Power Engineering - Privatization of Bahrain electricity gains pace

5 September 2005 - Bahrain's Al Ezzel independent power plant project, signed in July could be the first in series of privatization projects and could lead to further privatization of electricity production and also of the country ports, said Finance and National Economy Minister Abdulla Saif.

The Ministry already has the go-ahead from the Tenders Board to privatize the operational side of Mina Salman Port in Hidd, said Under-secretary Shaikh Ibrahim bin Khalifa Al Khalifa.

The deal for Al Ezzel Independent Power Producer (IPP) in Hidd proves that privatization is a very viable option, he said. "There are three outstanding aspects of this agreement," said Shaikh Ibrahim. "First of all it was conducted in six months, which is received bids from five companies, which is the highest number ever for such a project in the Middle East. "Finally, the project has received 20 years financing from banks, without a government guarantee."

Shaikh Ibrahim said Bahrain was continuing to expand its distribution network in anticipation of the extra electricity generated by the plant. "We have already awarded three contracts for new sub-stations and are planning to award three more shortly," he said. Belgian-Gulf consortium Tractebel EGI and Gulf Investment Corporation (GIC) entered into the contracts with the Bahrain government to design, build, own and operate the Al Ezzel Independent Producer (IPP) projects.

Shaikh Ibrahim said that the consortium, which is in the business of operating power plants, would be able to run the plant more efficiently than the government. "They will benefit from the economies of scale because they own many plants and were also recently awarded a contract for a similar project in Oman," he added.

Tractebel EGI Middle East and Asia regional manager Marc Josz said that the plant made good business sense. "Bahrain urgently needs additional generating capacity," he said. "The country's growth of power demand is seven percent per year and is expected to remain strong as it is driven by the increase in population, higher standards of living and economic development."

HSBC and Societe General have underwritten the debt financing. A number of Bahraini and international banks are participating. Mr. Saif said that local investors would eventually be offered a chance to participate in the project through the issuing of shares, which could be listed on the Bahrain Stock Exchange.

GIC chief executive officer Hisham Al Razzuqi said that the tender process was run in a well-organized way. "With this project the Bahrain government has created an environment conducive to attracting the private sector to invest," he said.

The first phase of the project, with a production capacity of 470mw will be ready in April 2006. It will reach full capacity the following year.

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