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					        Opportunities and Challenges
               in the Kingdom’s
Power Generation and Water Production Sectors

                 Panos Konstantin
                 Senior Consultant
            Fichtner, Stuttgart - Germany
                                            FICHTNER
                                               Fichtner’s profile


                                                      Energy Technology     Comprehensive technological know-how as foundation
                                                                            • conventional technologies
                                                                            • innovative technologies / renewable energies
                                                      Power Supply          Extensive planning experience in all project phases

                                                                            Classical planning services are rounded off by
                                                      Environmental         our over-arching expertise in consultancy
                                                      Technology
Saudi Energy Forum Conference , Dammam Nov06




                                                      Water and                  Technologies                    Planning
                                                      Infrastructure

                                                      IT, Economics and                         Consultancy
                                                      Finances



                                                          Broad-based range of services from one source
                                                     Complete solutions on a sound technical and economic footing
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                                               Contents


                                               • Key indicators – current and projected power and water demand
                                               • First IPPs and IWPPs in Saudi Arabia
                                               • Partnering for production, of power, power/water
                                               • Investment opportunities in integrated power and water and in stand
                                                alone power projects
Saudi Energy Forum Conference , Dammam Nov06




                                                    IWPPs (SWCC, WEC)
                                                    Power sector
                                                    Industrial sector cogeneration projects
                                               • Investment size, investment options
                                               • Conclusions
                                               • Glossary



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                                                   Key indicators - power and water demand

                                                                             Population:
                                                                              growth 1993 - 2002:      3.5% / a    expected 2.5 % /a
                                               High growth of
                                               population triggers
                                                                              population 2003:         22.7 m      2025:    40 m
                                               substantial
                                               increase of power             Power:
                                               and water demand               peak load
                                                                                 • growth 2002 - 2004: 7.9 % /a     expected 3.8 % /a
                                                                                 • 2003:               29 GW        2025:    59 GW
Saudi Energy Forum Conference , Dammam Nov06




                                                                              installed capacity:
                                                                                 • 2004: 30,5 GW                    2025:     70 GW
                                                                                 • reserve margin:                             15 %

                                                                             Water:
                                                                              demand 2004 :           6 m m3/d     2025:     8.0 m m3/d
                                                                                                                            (10.0 m m3/d)
                                                                              production 2004:        5 m m3/d     2025:     8.5 m m3/d
                                                                                 • desal water:        3 m m3/d               5.5 m m3/d



                                               Sources: MoWE Annual report 2003; WEC 2005
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                                                   First Saudi IPPs / IWPPs Projects


                                                                                   Capacity               Project
                                                IPP / IWPP Projects      Power     Steam      Water       Budget       Technology              IPP /IWPP
                                                                           MW       t/h        m3 / d       m$
                                                SADAF cogen                  250      510        -               169                     Saudi-US-Consortium

                                                Saude Aramco cogen         1,074    2,000        -               510   CCGT - NG       British-Saudi Consortium
Saudi Energy Forum Conference , Dammam Nov06




                                                Rabigh                       475    2,070      228,000       1,100     CCGT - NG        International consortium

                                                Shuaibah III (WEC)           900      -        880,000       2,400     ST - crude     Saudi-Malaysian Consortium

                                                Shuqaiq Ph II (WEC)          850      -        212,000      (1,900)    ST - crude     3 bids submitted / evaluation

                                                Marafiq                    2,500      -        800,000       -         CCGT-NG             final negociations

                                                                           3,000      -       1,000,000     (3,000)    CCGT-NG           Request for proposals
                                                Ras Az Zawr (WEC) *)
                                                                           1,100      -       1,000,000     (2,900)    ST - crude            1st. Qt 2007

                                               *) decision with regard to technology pending
                                               CCGT: Combined Cycle Gas Turbine; NG: Natural Gas; ST: Steam Turbine        (xxxx) estimated project budget

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                                                 Partnering for production of power and water

                                                                                                      MoWE
                                                                                         Ministry of Water and Electricity


                                                               SEC                           50%                   50%                  SWCC
                                                     Saudi Electricity Company                                               Saline Water Conversion Corp.


