Powering Up

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While Abu Dhabi is usually associated with oil, its main export and the backbone of its economy, the emirate's electricity sector is also lighting up nowadays, with a series of new joint ventures, expansions and regional projects.

At present, the emirate's power demand is increasing in the order of 7% annually. Wedded to the need to meet this growing requirement is the necessity of having excess capacity to respond to demand spikes. Between May and September, when the temperature can hit 50 degrees Celsius, high domestic usage of air conditioning and other appliances can double the load on output compared to the winter months.

As such, the past decade has seen a rapid expansion in the electricity generation capacity of Abu Dhabi, with large investments made to try and keep up and get ahead of demand.

Production, transmission, distribution and supply of electricity in the emirate are conducted by a series of hived off firms under the umbrella of the Abu Dhabi Water and Electricity Authority (ADWEA), established in 1999. Having long since adopted the policy of decentralisation, ADWEA has also moved in line with the emirate's policy of privatisation and liberalisation of the economy.

To date, four of ADWEA's major generation facilities have been partially privatised, though the authority remains a controlling stakeholder in all of the projects, with a 40% ceiling set on outside involvement. The Emirates CMS Power Company, the Gulf Total Tractebel Power Company, the Shuweihat CMS International Power Company, and the Arabian Power Company have been established over the past five years to operate different production facilities. Each have foreign partners holding 40% equity and sell all electricity generated to the single buyer of the sector, the Abu Dhabi Water and Electricity Company, which in turn is part of the ADWEA group.

The latest such privatisation project is the Fujairah facility. Currently, ADWEA is assessing four international bids for the maximum 40% stake on offer in the 650-MW power station. While the final decision was supposed to have been taken in mid-December, the deadline has been pushed back to February 2006 due to the differing financial packages put forward by the tendering firms.

The leading contender to take up the latest partnership project in the emirate's energy sector is Singapore's Sembcorp Utilities, which is supported by Barclays and Société Générale. The consortium has put $1.34bn on the table, just $5m more than the second favourite in the Fujairah race, Belgium's Suez Tractebel, which is working with Sogex Oman and backed by BNP Paribas.

Japanese duo Marubeni Corporation and JGC Corporation, and International Power (IP) of the UK combined with the Mitsui 8 Company, also of Japan, have also submitted bids, though well below those of the frontrunners. Under the provisions of the tender Fujairah's capacity will be boosted by about 200 MW.

Nearly all of Abu Dhabi's power stations have a secondary, though almost as important function, addressing the emirate's acute water shortage. The specially designed co-generation plants provide potable water through desalination. Such is the case with the Fujairah station, which has the capacity to produce 100m gallons of water daily.

Another major project is the Emirates National Grid, being developed at a cost of Dh850m ($231.46m), which will ultimately link the generation and distribution facilities of the UAE's different emirates.

The first stage of the project is scheduled to come on line next March, linking Abu Dhabi's Taweelah station to the H station of Dubai. The entire inter-connected grid is due to power up by the last quarter of 2006.

An even wider project involving the ADWEA is in the early stages, with the initial steps taken in November to create the Gulf Interconnection Grid to link up the electricity networks of the Gulf Cooperation Council (GCC) member states. With a completion date of 2010, the grid will integrate the power systems of the UAE, Kuwait, Saudi Arabia, Bahrain, Qatar and Oman. Contracts for the first phase of the $1.2bn development were awarded in late November.

Abu Dhabi is also entering the electricity technology sector, with British-based firm Brush Transformers Limited announcing in early December that it was establishing a joint venture with the emirate's al-Nasser Industrial Enterprises to set up a facility to produce power transformers for the region and beyond. It is no coincidence that one of Brush's major clients in the Middle East is ADWEA.

While the privatisation of Abu Dhabi's electricity sector has generated billions of dollars, most of this has been ploughed back into new investments as the emirate works to become a powerhouse of the future.

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