Alstom chief: KSA’s amazing growth story fueling corporate capital influx

The economic reforms pursued by Saudi leaders have reinvigorated market confidence and stability, encouraging multinationals such as Alstom to invest more in the Kingdom, says a top executive.
“By being a true partner to the Kingdom’s development, we now stand to not only secure our fair share of this highly attractive and stable market but, more importantly, we also stand to contribute to the amazing growth story of the Kingdom,” said Nader Abdellatif, Alstom country president for Saudi Arabia.
“The huge market growth in Saudi Arabia is attracting more and more investments,” Abdellatif said.
He said the visionary leadership of Custodian of the Two Holy Mosques King Abdullah is driving the Kingdom’s impressive economic growth and highly favorable investment climate.
It is in the context of this positive background and highly encouraging scenario that various corporate entities are making rapid strides and expanding across the Kingdom.
One of them is Alstom which, in fact, is at the start of a new phase of its long presence in Saudi Arabia.
This is in addition to the stable outlook and coherent business practices of our main client partners, especially SEC, SWCC, ACWA and Altoukhy and other major local partners.
“A key driver for Alstom also, especially on the power side, was the constant support and encouragement for local manufacturing, local training programs, and technology transfer initiatives that we witnessed from some of the leaders of the power sector in the Kingdom,” he said.
“We’ve obviously worked very closely with Saleh Alawaji, deputy minister for power and chairman of SEC, and Ali Al-Barrak, SEC CEO, who have had a major impact on this increased local presence by Alstom Power. We received similar support and guidance on the strategic Yanbu power plant project from Abdulrahman Al-Ibrahim, governor of SWCC,” said Abdellatif.
“Saudi Arabia continues to be one of the most important markets for Alstom in the Middle East and we are committed to furthering our presence in this market,” Abdellatif said.
These investments also come into training programs: A memorandum of understanding has been signed between Alstom and SEC to establish a pilot expert development program. The brainchild of SEC’s leadership, this program will embed top SEC experts within Alstom businesses for on-the-job training placements, and further cement Alstom’s commitment to develop local expertise.
This MoU is the latest step of Alstom’s 13-year-long partnership with SEC.
There is growing concern for more efficiency and flexibility for power generation across the Kingdom. Alstom is answering this market shift by supplying major power plant components and steam add-on solutions in Saudi Arabia and the entire Middle East, he said.
Extensive industrial development across Saudi Arabia is expected to drive up electricity demand to an estimated 85 GW by 2022.
Six major economic cities currently being built already require massive energy resources, he said, adding that electricity demand is already rising at around eight percent a year.
Alstom, a global leader in the world of power generation, power transmission, has been present in Saudi Arabia for over 60 years.
“It gives me immense pleasure to put on record that no less than 20 percent of the Kingdom’s power is generated from Alstom equipment,” Abdellatif added.
Alstom installed its first gas turbine in Saudi Arabia in 1951. Since then, Alstom’s presence in the Kingdom has continued to grow significantly.
Abdellatif said Alstom has achieved many milestones since its entry into the Kingdom’s lucrative power generation market.
In 1998, Alstom-led consortium signed the contract with Saudi Electricity Company (SEC) to build stage one of the Shoaiba power plant project consisting of five 400 MW units, which was completed in 2003.
In 2004, it signed the contract for stage two of Shoaiba project, including six 400 MW units and was completed in 2007.
The Alstom-led consortium signed the contract in 2008 to build Stage Three of Shoaiba power plant, completed in 2012 and delivered ahead of schedule, Abdellatif added.
He said the Shoaiba thermal power plant — at 5,600MW — is the region’s biggest and known as “the giant of the Middle East.”
Alstom has been present for many years also on the GRID sector side, with a significant presence in SEC’s High Voltage network (more familiar with the previous name Cogelex).
“We have completed the Gulf’s largest high voltage direct current (HVDC) converter station (3 x 60 MW) in 2009 and the network management system that connects the six member states’ energy systems with GCCIA,” he said.
Alstom signed a contract in 2012 with Arabian Bemco Contracting Co. and GS E&C for the steam tail of the Riyadh PP12 gas-fired power plant in Saudi Arabia.
