RIYADH, 7 June — A recent study revealed that the Kingdom would require a whopping $115 billion during the next 23 years to set up new power generation projects to meet surging demand. The highlights of the study, conducted by AlBank AlSaudi AlFransi, were released here yesterday by BSF Managing Director Bertrand Viriot.
Viriot said the Kingdom’s power-generating capacity currently stands at 23,400 megawatts, while predicting additional power capacity requirement to the tune of 20,000 megawatts by the year 2010. These figures, he said, were based on a 5.5 percent annual demand growth in power consumption in Saudi Arabia, where the total number of electricity subscribers exceeds 3.4 million at the moment.
The Kingdom, where 48 percent of power is consumed by the residential sector, has been pursuing a massive electrification plan under which more than 7,100 cities, towns and villages have been electrified.
The industrial sector uses up 24 percent of total power output while the agriculture sector consumes only 2 percent.
On the role of commercial banks in financing power projects, Viriot said “BSF is fully prepared to finance independent power projects (IPPs) in the Kingdom, whether on a stand-alone basis or in conjunction with other commercial banks. The bank could assist in raising necessary capital for these projects through private placement schemes in foreseeable future”.
He said there were two ways for involving the private sector in the electricity sector — direct sale of the government’s shares in different power companies whether in the Saudi stock market or via placements abroad.
“Another way is facilitating the establishment of IPPs on build, operate and own (BOO) or build, operate and transfer (BOT) basis,” Viriot said.
He pointed out that this growth in power consumption had prompted the electricity experts to call on the Saudi government to involve the IPPs and to embark on serious reforms in the power sector.
This is in addition to the call for restructuring including a regular review of tariffs, which may form part of the privatization plan aimed at ensuring the development of power sector.
According to another study, the Saudi government will be required to invest as much as $117 billion by 2020 to meet the incessant growth in demand. The government has already welcomed IPPs which are competent, capable and well-managed with long-term plans and competitive prices for consumers, to invest in the energy sector.
There are around 200 IPPs currently in operation worldwide. The private sector has taken the management, operation, rehabilitation or construction risk of 534 power projects in different countries with $131 billion investments during the last few years.
