Power & Water ? Dubai & the Northern Emirates Sector Report Power & Water Dubai and the Northern Emirates United Arab Emirates (UAE) Updated by: Adil Khan, Trade & Investment Adviser, British Embassy Dubai Last revised Jun 2009 Whereas every effort has been made to ensure that the information given herein is accurate, UK Trade & Investment or its sponsoring Departments, the Departments of Trade & Industry and Foreign & Commonwealth Office, accept no responsibility for any errors, omissions or misleading statements in that information and no warranty is given or responsibility is accepted as to the standing of any firm, company or individual mentioned. www.uktradeinvest.gov.uk Power & Water ? Dubai & Northern Emirates Table of Contents OVERVIEW 3  CHARACTERISTICS OF MARKET   OPPORTUNITIES 4  KEY METHODS OF DOING BUSINESS 5  MORE DETAILED SECTOR REPORTS 6  PUBLICATIONS 6  EVENTS 6  CONTACT LISTS 7  www.uktradeinvest.gov.uk Page 2 of 7 Power & Water ? Dubai & Northern Emirates OVERVIEW The demand for electricity and water is growing by approximately 15% per year in the UAE (more than five times the rate of countries like the US and UK). This growth is being driven by significant rises in population, economic diversification and the high levels of investment in new projects. Middle East Economic Digest (MEED) estimates that the UAE will require an additional 20000 MW of new capacity over the next 12 years ? equivalent to 20 large power stations. The Emirates International Bank has carried out a recent survey to ascertain whether the UAE will be able to cope with increased electricity demand. It concluded that, in just four years, the UAE's generating capacity will have to increase by 60%, with the Dubai market growing most rapidly. Despite the economic slowdown, Dubai?s growth rate for electricity and water in 2009 will continue to grow at 15%. Although a large number of projects have been put on hold, DEWA will continue to add capacity, as investing in infrastructure is of strategic importance to Dubai. In its budget for 2009 issued in January, Dubai has announced a 42% increase in public spending for 2009 to £6.9 billion, 45% of which has been set aside for infrastructure and public transport development. This is a 33% increase over 2008. Dubai Water and Electricity Authority (DEWA) expects to utilise the latest turbine technology to increase capacity, focus on desalination and also increase Transmission and Distribution (T&D) infrastructure to meet demand. A total investment of more than $4bn in power generation, transmission and distribution is required in the next ten years to roughly double overall generation capacity to more than 9000MW in Dubai. The need for extra capacity and greater efficiency is creating opportunities for UK companies. CHARACTERISTICS OF MARKET The United Arab Emirates is made up of seven sheikhdoms (Abu Dhabi, Dubai, Fujairah, Ras Al Khaimah, Ajman, Umm Al Quwain and Sharjah) and has a total population of about 5.6 million. The federal capital of the UAE is in Abu Dhabi that controls most of the UAE?s oil and gas reserves. Dubai is the country?s business hub. The power and water sector in the UAE has been characterised by rapid growth, driven by high demand from industrial, commercial, and domestic consumers. The UAE has spent over $5bn to develop power and water desalination projects in the past four years and has a predicted growth of generating capacity (all natural gas fired) in the sector averaging 12% per annum (14-18% in Dubai) and water production 5% per annum (the highest per capita in the world exceeding 300 litres per person/day). This, combined with a stable business environment and the fact that over $6bn is likely to be spent over the next five years on power and water capacity additions, indicates the UAE should be considered an important market for UK companies. www.uktradeinvest.gov.uk Page 3 of 7 Power & Water ? Dubai & Northern Emirates Taken in the context of the Gulf Co-operation Council (GCC) countries? energy requirements, the opportunities are even more attractive with $160-$200bn to be invested to develop 14-20 energy projects in the next 10-12 years to meet the increase in the Gulf energy consumption. Key project areas include privatisation, water distribution and wastewater management and the long-term protection of resources. Dubai has long established itself as a regional trade and business hub and provides a convenient gateway to some of the more challenging markets in the region. DEWA delivers electricity to about 400,000 customers and water to almost 331,000 customers across Dubai. DEWA owns all of Dubai's power assets and operates under a non-privatisation mandate. Its present generation capacity is 5400MW of which 3900MW is through gas turbines and 1500MW through steam turbines. It has 9 power generation and desalination plants the majority of which are located in Jebel Ali. With 7000 employees, DEWA has developed its power plants on a traditional EPC basis and has maintained that it can function as efficiently as a private developer. Sharjah Electricity and Water Authority (SEWA) have a power generation capacity of more than 1900MW. SEWA has 6 power and desalination plants and is in the process of refurbishing and adding capacity to its Hamriya Plant. It has more than 200,000 customers across Sharjah and its installed generation capacity comprises 1456MW gas turbine, 432MW steam turbine and 14MW diesel turbine. With the refurbishment, SEWA hopes to add capacity so as to reach 2950 MW by 2010. The Federal Electricity and Water Authority (FEWA) was established in 1999 to generate and distribute electricity and water in the Northern Emirates (excluding Sharjah). FEWA owns and operates six power generating plants and three water desalination plants, producing 1191MW of power and 18232 million gallons of water per day. FEWA is the smallest of UAE's utility authorities. The regional national grid is currently being expanded and at a broader level the UAE is also participating in a