JEDDAH, 26 March 2005 — Work on the multibillion-dollar GCC power grid project, which is to link the six-member Gulf Cooperation Council with an integrated electricity network by the year 2010, will start in September this year.

Dr. Saleh Alawaji, chairman of the GCC Interconnection Authority (GCCIA), and Saudi deputy minister for electricity affairs, said tenders for the project’s first phase, which will cost $1.2 billion, would be opened in April and May.

He said the project, which is to reduce the cost of power generation in the six GCC states of Saudi Arabia, Qatar, Bahrain, Kuwait, Oman and the United Arab Emirates, would be carried out in three phases.

GCCIA’s board of directors held a meeting in Abu Dhabi on Thursday and discussed matters related to the project.

The authority will award 13 contracts worth $1.25 billion to link Saudi Arabia with Kuwait, Bahrain and Qatar in the first phase.

Alawaji said the board meeting endorsed the audit report of the authority’s financial statement for 2004 as well as the board’s report, which included reassessment of capital and finance plan for the giant project.

Under the first phase, an 800-km 400KV overhead line will link Kuwait’s Al-Zour station with Doha and a 400KV submarine line will link Saudi Arabia with Bahrain.

The 13 contracts include sub stations, back-to-back HVDC converter station, overhead transmission lines, submarine cables, and a control center. Alawaji said the first phase would be completed by 2008.

Saudi Arabia has offered to meet 40 percent of the cost of the first phase while Kuwait will provide 36.5 percent, Qatar 13.5 percent and Bahrain 10 percent.

The second phase will link the United Arab Emirates with Oman. The resulting two mega grids will be joined in the final phase.

About the economic viability of the ambitious project, the chairman said the benefit to cost ratio for Phase-1 is 1:5 and that the pay back period for the investment is less than four years. Given the small incremental cost of Phase-III, he said this phase would further improve the attractiveness of the project.

Upon completion of Phase-I and the reduction of generation capacity, the total cost savings rate of return after four years from operations would be $2.5 billion. Once Phase-III is completed, Alawaji said that the total cost saving rate of return after three years from operations is projected at $3.35 billion.

The GCC countries gave the green signal for the power grid late last year after the project was declared technically feasible. “The intent is to enable a wide participation by international contractors in the implementation of the project in an efficient and economic manner,” he said.

About the time schedule for the project, Alawaji said bidders have already been pre-qualified for the different packages in the first quarter of 2004. He said that soon the bids will be evaluated and it is expected that contract awards will be made in August/September 2005.

The power grid is expected to boost electricity network in GCC member states. It will help them exchange electricity to meet growing needs, utilize their surplus output, save money on new power projects and ensure uninterrupted electricity supply.

The GCCIA has appointed Canada-based SNC Lavalin to prepare tender documents and tender evaluation and selection of contractors for the first phase.

The GCC states began discussing the project some 20 years ago to integrate their transmission systems and make better use of their power-generating capacity.