Algeria: Boost planned for power sector
In August, the Algerian government unveiled a proposal to invest AD2trn €19.51bn) between 2012 and 2016 to strengthen electricity production and distribution. The country has been hit with a wave of power cuts since July that have impacted local businesses and sparked street protests in several areas. To stem further load-shedding, an investment programme by the Ministry of Energy and Mines (MEM) aims to double electricity production by 2016, adding an additional 12,000 MW of capacity.
Sonelgaz, the state-owned utility responsible for electricity production and supply, estimates that Algeria’s infrastructure is currently able to meet a maximum demand of 9700 MW, but particularly high temperatures in July and August have caused a spike in usage. Sonelgaz reported that consumption rose to 9463 MW in mid-July, a 13% increase over the same period in 2011.
Officials from the General Union of Traders and Artisans (Union Générale des Commerçants et Artisans Algériens, UGCAA) stated in July that power cuts have cost member businesses an estimated AD2bn (€19.51m) in revenue, particularly among food providers. Street protests over repeated outages in cities such as Constantine have, in some cases, led to confrontations between police and protestors.
Sonelgaz had previously planned to increase capacity by 4000 MW in the next five years, which is insufficient to meet the rising demand for energy. In 2006, Sonelgaz based its investment programme on projected annual growth of 6-7%. However, Algeria is currently experiencing one of the fastest increases in power consumption in the region: demand increased by 14.5% year-on-year in 2012, following a 14% increase the previous year. Sonelgaz officials now estimate that demand will rise to 11,436 MW in 2013 and may approach 20,000 MW by 2017.
The MEM has indicated that roughly half of the projected AD2trn (€19.51bn) in investment will go toward the construction of nine new power plants in the next five years, with an estimated total capacity of 8050 MW. MEM officials expect the first 1200 MW to come online by the end of 2012, though most projects are still in the development stage.
The Algerian Electricity Production Company (Société Algérienne de Production de l’Électricité, SPE), part of Sonelgaz, issued tenders in August for the construction of four new gas turbine power plants. Domestic and foreign companies were invited to bid on plants with capacities of 51 MW in Tamanrasset, 30 MW in Illizi, 34 MW in Béni Abbès and 60 MW in El Goléa. Bids for all four projects will go under consideration in the first week of October.
The SPE also announced in mid-August that it had awarded a contract for the construction of a 1200 MW combined-cycle power plant in Ras Djinet (Boumerdès province) to the South Korean group Daewoo EC, for a total project cost of AD73.4bn (€715.9m). Daewoo will oversee all elements of the design, engineering, construction and preparation of the project, which will add a new combined-cycle facility to the existing 650-MW steam turbine power plant. Work is expected to be complete within five years.
The sector investment plan also includes key improvements to the distribution network, as insufficient access to the power network and elements of outdated infrastructure have also been an obstacle to the sector. Under the five-year plan, Sonelgaz aims to add 300 high-voltage stations, 10,000 km of high-voltage transmission lines and 500 km of gas transport networks needed to supply the new plants.
Sonelgaz has cited difficulties in obtaining work permits for maintenance and land titles from local and municipal authorities as a reason for the slow progress of past investment and maintenance efforts. As a result, expansion programmes have not kept pace with demand, and power cuts are a regular phenomenon during peak usage times in summer and winter.
At present, authorities have yet to determine how the plan will be financed. Both Sonelgaz capital and Treasury funds are under consideration. However, progress has been made on several construction contracts, which bodes well for growth in the sector. While Algeria’s need to boost electricity production is not new, the immediacy of the current situation may provide the necessary impetus to ensure the necessary funding and accountability to get the investment plan rolling.