                                                         BU               IPP´s                       WEC
                                                      Generation                         Water and Electricity Company            IWPP´s         Generation
Saudi Energy Forum Conference , Dammam Nov06




                                                                                          (off taker of power & water)             A         A
                                                             BU                                                                              Water
                                                      Power Transmission                 A                                               Transmission
                                                                                                         ECRA
                                                                                              Electricity & Cogeneration
                                                                                                Regulatory Authority
                                                             Large Industry
                                                                                                                                        7 regional Water
                                                                                                   Private Investor
                                                                                                                                    Distribution Companies
                                                              BU                                    opportunities
                                                        Power Distribution
                                                                                                       Responsibility
                                                                                                       Power/water flow
                                                                                                      buy & sell               residential   Industry   Agriculture
                       6                       residential   commercial       Industry                (SA, Sabic, Ma´aden)
                                                                                               BU :   Business Unit                                     FICHTNER
                                               Projected water demand and supply 2005 - 2025
Saudi Energy Forum Conference , Dammam Nov06




                                                          SWCC Existing &
                                                         Planned Production                        Planned & Private Desalination
                                                              Capacity                                  Production Capacity




                                                Source: SWCC, Marafiq, MoWE, Booz Allen Analysis, Fichtner
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                                               Water demand and supply balance and project budget for IWPP

                                                                                                                                      3
                                                    Item                                                                       mm /d

                                                    required production capacity, total                                            8.5

                                                        ./. ground & surface water                                                 -3.0

                                                    required desal production capacity                                             5.5

                                                        ./. existing SWCC old capacity after 2010 *)                               -1.0
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                                                    required new desal production capacity                                         4.5

                                                    planned IWPP & private capacity 2006**)                                        -2.9

                                                    required additional capacity                                                   1.6

                                                    project budget for planned capacity                                    9.0 billion US$

                                                        of which already contracted                                        5.8 billion US$

                                                    estimated budget for additional capacity ***)                         5 - 7 billion US$
                                                    *) existing capacity 2005 = 3 m m 3/d to be retired until 2010 = 2 m m 3/d remaining 1 m m 3/d
                       8                            **) Shuaiba, Shuqaiq Ph II, Raz Az Zawr, Marafiq
                                                    ***) roughly estimated by Fichtner                                                               FICHTNER
                                                Resolution 5/23 of the Supreme Economic Council

                                                                    • Establishes framework for the participation of private sector in
                                               Key provisions of
                                               the resolution to        power/water production projects
                                               attracting private
                                               investors            • Establishes WEC as LLC in which SEC and SWCC hold a 50%
                                                                        stake
                                                                    • IWPPs will be developed on BOO basis adopting ECA model
                                                                    • Project companies’ stakeholders: 60% project developer, 32%
Saudi Energy Forum Conference , Dammam Nov06




                                                                        PIF, 8% SEC
                                                                    • A joint team from SWCC and SEC will prepare and supervise
                                                                        the tender process for the projects
                                                                    •   Tenders will be assessed according to five principal criteria
                                                                          • price, capacity, Saudi employment, technical performance, use of local goods
                                                                            and services

                                                                    • State credit support will be made available
                                                                    • Some fiscal and financial incentives for project companies

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                                               Contractual structure for IWPPs

                                                                                                                        Government
                                               PIF             SEC          Developers
                                                                                                                          MOF
                                               32%              8%             60%

                                                                                                Credit Support
                                                                                                                             SWCC
                                                                   Shareholders’
                                                                    Agreement
                                                                                                                               WPA
Saudi Energy Forum Conference , Dammam Nov06




                                                                              Project                            PWPA
                                                                                                                                     FSA
                                               SWCC            LLA
                                                                             Company                                         WEC              Aramco
                                                                                                           Fuel (ECA)


                                                                                                                                     PWPA   : Power & Water
                                                                                                                               PPA            Purchase Agreement
                                                                                                                                     ECA    : Energy Conversion
                                                                                                                              SEC             Agreement
                                                                                        O&M
                                                     EPC                                                                             FSA    : Fuel Supply Agreement
                                                           Contract                      Contract
                                                                                                                                     LLA    : Land Lease Agreement
                                                       EPC
                                                      Contractor
                                                                                   O&M
                                                                                   Contractor
                                                                                                                                     OSA    : On Sale Agreement
                                                                                                                                     PIF    : Public Investment Fund

                                                                                                                                     Source: WEC, HSBC
                                                                        Contractual structure results
     10                                                            to a very low risk for private investors
                                                                                                                                            FICHTNER
                                                   The three WECs IWPPs

                                               In May 2003 a Consortium of
                                               Consultants consisting of:

                                               •HSBC bank, financial
                                               •Clifford Chance/Al-Jadaan, legal
                                               •Fichtner, technical

                                               were appointed as advisers to
                                               WEC for the three IWPP projects
Saudi Energy Forum Conference , Dammam Nov06




