PRIVATE power may be coming late to the Middle East but the pace of developments has quickened this year. Landmark private projects in Oman and Morocco are providing an example that other countries are keen to follow. Even in the cash-rich states of the GCC sweeping reform is in the air, with Abu Dhabi contemplating the wholesale privatisation of its power sector.

Saudi Arabia is facing up to its long-term financing problems by exploring a build-own-operate (BOO) option for the Shuaiba power plant and recently sealed a commercial loan for the Ghazlan scheme, another first.

The challenge of installing sufficient power to meet expected demand in the region remains daunting, however. And the region is still chided for not doing enough to address the needs of the independent power projects (IPPs) it is keen to attract (page 16). In the country survey below, MEED writers focus on the latest projects and plans for power plants in key regional states:

BAHRAIN

SINCE finally taking the decision last year to build the Hidd power plant as a public sector project, work has been progressing at a steady pace. The 280-MW, 30 million-gallon-a-day scheme is being built by the Zurich- based ABB Asea Brown Boveri, with Fisia Italimpianti and ABB SAE Sadelmi, both of Italy. Major subcontracts have now been awarded. The local AA Nass Contracting picked up a $40 million contract for onshore and offshore civil works. The company will build a seawater uptake and discharge system and will be responsible for the main construction work for the plant.

Work associated with the plant is expected to be awarded in the coming weeks by the Ministry of Electricity & Water (MEW). Japan's Mitsubishi Cables Industries Company has submitted the low bid for a contract to supply and install 220-kV cables to connect the new station to the existing distribution network. Four companies have submitted bids for the supply and installation of 220-kV switchgear and civil works for a new substation to serve the plant.

To complement the new capacity at Hidd MEW is expected to appoint contractors to upgrade the existing plant at Sitra. Germany's Fichtner has been appointed consultant and will carry out studies on the steam turbines, boilers, desalination units, electrical systems and civils. The plant has a capacity of 50 MW and 25 million gallons a day. Without upgrading - which could comprise rehabilitation or replacement of equipment - ministry officials say the plant would have to be retired by 2005.

When the Hidd project is complete - in 1999 if all goes to schedule - the government will have access to a total of 1,480 MW, assuming that Aluminium Bahrain continues to supply 240 MW. This will be more than enough to meet predicted demand. However with demand expected to reach 1,600 MW by 2005 it is clear that no sooner has one phase of Hidd been completed than the government will need to move ahead with the proposed second phase.

EGYPT

IF Egypt achieves its target of economic growth rates of 7-8 per cent a year, per capita income should increase fourfold over the next 20 years. This will pose a challenge to the country's infrastructure services, none more so than the power sector.

The government's planners say installed power generating capacity will have to rise by 5-6 per cent a year. The target is to reach 42,980 MW by 2017, compared with 14,800 MW now. Consumption is forecast to rise from 90,000 million kWh to 257,000 million kWh.

In the short term, all attention is focusing on Egypt's first independent power project, a 650-MW build-own-operate-transfer (BOOT) plant to be built in Sidi Krier, near Alexandria. The two-unit plant will have similar specifications to the first stage of the Sidi Krier power station, now under construction on a conventional basis. The prices for the first two units will provide a useful benchmark for the Egyptian Electricity Authority (EEA) when it comes to evaluate offers for the BOOT contract, analysts say.

After an exhaustive preselection process, the EEA narrowed down the list of bidders for the project to 11 groups. By the time the offers are actually submitted, in late August or early September, the number of bidders is expected to have been whittled down to six or seven, as several of the prequalifiers are understood to have pooled their resources. A team of US consultants has been working for 18 months on the documentation for the project.

Once the Sidi Krier contracts have been negotiated, the EEA will be able to turn its attention to the next projects. The veteran Electricity & Energy Minister, Maher Abaza, who retained his post in the 8 July reshuffle, has spoken with enthusiasm about carrying out a pumped storage system on the Red Sea. He is also keen for the pilot wind farm projects now underway on the Gulf of Suez to be expanded into major power generation schemes.

However, natural gas will continue to be the main fuel for power stations in the foreseeable future. Gas has been discovered at such a rate over the past few years that Egypt is planning to start exports by 2001.

