Bid & Tender
TEI - Energy Outlook

Private Power Outlook

The Mena region’s rapidly growing population and rising energy demand has driven authorities to implement more robust power sector programmes with substantial investment from private firms.

The growth rate for power in the MENA region is three times the global average and the estimates reveal that 50% increase in the present installed generation capacity would be needed by 2020 to meet ambitious energy targets.

The region is attempting to adopt new strategies like diversifying energy sources, improving energy efficiency and increasing private funding of power projects to ensure success in power reform programmes in the coming years.

Last year, about $65.4 billion of power projects were awarded in the MENA region. The governments’ investments levels will continue to increase; however, the project finance will undergo a major shift as the governments are trying to mitigate budgetary deficits due to decline in oil revenues.

State-owned power authorities, in GCC, are increasingly awarding power projects to the private sector. The private developer model – Independent Power Producer (IPP) projects – will play a major role in meeting the urgent need of power which is estimated to grow at an average annual pace of 8% between 2016 and 2020. According to Arab Petroleum Investment Corporation (Apicorp), IPPs will add more than 20GW of generation capacity in the region over the next five years.

IPPs offer several benefits like relieving governments of the burden of financing new plants and providing quick and on-time delivery of the projects. In many cases, IPP projects are more cost-effective and result in reduced costs for end-user.

With success in developing nearly 18 GW of power generation capacity, private firms from France, Japan and South Korea, have bolstered top positions in the GCC’s private power market.

French developer Engie has been responsible for developing about 21 IPPs/IWPPs, which comprises one-third of total private power development in the region.

Japanese firms – Marubeni Corporation, Mitsui, Sumitomo Corporation, Chubu Electric and Mitsubishi – are playing a key role in the region after having won a significant amount of work in power sector this year.

South Korean contractors Samsung C&T and Korea Electric Power Corporation (Kepco) have been actively expanding their power portfolio in the GCC market.

Evidently, IPPs inclusion in new build requirements and increasing competency of private developers will continue to bring success in the region’s market reform schemes in 2017 and beyond.

Pallavi Agrawal