Farayand Virtual World

*Tender for GCC power grid to be offered this year

Work on the mega project is expected to start in early 2005

A multi-billion dollar power grid linking the six Gulf Cooperation Council countries will be offered for tender before the end of the year after authorities in these countries agree on financing the giant project.

Work on the project, which was approved by the Gulf Cooperation Council (GCC) leaders at a summit in Kuwait in 1997, is expected to start in early 2005 to harness extra power in each Gulf state and provide adequate, reliable power to the fast developing region.

"The most important development is that after several feasibility studies, the GCC authorities have agreed on the financing aspect and the share of each country in the project," a source said.

Ministers of water and electricity have opted for a new method of financing the project, which when completed in 2008 will cost more than $6 billion. The GCC source said it would be a combination of direct financing by the sovereign states each according to their size and needs as well as their long-term borrowing from banks and other financial institutions.

The project will be divided into three phases. The first, costing about $1.25 billion, will link power grids in Kuwait, Saudi Arabia, Bahrain and Qatar. The second, which is already under way, is between the UAE and Oman.

The third phase will bring all these grids together, saving more than five billion megawatts in wasted electricity, worth an estimated $3.5 billion.

The payback period for the project is four years for phase one and less than three years for the two phases together, the source said.

"The final funding arrangement to create the integrated regional power system was finalised last May. The cash flow will start at the beginning of 2005. The four states that were involved in the first phase have to arrange for 30 per cent of the equity, as five per cent was paid when the GCC Incorporated Authority (GCCIA) was created," the source said. The GCCIA was created in 2001 to implement the project with a target completion date of 2010.

For the equity portion, Saudi Arabia has agreed to contribute 40 per cent, Kuwait 33.8 per cent, Bahrain 11.4 per cent and Qatar 14.8 per cent.

It has been agreed that the different GCC states will finance the project by paying 35 per cent of their shares from their own budgets and financing the rest by loans. "This option is cheaper and the debt and equity will be provided to the GCCIA as per cash flows of the project.
"There will be huge stra-tegic and financial gains from the project. It will pave the way for energy trading between the GCC states," he said.
(Source: Gulf News)