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Wed 10 Nov 2010 10:20 AM

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DEWA eyes Q1 launch for public-private tender

Hassyan power plant tender is Dubai's first public-private partnership in utilities sector

DEWA eyes Q1 launch for public-private tender
The cost of water and electricity has also been a point of contention for many residents in the UAE, and especially Dubai. Dubai Electricity and Water Authority (Dewa) in March hiked rates in what it said was an effort to curb excessive water and power usage. The utility needs to invest more than $19 billion to increase electricity capacity by 150 percent by 2012 from 5,000 megawatts and 255 million gallons per day of water. (Getty Images)

Dubai Electricity and Water Authority (Dewa) will launch
the tender for the Hassyan power plant in the first quarter of 2010, once
regulation allowing for public private partnerships in the emirate has been
rolled out, Dewa CEO Saeed Mohamed Al Tayer said.

“The legal framework will be introduced during the first
quarter,” said Al Tayer on the sidelines of an industry conference held in
Dubai. “I think the tender will also be around the first quarter.”

The 1,500MW, 120 million gallons per day (MIGD) independent power
and water project (IWPP) will be Dubai’s first foray into public private
partnerships in the utilities sector.

Dewa announced its intention to make use of the IWPP model
in January, and in July appointed a consortium of advisors comprising of HSBC, Clifford
Chance and Mott McDonald. The emirate is currently working on legislation
to allow private sector involvement.

Al Tayer, who last week revealed that peak power demand in
the emirate had risen almost threefold to 6,161MW over the last decade, said
that additional generation capacity is also being added by
upgrading the power plant in Jebel Ali.

Dewa will add 400MW by enhancing the existing gas turbine
and through other upgrades at a capital expenditure of around US$200m.

“To add new power, we will work on efficiency rather than
creating new capacity,” said the CEO.

In the longer term, the authority seeks to roll out smart
metering across Dubai. A pilot project of 10,000 smart meters
installed in selected buildings will be commissioned “in a few months”
said Al Tayer. The success of the project will determine Dewa’s course of
action.

“We are evaluating this project, based on that we have to
make a final decision," he said.

Installing smart meters across the emirate would pave the
way for variable tariffs to curb consumption during peak hours and penalising
excessive use of electricity.

A lower peak load would reduce the need for new power
generation capacity. An accurate reading of individual consumption would enable
the utility to raise the tariff after a certain threshold has been passed, so
encouraging more moderate consumption.

“Its good to have a time-based meter in order to give
incentives,” replied Al Tayer to the question of whether tariffs would be
altered in response to the smart meter roll out.

Electricity and water consumption in the GCC is the highest
in the world, due to heavy subsidisation and high cooling and water
requirements.

Dewa will not enter the bond markets next year to funds its
activities, according to Al Tayer. The authority in October issued a $2
billion, dual tranche bond in October, but the CEO said that no issuance is
planned for 2011.

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