Some new private industrial ventures are choosing to install their own gas turbine power units. Recent examples include a steel plant in 10 Ramadan City for which the local First Power has installed a 46-MW General Electric turbine generator. The same company is planning to provide a 60-MW unit for a steel plant in Suez.

For larger power stations, local input is increasing. The two major plants now under construction - Sidi Krier (first phase) and Ayun Musa - will have about 45 per cent of their materials made in Egypt. This trend could gain momentum next year, if talks to convert a battle tank factory to civilian use come to fruition. The factory was built to make 550 M-1A1 tanks in co-operation with General Dynamics of the US. The contract will be completed in 1998, and the government is talking with international companies about converting it to make equipment for gas turbine generators.

IRAN

IRAN'S state-run power sector is restructuring itself and preparing the ground for private local and foreign companies to play a bigger role. National electricity generation capacity needs to increase by almost two- thirds within a decade and planners are hoping that the private sector can help reduce the cost.

Installation of new capacity is back in full swing after a hiatus in the mid-1990s. The work relates to hydro-electric dams and thermal projects which had been delayed because of financing problems.

However, the electricity shortages which were a regular part of urban life into the early 1990s may recur unless provisions are made for the addition of at least 1,500 MW of capacity a year as of 2001, say experts in Tehran. The annual increase will have to be maintained for at least two decades, probably approaching the 2,000-MW mark in the latter part of that period. Nearly 60 per cent of new capacity will be provided by gas turbines and combined-cycle facilities, with the rest coming from hydro.

As part of the government's long-term strategy for greater efficiency and privatisation, state management has been revamped, and a series of new measures are being introduced .

The Energy Ministry has redefined the role of Tavanir, which used to be the state power generation and transmission company. Tavanir owns most of the country's plants and controls the national grid, but has now been designated as a buyer of electricity. In the longer term, it will only act as controller. Tavanir's executive arm is now Iran Power Development Company (IPDC), which acts as the client issuing tenders.

Below Tavanir are the regional electricity companies, which have considerable independence. Further down the line in the state sector are contractors such as Mapna, which bids for projects on a turnkey basis and has a mandate to bring in foreign investors as well.

The country's power plants are now operated by 19 management companies, which are 60 per cent private.

Another 34 joint ventures have been established between the state and private companies for power distribution. The private sector will dominate repair and maintenance work within two years, experts say.

Officials are meanwhile trying to finalise legislation to allow private power plants. Experts claim it would not be hard to obtain a majlis pronouncement confirming that the state's duty to provide electricity does not mean it has to own the means of production. 'There is no reason why the state cannot simply provide electricity which it buys from private producers,' says an expert.

Plans for private power plants include build-operate-transfer (BOT) arrangements and the prospect of foreign investors having a 100 per cent stake. Mapna, among others, is promoting projects with foreign investors, including a 1,100-MW combined cycle plant in Kerman. Foreign investors will be offered sovereign guarantees and a concession period of up to 15 years, says Kamran Khatami, project finance division manager of Mapna International, a Mapna subsidiary set up at Jebel Ali in Dubai.

Work is already going ahead on several big projects announced or started in recent years. Most recently, in late 1996, agreements were signed with China for equipment supplies for a 1,300-MW thermal plant in Arak and the creation of local facilities to make turbines for dams.

Bids are also being considered for the second, 1,000-MW phase of the Masjid-e Soleiman dam, originally named Godar-e Landar, in the south. The first

phase is being built by Daelim Industrial Company of South Korea and local firms and is financed under a Japanese soft loan. The Japanese government is said to have started reconsidering a second tranche of the Y 120,000 million loan, having suspended a decision in 1995 under US pressure.

Other plants under construction include the steam unit at the Qom combined- cycle facility, the steam unit at the Fars plant, the Shahid Montazeri plant in Isfahan and the Karun-3 dam.

Projects coming up include the second, 1,000-MW phase of the Shahid Rajai plant in Qazvin, a 650-MW thermal plant in Azerbaijan and conversion to combined cycle of 22 gas turbines operating in Neishapour, Fars, Shahid Rajai, Shariati and Khoy.