                                                                                   Note (WEC): Raz Az Zawr to be decided
                                                                                   between 1,100 MW ST-crude oil or 3,000 MW CCGT-NG
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                                                  The Shuaiba IWPP - first IWPP project in Saudi Arabia
                                                                        Technical Constraints
                                               Successful closing of    • Location: West Coast
                                               the Shuaiba project
                                               establishes a model      • 900 MWe - 880 m3/d, base-load plant
                                               for the involvement of
                                               private sector for       • crude oil fired steam power plant, with FGD
                                               IWPPs in the Kingdom
                                                                        • fully meets WB’s and PME environmental standards
                                                                        • MSF desalination plant
Saudi Energy Forum Conference , Dammam Nov06




                                                                        Financial constraints
                                                                        • First IWPP in Saudi Arabia
                                                                        • World’s largest, crude oil fired new-build IWPP
                                                                        • Project budget 2,4 billion USD
                                                                        • 20 year PWPA, availability based tariff including indexation
                                                                        • fuel supply by WEC based on ECA
                                                                        • Payment obligations of WEC guaranteed by MOF
                                                                        • Financial closing in Jan. 06 with a Malay-Saudi consortium
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                                                   Advancing the WEC programme


                                               WEC’s strong project         •   Following successful closing of the Shuaiba IWPP contractual constraints
                                               development pipeline             has largely been accepted by Bidders. On the same basis the other two
                                               offers significant
                                               investment, financing and        WEC IWPPs are being developed
                                               contracting opportunities
                                               for private investors IWPP   •   For the Shuqaiq IWPP - 850 MW / 212,000 m3/d, estimated project
                                                                                budget $1,9 billion - three bids from credible international and Saudi
                                                                                developers have been received and are being evaluated
Saudi Energy Forum Conference , Dammam Nov06




                                                                            •   This is an evidence that crude -oil fired IWPPs are bankable

                                                                            •   For the Raz-Az Zawr IWPP on the East Coast - 3,000 / 1100 MW *)
                                                                                1,000,000 m3/d, estimated project budget $3,0 billion - tender doc’s are
                                                                                under preparation. Pre-qualification and RFP to be issued 1st Qt 2007




                                                                                *) 3,000 MW if CCGT / 1,100 MW if ST- crude oil

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                                               Power system of Saudi Arabia

                                               The power system of SA consists of four main
                                               grids. The grids of the Eastern and Central
                                               Region are interconnected, those of the
                                               Western and Southern Region are isolated
                                               networks.

                                               Length of the lines in 2004:
                                               • Transmission:         33,685 km
                                               • HV-distribution:     141,054 km
                                               • LV-distribution:     148,688 km
Saudi Energy Forum Conference , Dammam Nov06




                                               • Total                323,427 km

                                               Peak load by SEC Region in 2003:
                                               Eastern Region:     11.0 GW
                                               Western Region:      8.0 GW
                                               Central Region:      8,6 GW
                                               Southern Region:     1.9 GW
                                               Total:              26,3 GW

                                               Magnitude of investment rqrd until 2020
                                               total:    92 - 117 billion US$
                                               of which: generation 51%
                                                         transmission 28%
                                                         distribution 21%
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                                                    Power sector investment opportunities

                                                                             • Generation capacity about 30.5 GW (of which SEC 27.7 GW) in 2004

                                               Significant                   • Small, insufficient reserve capacity margin
                                               investment
                                               opportunities for             • outdated PPs in the West, Central and Southern region need
                                               private investors
                                               and suppliers of                  replacement
                                               hard ware
                                                                             • New capacities of 30 GW to 40 GW required to cover growing demand

                                               Participation of              • Four grids, only Eastern and Central grid interconnected:
Saudi Energy Forum Conference , Dammam Nov06




                                               IPPs in power                         •Transmission 33.7 th. km, HV-distribution 141 th. km, LV-distribution 148,7 th. km
                                               generation is the
                                               prerequisite for the          • Construction 1st-Phase GCC-Interconnection project started
                                               future competitive                    •SA, Bahrain, Kuwait, Oman, Quatar (48 MW)
                                               market in the
                                                                                     •400 kV line from Kuwait to SA and SA - Bahrain , HVDC-interconnector to SA 60Hz/380 kV
                                               power sector of SA
                                                                                     grid

                                                                             • Interconnection of the four SA-grids planned in the medium term
                                                                             • Investment in the range of $92 to $117 billion acc. MoEW´s 25-year
                                                                                 electrification plan
                                                                                     •in billion $ minimum: generation 46.9, transmission 26 distribution 18.9