project to link the electricity grids of the six Gulf Co- operation Council Interconnection Authority (GCCIA) countries, at an estimated cost of $3bn. OPPORTUNITIES Although DEWA will continue to invest heavily to raise power generation and desalination capacity to meet demand from the soaring residential and commercial developments, the current economic crisis might slow down this investment. DEWA is committed to adding capacity and the cooling of growth is likely to give DEWA as well as the other utility companies like SEWA and FEWA the opportunity to catch up with the demand. The population of the Northern Emirates is growing by 15-18% and real estate projects worth AED 80 billion are being carried out. FEWA?s electricity generation is unable to fulfil the immediate future power demands due to this growth. Some of the Emirates like Ajman are looking at plugging the gap by looking for temporary power solutions till a 350MW plant is up and running by 2012. Fujairah, another emirate, is keen to talk to companies about setting up alternate energy solutions like wind turbines in order to generate electricity to keep up with the galloping demand. In order to attract private investment in electricity generation in the Northern Emirates, a decree was passed recently, that allowed private companies www.uktradeinvest.gov.uk Page 4 of 7 Power & Water ? Dubai & Northern Emirates to set up power generation plants in the Northern Emirates. Companies willing to go the Build, Operate, Transfer (BOT) way will find the going easier, especially in the current scenario. Equipment supply, investment and project opportunities exist throughout the whole project development lifecycle and range from IPP/IWPP developer, EPC contractor, owner/developer/lender?s engineer, insurance consultants, legal/financial and risk management consultants, O&M, modern power generation services, boilers, small gas turbines, gas engines, T&D equipment and services, switchgear, and metering systems. Whilst it is clear that the market is strongly price-driven there still remains significant opportunity for value added equipment and services like Asset Management, Benchmarking, Corporate Social Responsibility (CSR) and Energy Conservation. UK companies also have the advantage of being well respected and trusted. They must however be aware of increased competition from other countries especially from the Far East and the Indian Sub-continent. KEY METHODS OF DOING BUSINESS DEWA tenders are advertised in the local Arabic/English press and are posted on the DEWA website. All sub-contractors will need to be on a DEWA approved list which is a relatively straightforward process. The results for all bids are posted on the website, thus providing organisations with information about successful tenders and prices. A foreign company must have a local partner/sponsor in order to bid and the UK Company bears all liabilities. Bids have to be in on time and a 5% tender fee must be paid to qualify. Contracts are generally awarded to companies who have demonstrated they have met technical standards at the lowest price. DEWA prefer companies to take a long-term view of the market and build relationships and have a presence on the ground. When considering doing business in Dubai and the Northern Emirates, it is essential to obtain legal, financial and taxation advice. A useful contact list of lawyers and other relevant professional bodies as well as further information on the fire, police & security sector in the country is available from the Embassy. Lists of lawyers are available from the Embassies in Dubai and Abu Dhabi at www.ukinuae.fco.gov.uk. Other background information on doing business in the UAE can be found on UKTI?s website. Simply go to the UAE country page where you will find information on: ? Economic background and Geography ? Customs & Regulations ? Selling & Communications ? Contacts & Setting up ? Visiting and Social hints and tips www.uktradeinvest.gov.uk Page 5 of 7 Power & Water ? Dubai & Northern Emirates MORE DETAILED SECTOR REPORTS Research is critical when considering new markets. UKTI provides market research services, which can help UK companies doing business overseas including: ? Overseas Market Introduction Service (OMIS). Bespoke research into potential markets, and support during your visits overseas ? Export Marketing Research Scheme In depth and subsidised service administered by the British Chambers of Commerce on behalf of UKTI Please contact your local International Trade Adviser if you are interested in accessing these services or for general advice in developing your export strategy. PUBLICATIONS MEP Middle East - information for mechanical, electrical and plumbing professionals. An ITP business publication www.itp.com. Utilities Middle East - catering to Middle East water, gas and electricity professionals. An ITP business publication www.itp.com. EVENTS There are two particular exhibitions in Dubai relevant to this sector: Middle East Electricity Show annually in February WETEX annually in March UK Trade & Investment?s Tradeshow Access Programme (TAP) can help eligible UK businesses take part in overseas exhibitions. Attendance at TAP events offers significant benefits: ? possibilities for business opportunities both at the show and in the future ? chance to assess new markets and develop useful contacts ? grants are available if you meet the criteria ? UKTI staff overseas will be available to assist delegates Find out if you are eligible to apply to attend this event and more about the support UKTI can offer on the UKTI website?s Market Entry page. Details of TAP events can be found in the Events section on the UAE page. Other Market Visit Support may be available via your local International Trade Adviser. www.uktradeinvest.gov.uk Page 6 of 7 Power & Water ? Dubai & Northern Emirates CONTACT LISTS UKTI?s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest adviser by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. www.uktradeinvest.gov.uk Page 7 of 7