JORDAN

RECENT months have seen Jordan take a series of decisive steps to attract foreign investors. As the government continues to maintain a tight grip on expenditure, private finance is increasingly being seen as the key to accelerating Jordan's development. Ambitious infrastructure projects are prime candidates for foreign capital.

The publicly-financed expansion of Jordan's generating capacity will end next year, when Italy's ABB Sae Sadelmi finishes installing a third gas turbine at the Aqaba power plant, lifting its capacity to 390 MW. Further expansions will depend on private investment and the Energy & Mineral Resources Ministry has invited contractors to apply by early September to prequalify for the construction of Jordan's first private power plant. K&M Engineering & Consulting Corporation of the US has been appointed to assist with the prequalification process. The ministry intends to award the contract on a build-own-operate (BOO) basis, with the first unit scheduled to come onstream by July 2001.

The state-owned National Electric Power Company (NEPCO) will buy power from the plant, but it is not yet clear whether the government will guarantee sales. Jordan has yet to launch a BOO or build-operate-transfer (BOT) project successfully. When the Energy & Mineral Resources Ministry retendered a BOT contract to build an oil refinery in February, it refused to commit itself to sale and purchase agreements with the operator. The work has yet to be awarded.

NEPCO will itself be opened up to private investment when the government sells a stake in the company, which replaced the Jordan Electricity Authority as a public shareholding company in mid-1996. However, the government's more immediate priority is the sale of stakes in the Jordan Cement Factories Company and the Jordan Telecommunications Company, and it has not yet decided the size of the stake it will offer in NEPCO, nor when the sale will proceed.

The most ambitious project to be awarded in recent months is the connection of the Jordanian and Syrian electricity networks, financed by the Arab Fund for Economic & Social Development. The work is part of wider regional plans to link the grids of Egypt, Jordan, Syria, Lebanon, Turkey and eventually Iraq. The work has been divided into a number of packages, awarded to Electromontaj of Romania, Bahrain's Midal Cables, Nokia Cables of Finland and Italy's Borma.

KUWAIT

The power sector in Kuwait has been very active in the first half of the year, with plans for the Al-Zour power plant moving ahead and a series of substation contracts awarded.

Bids for the first consultancy contract on the proposed 2,400-MW Al-Zour plant were submitted in mid-June. The following five US consultants were invited to bid: Parsons Brinckerhoff International; Parson Main, part of the Parsons Corporation; Sargent & Lundy; Stone & Webster Engineering Corporation; Black & Veatch International.

The successful bidder will provide full consultancy services, including engineering, design and site supervision for the power generation facilities at the plant. The contract will run for eight years. A separate consultancy tender will be issued for the facility's desalination plant which is expected to have a capacity of 48 million imperial gallons a day.

On completion, the Al-Zour plant will boost Kuwait's installed capacity to 11,680 MW. Current capacity is 6,680 MW, but this will rise to 9,280 MW when the Subiya plant is fully commissioned in 1999.

A number of long-awaited substation contracts have been awarded this year. Italy's Ansaldo Industria has made a dramatic entry into the Kuwaiti market. The company was awarded a KD 9.14 million ($30.21 million) contract to supply and install the Al-Shagaya A substation. The company is also low bidder at KD 12.8 million ($42.2 million) to supply and install Umm al-Haiman B and C substations, which will supply the new housing developments in the area. In June, Germany's Siemens won a KD 7.4 million ($24.6 million) contract to supply and install the Hadeen D 132/11-kV substation.

LEBANON

WHEN the two new power plants at Zahrani and Beddawi start operating at the end of August, Lebanon will have almost finished restoring and expanding its generating capacity. Restoring a regular power supply was one of the top priorities of the government's post-war reconstruction programme, and the installed capacity should be able to meet expected demand until 2006.

Work is continuing on the expansion of the power distribution network, with the aim of extending the supply to as much of the population as possible. France's Groupe Schneider has a $99 million contract to build four metal- clad substations in Beirut, which now receives a reliable supply around the clock. Outside the capital, a consortium of Spie Batignolles, also of France, and Germany's AEG is constructing three conventional substations at a cost of $34 million. Turkey's STFA Enerkom is erecting 152 kilometres of 220-kV power lines in the Beqaa valley.

