ABU DHABI - The Power Sector.

Abu Dhabi's power plants at present have a generating capacity of 7,625 MW, up from about 5,000 MW in early 2003, compared to 2,100 MW in 1994 when 300 MW were added to Al Ain's capacity. Most of the new capacity lies at the Taweelah complex of power plants. This is where two units (with a combined capacity of 370 MW) of Abu Dhabi's independent water desalination and power producing (IWPP) ventures went into operation in July 2000. Abu Dhabi's power generating capacity is to reach more than 11,000 MW by mid-2009. The whole of the UAE has a capacity of a little over 10,000 MW, up from 9,235 MW in early 2003 and 6,435 MW in early 1999. Abu Dhabi's power demand is rising by 8% a year. UAE demand for power is rising by 7.10% per annum, and total capacity by 2010 should exceed 15,000 MW.

Taweelah, the main water desalination and power generating zone in Abu Dhabi, is a state-of-the-art centre on which huge capital has been spent. All the water and power plants at Taweelah and elsewhere in Abu Dhabi are being privatised.

Restructuring Background: The power and water systems in Abu Dhabi were restructured and partly privatised under a programme launched in October 1998. All power would be produced by independent ventures by 2006. Now the system consists mainly of several firms, mostly in operation since Jan. 1, 1999. The Abu Dhabi Water and Electricity Authority (ADWEA), chaired by Shaikh Dhiyab Bin Zayed Al Nahyan, replaced the Water and Electricity Department, which was disbanded.

Restructuring was undertaken by the Regulation and Supervision Bureau for the Water and Electricity Sector (Bureau), a body created as part of the programme in 1999. Shaikh Dhiyab then appointed a three-member board for the Bureau consisting of Zaal Mohammed Al Hameeri as chairman, Graeme Sims as general manager and Ibrahim Yusuf Mubaydeen as a part-time member. The Bureau in 1999 issued licences for the following companies:

Abu Dhabi Water and Electricity Co. (ADWEC), fully owned by the state (ADWEA), is the emirate's single buyer of water and power and the firm in charge of procurement for all water and power projects. It signs long-term power and water purchase agreements (PWPAs) with independent water and power producing ventures (IWPPs).

Abu Dhabi Transmission & Despatch Co. (Transco), fully owned by ADWEA, is in charge of all power and water transmissions in the emirate.

Abu Dhabi Distribution Co. (ADDC), fully owned by ADWEA, is in charge of supply and distribution of water and power to the area of Abu Dhabi Municipality, with a capacity to serve a population of 750,000. ADDC is to be privatised gradually.

Al Ain Distribution Co., fully-owned by ADWEA, is in charge of supply and distribution of water and power in the area of Al Ain Municipality, with a capacity to serve a population of 370,000. This, too, is to be privatised gradually.

Abu Dhabi Co. for Servicing Remote Areas, fully owned by ADWEA, is in charge of generation and supply in all the remote regions of the emirate. Its capacity is 286 MW and 31.1 MG/d of water, consisting of small plants, to serve a population of 100,000.

Emirates Power Co. (EPC), 100% owned by ADWEA, represents the state in all the IWPPs. It was formed in mid-1998 under Law No. 2 for the restructuring and privatisation of the power and water systems. Apart from its 60% holding in Taweelah A-2 Emirates CMS Power Co., the first IWPP in Abu Dhabi, EPC will hold a similar controlling stake in each of the other IWPPs. All the IWPPs will be on BOO basis, as in the case of the first one.

Taweelah A-2 Emirates CMS Power Co. is the first independent water and power producing (IWPP) venture in Abu Dhabi. It is owned 60% by EPC and 40% by CMS Energy Corp of the US. The first two gas-fired units of the Taweelah A-2 combined cycle (CC) plant went into operation in July 2000 with a capacity of 370 MW. In August 2001, Taweelah A-2's capacity reached 770 MW and 50 MG/d. (CMS Energy signed its JV agreement with EPC on Oct. 3, 1998, against competition from several companies - see background in DT Vol. 56, No 1). Its local unit CMS Generation Taweelah runs the plant. Its power and water outputs are sold to ADWEC under a 20-year contract. CMS Energy is also a co-developer of the 1,500 MW, 100 MG/d Shuwaihat IWPP completed in August 2004.

Taweelah A-1 water/power plant, in operation for several years, was in July 2000 sold to a consortium called Gulf Total Tractebel Power Co. (GTTPC) - owned 60% by EPC (ADWEA), 20% by Total and 20% by Tractebel - which has since expanded its capacity from 225 MW and 29 MG/d to 1,350 MW and 84 MG/d in a $1.5 bn project completed at end-April 2003. The Frame-9 gas turbines were supplied by General Electric of the US and Sidem of France supplied the multi-effect distribution units. In a $200m project, GTTPC is having the power plant expanded by another 400 MW, plus two heat recovery boilders and associated facilities under a 21-month EPC contract finalised in March 2003 with Doosan Heavy Industries & Construction of South Korea. The project consists of four 100 MW gas turbines.

