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Tue 7 Oct 2008 06:05 AM

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Big investment needed to meet Gulf power demand

New report says population growth is putting major strain on supplies.

Large investments will be required to ensure the continuity of power to the Gulf region due to growing electricity demand, says Moody’s Investors Services in a new report published on Tuesday.

The study, entitled Arabian Gulf Electricity Industry, claims unprecedented economic and demographic growth is creating a strain on power supplies in the region.

“Moody’s believes that these exceptional growth trends are likely to challenge local utilities, which will need to install significant additional capacity to meet rising demand,” said Philipp Lotter, Dubai-based Senior Vice President at Moody’s.

“Power shortages and temporary blackouts have already been seen in certain countries with particularly tight supply margins, and these are likely to increase, particularly where utilities are operationally and financially unable to fully execute their expansion plans.”

According to estimates, up to $50 billion could be spent in the GCC countries by 2015 for increased generation capacity of nearly 60,000 megawatts.

Additional, substantial investments will also be needed to update transmission and distribution networks.

Alternative energy sources, such as renewable and nuclear energy, are being investigated by the governments to meet the increased demand, particularly as some countries run short of gas and the region’s fuel mix remains over-exposed to gas and oil.

Furthermore, continued government support, the involvement of private operators, a unified electricity grid, and more regulatory transparency could help ease the burden, the report added.

“Ultimately, players in those markets that provide greater transparency in their regulatory framework and tariff-setting, and share some of the expansion burdens with private sector operators will be better positioned to embrace the future demands of the sector,” said Lotter.

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