TUNISIA - The Power Sector.

There are over 2.3m power clients in Tunisia. Per capital consumption of electricity exceeds 960 kWh/year. STEG, in charge of the power sector in terms of planning, policy execution and distribution, expects the country's power generating capacity to reach 3,540 MW by 2006, from about 2,480 MW in early 2002 and 1,540 MW at end-1995.

Tunisian power demand is growing at the rate of 7% annually. Much of this reflects an increasingly comprehensive nature of the Tunisian grid. Recent census figures indicate that around 95% of Tunisian homes had access to electricity in 1999, up sharply from 86% in 1994. The national power grid now is estimated to supply about 90% of the country.

More than 95% of Tunisia's electricity is generated by fossil fuel plants, with the remainder accounted for by hydroelectric plants. Until 1996, STEG had a monopoly over power production and still generates over 90% of Tunisia's power.

The first independent power plant (IPP), a $261m, 471 MW, combined cycle (natural gas and diesel-fired) power venture came on stream at Rades in 2002. It is operated by a consortium comprised of US-based Public Sector Enterprise Energy Group (PSEG) holding 60%, and Marubeni Corp. of Japan (40%) on a 20-year build-own-operate-transfer (BOOT) basis. STEG provides the gas feedstock and buys the electricity, also maintaining its monopoly over distribution and pricing.

In July 2003, a 27 MW associated gas plant - the country's second IPP - began commercial operations. It is operated by CME Energy and uses associated gas from the El Biban, Zarzis oilfields. Previously, the gas was flared (see Gas Market Trends).

The government is encouraging other IPP ventures in order to reach its goal of an installed capacity of 3,540 MW by 2006. A key part of this plan is the $250m, 500 MW power plant (Barca Power) which BG is to have built near Sfax and the EPC contract is to be awarded this year. It will utilise natural gas from Miskar and, eventually, the Hasdrubal field. The plant, as an IPP venture, should be operational in 2006. In a second phase, Barca II, the plant's capacity will be doubled to 1,000 MW by 2009.

To be built at the same site as the power plant, BG is to a liquefied petroleum gas (LPG) plant. This will serve the Tunisian market.

In December 2003, the African Development Bank approved a loan of $98.3m to finance a project to rehabilitate and modernise Tunisia's power distribution network. In July 2002, the European Investment Bank (EIB) approved a 150m Euro loan aimed at upgrading Tunisia's power transmission network. The Kuwait-based Arab Fund for Economic and Social Development (KFAED) announced in August 2003 that it would provide a $100m loan for the development of Tunisia's electrical network.

Tunisia is paying considerable attention to the development of renewable energy as part of the government's 10th development plan. To this end, the country has received considerable assistance from international agencies. At end-January 2004 the Ministry of Industry and Energy received expressions of interest for a concession to build and operate the first phase of a 300 MW wind farm. The first phase should have the capacity of 100 MW. The concession is expected to be awarded in the third quarter of this year. The second phase, 200 MW, will be tendered in 2006.

In May 2003, the government announced that 12 new windmills would be added to the wind farm in Hawariya, bringing total capacity to 20 MW. Separately, the Global Environment Facility (GEF) is providing $10.5m to build windmills in Tunisia. GEF expects that its initial investment will be followed by an additional $106m in private funding in order to generate 100 MW. The German Technical Co-operation Agency also is providing money for wind power.