Utilities Middle East – August 2019

(Kiana) #1


36 Utilities Middle East / August 2019 http://www.utilities-me.com

The introduction of IPPs in the GCC could be instrumental in meeting rapidly rising elec-

tricity demand through increased effi ciencies and broader project fi nancing channels


ast year, the Kuwait Authority for Part-
nership Projects (KAPP) invited local,
national, and international companies
to issue an expression of interest (EOI)
for up to two water and power projects: Al-Khai-
ran Phase 1 and Az-Zour North 2 and 3. The proj-
ects will be procured under a public-private
partnership (PPP) model.
Using a PPP structure could bring the effi -
ciencies and capital of the private sector to
Kuwait’s water and energy industry, which has
traditionally been state-controlled.
KAPP says that opening up the market to
private stakeholders may reduce the public
sector cost of scaling up power and desalina-
tion plants, improve production reliability, and

bolster competition in Kuwait’s energy market
at a time when power demand is rising fast.
The region still relies on the single-buyer
model where a state-owned entity is the only
wholesale purchaser from power generating
companies. The single buyer is responsible for
selling the electricity to distribution companies
which then sell to the fi nal consumers. While
the power-generating sector is open to the pri-
vate sector, governments still have monopoly
over transmission and distribution networks.
The current market structure in the GCC has
served IPPs well as governments assume most
of the risks. IPPs are usually off ered 15 to 25-year
Power Purchase Agreements (PPA) where the
government agrees to buy the electricity at a

‘take it or leave it’ basis at a previously agreed
price for the duration of the contract, thus miti-
gating demand-side risk.
Oman is leading GCC eff orts to unbundle
the power sector by privatising most of its gen-
erating assets and is considering to privatise
transmission and distribution. The country
will become the fi rst GCC country to introduce
spot trading in the electricity market by the
end of the decade. In Saudi Arabia, state utility
Saudi Electricity Company (SEC) has recently
announced plans to break up into four indepen-
dent power-generating bodies and an indepen-
dent transmission company by the end of 2016.
Most IPPs also sign fuel supply agreements
with governments to mitigate feedstock price


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