Al Taweelah Power Co., fully owned by ADWEA, was in 1999 in charge of the Taweelah B plant, which has a capacity of 1,070 MW and 103 MG/d. Under a decree issued on Dec. 28, 2004, by Abu Dhabi's new ruler Shaikh Khalifa Bin Zayed, this is to be replaced by a holding company, Al Taweelah United Power (60% EPC & 40% by a consortium led by Marubeni Corp. of Japan selected officially by ADWEA on Dec. 29), and an operating firm - Taweelah Asia Power Co. (60% EPC, and the rest to be shared between Marubeni, the Malaysian firm Pendekar Power, BTU Power of the US and JGC Corp. of Japan). The foreign partners made the highest bid, $1.69 bn, to purchase the Taweelah B plants and pledged to expand them by 970 MW and 65 MG/d.

The IWPP will sign the PWPA with ADWEC in the middle of this month, which will be followed by assets acquisition and project financing agreements. Financial close is expected by end-March - with the main financiers lined up being Standard Chartered Bank (which is acquiring the project finance division of ANZ Investment Bank), BNP Paribas and Kreditanstalt fur Wiederaufbau of Germany and, in turn, these have invited eight other banks to join them in a lead arranging group. All other IWPPs in Abu Dhabi follow the same model of partnership, with EPC holding 60% in each venture.

Umm Al Nar Power Co., fully owned by ADWEA, has run the Umm Al Nar power and water desalination complex, which has a capacity of 805 MW and 157 MG/d, and the 120 MW Bani Yas station. Umm Al Nar island is the site of an oil refinery. But in April 2003, the Umm Al Nar power and water plants and associated facilities were purchased by a consortium of International Power (IP) of the UK, Mitsui of Japan and Tokyo Electric (Tepco) under a $2.1 bn deal. As in the above IWPP, a dedicated Arabian Power Co. was formed subsequently (60% EPC & 40% IP-led group) to run the plants and expand their capacities by 1,550 MW and 25 MG/d. Mitsui got the EPC contract and sub-contracted Toshiba for the power plant (using GE9FA turbines) and Hitachi Zosen for the water plant (using Multi-stage Flash desalination technology).

Commissioning of the first of the new power units is due by mid-2005 and commercial operation is expected by mid-2006. On completion of the new plants, seven of the existing water units totalling 69.5 MG/d will be integrated with the new water plant, taking the total capacity to 94.5 MG/d. In mid-2008, the other existing water and power units will be handed back to ADWEA for de-commissioning, leaving the final size of the Umm Al Nar complex at 1,550 MW and 94.5 MG/d. For a two-year period when the new expansion and existing plants are running concurrently, the total contracted capacity of the complex will be 2,200 MW and 143 MG/d. The foreign consortium is owned 50% by IP, 35% by Tepco and 15% by Mitsui & Co.

Bainounah Power Co. is in charge of two co-generation plants and one power station with a combined capacity of 1,201 MW and 44 MG/d. The plants are the Taweelah A unit, the Abu Dhabi Central Plant, and the Al Ain station.

Al Mirfa Power Co. is in charge of two power plants and their water desalination units in the western region, which have a combined capacity of 311 MW and 16.2 MG/d. They include a plant at Madinat Zayed. ADWEA has offered Mirfa's 192 MW and 38.7 MG/d plants for sale to an IWPP which will have to expand the power plant by 600-700 MW and provide steam for the exist-ing desalination units. ADWEA in mid-2003 planned for the new power plant to be commissioned by May 2007, with the foreign partner to hold 40% and EPC to hold 60%. But until now there have been no firm takers.

The project's financial adviser is HSBC. Fichtner of Germany is the technical adviser. White & Case is the international legal adviser. Simmons & Simmons is the local legal adviser.

Shuweihat CSM International Power Co. (60% EPC & 40% CSM) runs Abu Dhabi's third IWPP, which has built a $1.6 bn grassroots complex at the western region of Shuweihat, near Jebel Dhanna, with a 1,500 MW co-generation plant and a 100 MG/d water desalination system completed in August 2004.

This will be followed by two more phases at Shuweihat. Shuweihat-2, originally planned to be completed in mid-2006, has been delayed due to a lack of interest on the part of big foreign developers. Shuweihat-3 has been planned to be completed in mid-2009, which should bring capacity there to 5,000 MW and 300 MG/d.

There will also be a 50 MC/d reverse osmosis (RO) water plant at Taweelah as an IWP venture, with the plant to cost between $300-400m. But this, too, has been delayed by a long ADWEA process of selecting the most suitable foreign partner to hold 40%.

Two international groups bid for the project on June 21, 2003: Ondeo Group of France bid the lowest water production price of AED 9.11 (then $2.48) per 1,000 gallons. A partnership of Mitsui & Co. and Vivendi of France bid AED 10.65/000 gallons. Subsequently, ADWEA asked the bidders to offer revised prices for further evaluation. Since then there has been no progress reported on this project.

Citibank is the financial adviser for the project. The technical adviser is Mott MacDonald of the UK. The RO plant will take advantage of spare power generating capacity at Taweelah during the winter months, when electricity demand can be as low as 35% of the peak summer level. The water should be used for agriculture in the Al Ain area.