Special Report Contents

• Delaying projects is not an option
• Middle East faces 2020 power capacity challenge
• Renewables widen the energy mix
• Russia leading the way in region’s nuclear power race
• Databank: Power projects pipeline

The value of independent power project (IPP) awards across the Middle East and North Africa (Mena) region is forecast to reach $28.8bn in 2016. Nineteen schemes are expected to move ahead, raising questions around how the projects will be financed.

It is anticipated that 2016 will be a much busier year for IPPs in the region than 2015. To date this year, about $9bn-worth of IPPs have been awarded, spread across six schemes.

Kuwait has three IPPs planned for 2016, worth a total of about $3bn. However, the liquidity in its banking sector and its risk appetite to finance means it is unlikely to struggle with investment for its schemes.

Challenges for Egypt

However, Egypt, which relies on local and development banks to fund its power projects, will face more challenges. With $18.4bn of private power schemes in the pipeline, it is likely that some, for example coal-powered plants, will fail to secure financing.

Others may experience long delays, as developers put together financing deals and seek currency conversion guarantees.

Oman also has a promising pipeline, with two IPPs worth a total of about $2.6bn due for award.

Other GCC countries have limited plans to award IPPs. Saudi Arabia and the UAE are expected to award just one each in 2016 – the Fadhili IPP and the third phase of Mohammed bin Rashid solar park respectively.

Qatar has front-loaded its power investment plans in preparation for the 2022 World Cup, and there are no upcoming IPPs.

Renewable energy

The arrival of a renewables feed-in tariff and build-own-operate market has boosted the volume of potential IPPs for 2016.

Some $10.7bn, or 37 per cent, of the privately-financed power projects in the pipeline for next year are renewables projects, split evenly between solar and wind.  

The rise of this market will mean there will be more small deals and syndications, as renewables projects tend to range between 10MW and 250MW.

Just 31.2 per cent by value of IPPs in the pipeline use conventional gas generation. This reflects both the energy diversification strategies of Mena governments and the potential of the private sector to introduce new technologies.

The 2017 IPP pipeline is less clear, with only Oman and Kuwait publishing long-term plans.