In June the government launched a $100 million Eurobond to finance the construction of substations in Sidon, Baalbek and Bsaleem. Zurich-based ABB Asea Brown Boveri submitted the low bid for the work in early 1996, but discussions with the client are believed to have broken down over price.

EdL will invite new bids for the Baalbek and Sidon work in the last quarter of 1997. It has not yet decided when to retender the Bsaleem substation.

Bids are expected to be invited soon for consultancy work on the connection of the Lebanese and Syrian electricity grids. The scheme is financed by the Arab Fund for Economic & Social Development, which has also provided loans for the link-up of the Turkish, Egyptian and Jordanian networks. The grid connection will help Lebanon to meet peak demand in the future if its own installed capacity proves to be inadequate.

EdL aims to carry out a programme to upgrade and refurbish a number of power plants. The plans are likely to cost up to $100 million, and will include desulphurisation works at the Zouk power station and an upgrade of the Jiyyeh plant north of Sidon. However, the growing budget deficit and pressure on the government to increase social spending is likely to delay implementation until more finance becomes available.

LIBYA

The main focus for international power contractors has been the bid invitation for the estimated $1,600 million power and desalination plant in Sirte. Bids were submitted in March for the plant, but contractors are expressing doubts about whether the project will go ahead.

The proposed plant will be oil and gas fired with a capacity of 1,000- 1,200 MW of power and about 20,000 cubic metres a day of desalination. Bidders for the project are understood to include the Zurich-based ABB Asea Brown Boveri, the Anglo-French GEC Alsthom, a joint venture between Germany's Siemens and Deutsche Babcock, and South Korea's Hyundai Engineering & Construction Company. The consultant is Germany's Lahmayer International.

The plant was initially planned for Milta, 70 kilometres west of Tripoli, but in 1993 the location was changed to Sirte. Hyundai received a letter of intent from General Electric Company to build the plant but a contract was never finalised.

Sources close to the project say that most of the bids are incomplete and will need clarification before a contract award can be made. Contractors are also understood to be reluctant to be paid in oil, the government's favoured method of payment.

There is a consensus that the country needs a new source of power supply. In 1993, ABB Asea Brown Boveri did boost capacity by 1,000 MW by installing new gas turbines to existing plants in Tripoli, Zueitina, Homs and Sirte. However, this is not seen as a permanent solution. Demand continues to grow and contractors say that the cost of maintaining gas turbines makes a new steam-powered plant the most economical choice.

In mid-June, bids were submitted for the 400-kV transmission link between Homs and the first stage of the great manmade river (GMR) project. The project is divided into two lots. The first involves the supply and installation of transmission cables and the second, the supply and installation of two 400-kV substations. The bid bond on both projects is valid for six months. Bids have also been submitted for the supply and installation of a 66-kV transmission line between Messla and Sarir.

MOROCCO

NO country in the Middle East and North Africa region has made more progress with private power than Morocco. The national power utility Office Nationale d'Electricite (ONE), which is keen to get private investors into all types of power generation, has already scored some notable successes. ABB Asea Brown Boveri and CMS Energy Corporation of the US have signed a $1,500 million build-operate-transfer (BOT) scheme and taken over two coal-fired units at Jorf Lasfar.

The partners are to build two more 300-MW units and operate the whole complex for 30 years. They have also used their considerable experience to put together a unique financing package which overcomes many of the problems faced by developing countries that are keen to privatise power but are anxious about the long-term costs (Power Engineering, MEED Special Report 31:1:97).

The next BOT scheme is a 370-470 MW combined cycle plant for Tangier which will tap gas from the Europe-Mediterranean pipeline which crosses Morocco on its way from Algeria to Spain. ONE plans to be an investor in this scheme but it remains to be seen whether the proposal will prove attractive to international investors in general and power engineering firms in particular.

Morocco is encouraging private management of existing utilities and services and has negotiated a complex deal with Lyonnaise des Eaux of France to operate water, wastewater and power for Casablanca for 30 years (MEED 2:5:97).

