In the works
Assessing Bahrain's move to embrace the private sector
Despite the heat of the Middle Eastern summer, it’s been a landmark period for the Gulf utilities industry, a fact that has been highlighted by the four-country grid link-up between some GCC nations in July.
As one of those countries, the Bahraini cabinet has earmarked significant funds for the development of both the electricity and water grids – most recently a US $1.3 billion (BD500 million) loan to finance key utilities projects over the next five-year period.
The country’s Electricity and Water Authority (EWA) has been at the forefront of this renaissance. Bahrain is making headlines in the industry due to its innovative use of public private partnerships (PPP) to drive some of its biggest developments. And on the horizon, it seems that the country is likely to be a leader in terms of the amount of renewable energy that it is planning to put back into the grid.
So what are the reasons that led EWA to embrace this mix of private- and public-sector participation in utilities? Bahrain’s Minister of Works, HE Fahmi Bin Ali Al Jowder, has been in his position since 2001, and was also handed the crucial EWA portfolio in 2007. His role has been crucial in ensuring the continuation of the ministry’s self-improvement programme, which began in 2002.
“This programme firstly helped set out a strategic path for the ministry for the years to come. It also brought about a significant restructure,” Al Jowder remarks. “We involved an international consultant to look at the duties of the ministry and try and come up with a formula that would allow us to best meet the expectations of the government and the people of Bahrain.”
Al Jowder admits that without the restructuring programme, the ministry would not have been able to move forward with its impressive portfolio of current projects. A major aspect of the reshuffle has also been a lean towards project management skills, which allows the ministry to ‘outsource’ other works to the private sector.
In 2004, the ministry determined that PPP arrangements was an area that demanded immediate focus and a deal was therefore signed with consultant KPMG to plan the legal and administrative framework of the different services.
“This not only helps the growth of the private sector but also allowed us to be more focused on delivering our projects,” Al Jowder continues, adding that EWA now has more PMI-certified project management professionals than any other organisation in Bahrain. “Now we are probably the only ministry in the Middle East to have a project management methodology which covers all our work, whether it’s construction, procurement or any other project.”
The next and final stage of the EWA plan covers the improvement of the agency’s IT systems. To that end, the ministry has signed a US $2.65 million deal with technical support outfit AECOM to upgrade software and automate all the project management steps EWA is taking.
The recent launch of Bahrain’s 2030 Economic Vision has meant that EWA’s plans come under a national framework for privatisation, a strategy that Al Jowder believes has made the realisation of PPP projects in the future will become much easier. Back in the present, however, and the fruits of the ministry’s work over the last five years or so are already more than evident.
“The first project that is being rolled out is the Al Dur Water and Power Plant, which is being developed by the private sector for the government and has been fully subscribed,” Al Jowder says. “We’re expecting the plant to begin producing water and power in June next year and achieve full production the following year.”
The Al Dur IWPP, with an estimated value of US $2 billion, is one of the biggest power and water projects in the Middle East to date. When the plant comes online next year, it will have a capacity of 1234MW and 218,200m³ a day. It comes as no surprise that with projects of this size being built, the existing infrastructure embedded around the development also needs to be upgraded.
“For that reason we have to start rolling out a new transmission network over the next five years,” indicates Al Jowder. “It is a substantial programme, around $1.3 billion of which will be funded by the private sector.”
On the wastewater side, Bahrain recently held the bid conference for the Muharraq Waste Water Treatment Plant, the first stage in the country’s masterplan for the privatisation of sanitary services.
“We have prequalified 16 consortiums and I think we have ended up with 11 bidding on the project which is very good and we should get a competitive price,” Al Jowder explains. “We have also signed a deal with GTZ, a major consultancy in Germany, to work on the financing master plan.”
In fact, the Muharraq plant bid conference attracted around 100 representatives from a significant number of international consortiums, all of whom are vying to develop a greenfield sewage treatment plant and a sewer conveyance system on a 27-year Build, Own and Operate (BOO) contract. Work at the site is already under way, and the Ministry of Works has announced that land reclamation at the location should be ready for completion in March next year.
While Muharraq represents a national first for the sanitary sector, Al Jowder reveals that there are a significant number of other projects in the pipeline.
”We also have a consortium of HSBC, Fichtner and Norton Rose, which are doing the privatisation master plan for sanitary services in Bahrain,” the minister continues. “The next plant will be in Tubli, which could go out to tender this year and we also have plans to build plants in Al Dair and Zallaq over the next 10 years.”
Naturally, the economic crisis has put pressure on all the Gulf states when it comes the financing of major infrastructure projects. But does Al Jowder believe that this is hampering Bahrain’s push in this regard, especially given its chosen reliance on the private sector? “I believe the interest is still there,” he says. “Lenders and financial institutions are looking to lend to governments these days because it’s much safer. Every day we receive a proposal from a bank or funding institu tion that says they are willing and ready to lend.”
With regard to the increasing importance of renewable energy, Al Jowder is adamant that Bahrain cannot continue to rely on natural gas to power its plants. Certainly, the construction of buildings such as the Bahrain World Trade Centre, with wind turbines built into its design, has helped promote the idea that the country has a future base of sustainability. But it’s important to ensure that this image does not remain rhetoric, the minister says.
“We were among the first countries to sign the establishment of the International Renewable Energy Agency [IRENA],” the EWA chief explains. “We have also established a committee, which I appointed, which involves several ministries and will investigate a number of renewable options.”
“There is also a higher commission, which was appointed by the cabinet in June, to look into nuclear energy options,” Al Jowder continues. “In parallel to these committees, EWA has its own internal committee which is looking into both nuclear and other renewables. We are not just leaving it to eventualities; we are trying to plan for our future and look into the different available options.”
How renewable energy will feed power back into the grid has yet to be established, but it’s clear that this is high on the EWA committee’s agenda for the future.
“Any renewable that is going to be produced by individual institutions has to feed back into the grid and they should get credit for that because we want to make renewable energies enticing,” Al Jowder explains.
“But we have to assess how this will work and this is going to be part of the work that the committee will be doing.”
The committee has already held its first meeting, and Al Jowder believes that it will come up with the first of its recommendations in about six months’ time.
Work on Bahrain’s utilities industry is clearly very much a work in progress, as it is in the other Gulf countries. But by placing an emphasis on the role that the private sector can play in its growth, the country is at the forefront of the GCC’s strategy to upgrade its infrastructure in tandem with ongoing macroeconomic growth.