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                                               Sources: www ://eia.doe.gov/emeu/cabs/saudi.html, US commercial service, bfai                                     FICHTNER
                                                  List of SEC-Projects for the period 2006 - 2010

                                                                                Required capacity addition until 2024 about 30,5 GW

                                               Size and time requirements for    Plant                                        MW
                                               investment call for
                                               participation of the private      Tabuk power plant expansion                      200
                                               sector - IPP - in the
                                               implementation of the
                                                                                 Shuqaiq-III power plant                          600
                                               programme                         Muzahimiyah power plant                        1,725
                                                                                 Rabigh-II power plant                          2,400
                                                                                 Quarayyat-II expansion                         3,600
Saudi Energy Forum Conference , Dammam Nov06




                                                                                 Salboukh power plant                           1,725
                                                                                 Power plant # 10                               1,725
                                                                                 Yanbu-II power plant                           2,400
                                                                                 Riyadh power plant-7 expansion                   500
                                                                                 Quasim power plant expansion                     360
                                                                                 Al-Khafgi power plant                            200
                                                                                 Total                                         15,435
                                                                                 estimated CAPEX range billion              $ 12 - 15
                                                                                 Source: US-commercial service, June 2006
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                                                  Industrial sector investment opportunities

                                                                                  • Industrial cogen - IPPs already implemented:
                                               Cogeneration of power and              • SADAF cogen 250 MW
                                               industrial steam is a highly           • Saudi Aramco 4 cogen plants, total capacity 1,074 MW
                                               energy efficient technology            • Rabigh cogeneration plant, 475 MW
                                               achieving fuel savings of about
                                               35%.
                                                                                  • Huge cogeneration potential in the oil/gas, petrochemical
                                               Possibilities to utilize process     and basic industries
                                               waste heat for power generation

                                               Small attention given to this      • BOO schemes most suitable with the industrial facility
                                               opportunity in SA until now.
Saudi Energy Forum Conference , Dammam Nov06




                                                                                    on-site as off taker of cogen power and steam
                                               Provide attractive investment
                                               conditions for IPP without         • Possible excess power production can be sold to the
                                               subsities and state guarantees       Single Buyer (Transmission Company) in future

                                                                                  • Preferred option, however, is the transmission of excess
                                                                                    power to other facilities of the same enterprise against
                                                                                    reasonable transmission fee. This approach may
                                                                                    accelerate process

                                                                                  • Favorable conditions for IPPs with regard to financing
                                                                                    and payments even without state guarantees.
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                                               Conclusions

                                                   •   Size of the projects and the magnitude of investment in the power and
                                                       power/water sector SA call for participation of private sector
                                                       investment


                                                   •   Legislation in SA provides favorable conditions for IPPs and IWPPs
Saudi Energy Forum Conference , Dammam Nov06




                                                   •   Successful closing of the Shuaiba project has established a model for
                                                       IWPPs in Saudi Arabia


                                                   •   Stand alone power generation projects could be developed in a similar
                                                       model


                                                   •   Participation of IPPs is the precondition for competition in the power
                                                       sector of SA
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                                               Glossary

                                                          BOO     Build, Own & Operate
                                                          BU      Business Unit
                                                          ECA     Energy Conversion Agreement
                                                          ECRA    Electricity & Cogeneration Regulatory Authority
                                                          EPC     Engineering Procurement Construction Contract
                                                          FSA     Fuel Supply Agreement
                                                          GCC     Gulf Co-operation Council
                                                          GW      Giga Watt
                                                          IPP     independent Power Producer
Saudi Energy Forum Conference , Dammam Nov06




                                                          IWPP    Independent Water & Power Producer
                                                          LLC     Limited Liability Company
                                                          MoF     Ministry of Water and Electricity
                                                          MW      Mega Watt
                                                          PIF     Public Investment Fund
                                                          RFP     Request for Proposals
                                                          PPA     Power Purchase Agreement
                                                          PWPA    Power & Water Purchase Agreement
                                                          SABIC   Saudi Basic Industries Corporation
                                                          SEC     Saudi Electricity Company
                                                          SWCC    Saline Water Conversion Corporation
                                                          WEC     Water & Electricity Company LLC


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                                                                                                               FICHTNER
                                               Thank You for Your Attention
Saudi Energy Forum Conference , Dammam Nov06




                                                       FICHTNER      Your contact person:
                                                                     Panos Konstantin
                                                                     Phone +49 711 / 8995-266
                                                                     KonstantinP@fichtner.de




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                                                                                         FICHTNER

				
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