both of the US, France's Total and the UK's International Power (IP) are the only international developers that hold on stream power generation assets in the GCC. However the pool is set to grow. In January, a consortium led by Japan's Marubeni Corporation, and including JGC Corporation, also of Japan, Malaysia's Pendekar Power and US-based BTU Ventures, signed the key agreements on Abu Dhabi's Taweelah B IWPP - the emirate's fifth (see pages 35-36) - while last year saw several new faces appear on prequalification lists, most notably from the Far East. Korea Electric Power Company (Kepco), Singapore's Sembcorp and Tanaka National and Malakoff, both of Malaysia, are just a few of the new entrants.

This year's main focus in the Gulf will be Saudi Arabia, the region's largest market. The coming months will be a crucial litmus test f