It is also exploring the possibilities of alternative energy and there are plans for a huge wind-power development. Rural electrification is another priority in this predominantly agricultural economy. France's Caisse de Developpement is funding a major programme and Norelec of France has won most of the recent awards. ONE's programme will reach 389 villages. A grid interconnection with Spain is also being developed.

OMAN

OMAN has the Gulf's first private power project, but it is thinking long and hard about bringing in the private sector for other power ststion schemes.

However, after long deliberation, the government took the plunge and issued tender documents for the 200-MW Salalah power scheme in early 1997.

This project will be significantly different from the completed Al-Manah power plant, but like Manah, is set to be a first for the Middle East. It will be a fully integrated project - the developer will not only build new generation capacity, but will also take on existing capacity and the existing transmission and distribution network in the area. The company will be responsible for building new transmission facilities, a new diesel storage facility and a pipeline connecting Raysut port to the new plant. Billing and revenue collection will also be the responsibility of the private developer.

Several consortia will bid by the 18 August deadline. There is no shortage of interest in the scheme with bids expected from groups led by Community Energy Alternatives and Enron, both of the US, Midland Power International and National Power, both of the UK, Belgium's Tractebel and Italy's Ansaldo Energia.

In order to keep pace with demand the government has shown willing to spend public money on a number of smaller schemes. An additional $376.6 million has been allocated to the power and water budget, Electricity & Water Minister Mohammad Bin Ali al-Qatabi announced on 24 June. Projects which are likely to receive a share of these funds include the expansion of capacity in the greater Muscat and Sohar areas. Switzerland's Electrowatt Engineering Services has been appointed consultant and will evaluate the relative merits of adding turbines to the stations at Ghubrah and Rusail, which currently serve Muscat, and at Wadi al-Jizzi, which serves Sohar. Consultants have also bid for work on a new 30-MW facility at Raysut which would serve Salalah. Germany's Fichtner has prepared a study on the expansion of capacity in the Sur area.

In the non-government sector the prospect of a third private power project is raising its head. Petroleum Development Oman (PDO) has invited bids for the development of a 90-MW gas-fired plant as an independent power project. The developer is expected to be asked to finance, construct, maintain and operate the power station. A total of 14 companies have been prequalified for the work and bids are due on 23 August. Electrowatt is the

consultant.

PAKISTAN

PAKISTAN'S private power initiative means that the country will have more than enough generation capacity to meet demand in the next few years. But questions are being asked in earnest as to whether the government can actually afford to pay for it. The result has been widespread confusion and the loss of investor confidence.

The Hub power project, Pakistan's first private power plant, is already generating power. There are 19 further projects, with a combined capacity of over 3,000 MW that have reached financial close. The government has signed power purchase agreements for these projects and is guaranteeing to pay for a minimum amount of power, regardless of whether it is used or not.

This has created a potential financial crisis at the Water & Power Development Authority. In an attempt to avert this the government has said it intends to renegotiate agreements, arguing that the tariffs agreed by the previous government are unfairly high. A great deal of uncertainty has resulted, with some observers saying that the government has come to accept that it cannot change agreements which are already binding. Others say that the point when they do become binding - at financial close - is loosely defined, that the government may therefore have some room for manoeuvre. With some of the 19 main projects already under construction there is little the developers can do. Work will continue but the feeling among industry observers is that the government will do everything it can to reduce its financial obligations, but stop short of reneging on legal commitments.

The most recent upsets have been caused by project cancellations. The 1,320-MW power station planned by Consolidated Electric Power Asia (CEPA) is the largest project under threat. The project has not reached financial close and the government is legally entitled to cancel it.

The government objects to the use of imported, rather than indigenous coal. CEPA counters that it is prepared to investigate the possibility of using indigenous coal for a second phase and has provided $5 million to fund a feasibility study on developing coal deposits in Baluchistan. The government also objects to the tariff agreed by the previous government and argues that the location is inappropriate. The government announced in late June that it would cancel the project. In early July CEPA announced that it had been invited to talks on the project and industry sources say that a compromise solution is not impossible.

Other rumoured cancellations are of a 212-MW project planned by Liberty Power, a venture led by Malaysia's Tenaga, and a 450-MW barge-mounted project being promoted by the local WAK Orient Power & Light.