Traditional procurement methods are being favoured ahead of private sector involvement
Saudi Arabias ambitious upcoming power programme has followed the same route as the countrys desalination programme and disappointed the private developer market by reverting to engineering, procurement and construction (EPC) contracts for major power projects.
While Saudi Electricity Companys (SEC) is planning to add an additional 47GW of capacity to the kingdoms grid by 2024, the only independent power project (IPP) currently under discussion is the joint-venture Fadhili cogeneration IPP with Saudi Aramco. Out of the last five major SEC power contracts tendered in the kingdom, all are being procured through the EPC model, with the last private contract awarded for the Rabigh 2 IPP in late 2013.
With the kingdom having pushed ahead with 13 major public-private partnership (PPP) utility projects between 2003 and 2013, developers and project financiers were expecting the market to continue to offer lucrative opportunities over the next two decades, with demand growth rate for electricity and water continuing to grow at rapid pace.
SECs move away from the use of private partnerships for power projects follows the countrys desalinated water provider, Saline Water Conversion Corporation (SWCC), shelving its IWPP programme in 2009.
The reasons for SECs move away from IPPs are unclear, with the utility having not made any public announcements on the reasons for switching the procurement model for the Duba 1 integrated solar and combined-cycle (ISCC) project from and IPP to an EPC model in 2014. Some in the kingdoms power sector point to the change in leadership of the utility, while others say that the companys restructuring may be a factor.
With Saudi Arabias renewable energy programme having been shelved, the focus on EPC contracts for major power projects has compounded the woe for developers and project financiers in what was once the regions most promising private utilities market. With no sign of the kingdoms power and water providers reverting back to private partnerships soon, the focus of developers will have to shift elsewhere.