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Saudi Arabian Power & Desalinated Water Sectors The Role of IWPPs and IPPs

CWA. Power. INTERNATIONAL. 6 th Turkish Arab Economic Forum Istanbul, 26/27 April 2011. Saudi Arabian Power & Desalinated Water Sectors The Role of IWPPs and IPPs. Prepared by:. Presented by: Dr H.E. Dr. Madani Alaki Chairman of Shuqaiq Water & Electricity Company.

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Saudi Arabian Power & Desalinated Water Sectors The Role of IWPPs and IPPs

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  1. CWA Power INTERNATIONAL 6th Turkish Arab Economic Forum Istanbul, 26/27 April 2011 Saudi Arabian Power & Desalinated Water Sectors The Role of IWPPs and IPPs Prepared by: Presented by: Dr H.E. Dr. Madani Alaki Chairman of Shuqaiq Water & Electricity Company

  2. Sector Size and Growth both power & Desalinated water • Challenges & Opportunities • Sector Participants till 2004 • The role of Privatization • The clear Success f the Programme • Benefits of transparent Competitive Procurement • Much Opportunity in the Future

  3. 1.1 Sector Size & Growth - Power • Power Generation Capacity today – 43,000MW • It is forecasted that Power demand in KSA would grow at 8% for the next 10 years requiring an installed capacity of 75,0001 MW in 2020 • Growing to over 100 000 MW by 2030 CAGR : 7.3% CAGR : 4.3% Projected Actual

  4. 1.2 Sector size & Growth – Desalinated Water • Desalinated Water Capacity today – 6 million cu m per day • It is forecasted that the need for Desalinated Water will grow to 10 million cum/day by 2030 (with the expectation that demand management + Conservation will signifanctly contain the need for new water)

  5. 2. Challenges & Opportunities • High annual growth in demand for both power and water; • Growth in population and the ever growing younger population segment reaching the stage of needing their own houses and services (schools, universities, hospitals). • Rapid growth in the commercial and industrial sectors. • In the case of electricity, extremely sharp daily and yearly load curve due to the significant air-conditioning needs • Replacement of inefficient old generating units in the case of power plants and several desal units towards the end their economic life in the case of water. • All needing to require very high levels of capital investment for both capacity expansion and refurbishment , upgrading or replacing existing units.

  6. 3. Sector Participants – Till year 2004, only 4. • Saudi Electricity Company - Responsible for generation, transmission & distribution of electricity. • SWCC - Responsible for the production of desalinated water but it also generates electricity as it is economical to co-generate power when oil is used as fuel; SWCC then sells the power to SEC at factory gate. • Marafiq – A utility company that is responsible to provide utility services to the two industrial cities of Jubail and Yanbu and thus buys from SEC and SWCC to internally distribute but also self generates and produces some dsal water itself. • ARAMCO – The oil and gas produces Self generates for its own needs.

  7. 4.1. Role of Privatization • In 2004 His Majesty the King and the Custodian of the two Holy Mosques passed Resolution 523 which established Water and Electricity Co. (WEC) signaling the Kingdom’s intention to progressively open up the electricity and water sector to the private sector to own and operate. • The first step was to start filling the capacity deficiency by instructing WEC to launch four Independently Financed Water and Power Projects, where the private sector is given the reasonability of: • developing, constructing, owning and operating power and desal plants • at sites provided under a land lease by WEC . • Using fuel supplied by WEC • And sell the power and dsal water on 20 year off take contracts • The other three participants in the sector, SEC, ARAMCO and Marafiq accepted the logic of outsourcing the services of owning and operating power and desal plants and have now launched their own programmes.

  8. PIF 32% SEC8% Developers60% EPC Contractor O&M Contractor 4.2. Typical IWPP /IPP framework GovernmentMOF Credit Support Shareholders Agreement SWCC WPA PWPA SWCC ProjectCompany WEC Aramco FSA LLA Fuel (ECA) PPA Contract EPC O&M Contract SEC

  9. 5. 1. Success of the Private Public Partnership Programme • 10 IWPP/IPP projects in Saudi Arabia already contracted, 8 of which are in operation and are performing according to plan. 2 plants are under construction. • Note Worthy - Financial Close of Rabigh IPP, the 9th project Was achieved in July 2009, becoming the first Project Finance transaction with long tenor debt to achieve financial close post Lehman Brothers collapse (during the height of the financial crisis). Under Construction First 8 IWPP/IPP already fully operational

  10. 5.2 - 21% of power + 42% of Desal Water + USD 15 Billion Raising the efficiency of the national economy – A new industry has been created. Ten companies founded in Saudi Arabia are now delivering: • 9,350 MW of electricity - 21% of the power generation capacity of the Kingdom • 2.3 million cum/day. Representing 42% of the Kingdom's desalinated water production capacity of 5.5 million cubic meters per day. • One company, ACWA Power, which is involved in 7 out of the 10 privately owned and operated plants has emerged as a national champion now spreading its wings outside KSA. Encourage the investment of private (local and foreign) capital in a productive sector of the economy • SAR 56 billion (USD15 billion) of private investments has flowed into this sector. • Of this SAR 22.5 billion (USD 6 billion) is foreign direct investment. Most important of all - 21% additional power generation capacity and 42% desalinated water production capacity has been added at a price competitive basis all with out the customary delays.

  11. 6. Much Opportunity in the Future • 30 – 40 % of Future generation is expected to be IPP(BOO) with Long term power purchase agreements (20years) • SEC plans to add an additional 12,400 MW in the next 6 years through the IPP framework (SEC keeps moving more projects into the IPP programme) IPP Project – Pipeline1 In addition, IWPP’s are planning to add additional capacity of 6,000MW over the next 6-7 years 1. Source : SEC Presentation

  12. 6th Turkish Arab Economic Forum Istanbul, 26/27 April 2011 Saudi Arabian Power & Desalinated Water Sectors The Role of IWPPs and IPPs Thank You for Your Attention 212,000 m /day Desalinated Water Export 3

  13. Appendix A1 The Value of Competitive Procurement In net present value terms the saving between lowest and next

  14. Appendix A2 Value of Competitive Procurement In net present value terms the saving between lowest and next

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