In 2012, Alstom built automation systems and protection relays factory in Alkhobar. It awarded the supply and supervision of 21x380 kV gas insulated switchgear for the Dawadmi substation in 2012.
In 2013, Alstom was awarded contract by SEC for the Al-Salam substation and associated circuits in Saudi Arabia.
It announced the launch of Expert Development Program with SEC and Graduate Development Program in Saudi Arabia in 2013.
Alstom awarded in 2013 a contract to supply equipment for the five 620 MW units for Yanbu 3 power and desalination plant.
It awarded a 170 million euro contract to supply steam turbine generators for Shuqaiq Power Plant in 2013.
After Shoaiba, Alstom will demonstrate its technological excellence at Yanbu 3 power and desalinization plant that will be among the first supercritical plants for the region running on HFO.
The plant will provide power to Makkah and the desalinization plant will serve Madinah.
Saudi Arabia today has 55 GW in installed base out of which Alstom is able to service its own fleet as well as other manufacturers.
With a growing population and new industries, power needs are expected to grow with another 60 GW planned over the next 10 years.
One major milestone for us of course came in the summer when Alstom was awarded as part of the FAST consortium 3 main lines of the Riyadh Metro project.
This project is a game changer for us in terms of presence and visibility consider being such a high profile project.
Saudi Arabia is investing a lot in railways and the future is very bright in this sector, Abdellatif said.
Alstom has participated in the transport project and was awarded 1.4 billion-euro turnkey metro project in Riyadh in 2013, he added.
Alstom, as a member of the FAST consortium, has received a letter of award by the Riyadh Development Authority (ADA) to provide a complete automatic and driverless metro system to equip three of the six lines to be built by the city.
The total value of this project, which is financed by the government of Saudi Arabia through the Public Investment Fund, amounts to 6 billion euro.
Riyadh counts almost 6 million inhabitants, with an expected population explosion in 2030 set to increase the population to more than 8 million.
The city has decided to build six new subway lines in order to reduce traffic congestion, enhance the economic dynamism of the Saudi capital and improve its inhabitants’ quality of life.
One of the largest turnkey metro projects ever launched in the world, this fully automatic driverless network will be 170 km long and will include 87 stations.
The network is scheduled to enter commercial service in 2018.
According to Abdellatif, Alstom will continue its aggressive strategy in Saudi Arabia in 2014.
One of the key milestones of our presence in the Kingdom has been that Alstom and our reputable and well known partners Arabian Bemco Contracting Co. Ltd. have signed an agreement to create a joint venture (JV) company — Alstom Arabia Power Factory Ltd. — with investment worth over SR240 million.
The company will set up a world-class manufacturing facility in Saudi Arabia for power generation components, primarily heat recovery steam generators (HRSGs).
This operation reflects Alstom’s ongoing commitment to localization within the Kingdom and offers strong market opportunities across the Middle East.
The factory, to be located in King Abdullah Economic City (KAEC), north of Jeddah, will train and employ hundreds of Saudi nationals to start with.
Multinationals have a wealth of knowledge and know-how. On transferring the know-how to local companies in the Kingdom, Abdellatif said: “We share the know-how with the local companies for manufacture sharing because local companies cannot do by their own. They need know-how.”
For many years, he said Alstom’s engagement in Saudi Arabia was limited to mostly pursuit of projects, without seeking to bring any higher level added-value to the country.
This trend, however, has been a major turnaround over the last few years into a much more locally engaging and win-win partnership approach and not only a seller-buyer relationship.
Abdellatif said the local JV with Bemco will eventually own the full license to manufacture HRSGs with Alstom technology.
At the same time, Alstom will benefit from Bemco’s local expertise and know-how.
The partnership will serve SEC and other major local and regional utilities in bringing the latest in technological excellence to the Kingdom.
With this new investment, Alstom also inaugurated its Rabigh Thermal Services workshop in Rabigh earlier this month.
Strengthening Alstom’s long-term local presence, the Rabigh workshop meets reconditioning and repair needs quickly and efficiently.
Alstom’s Rabigh workshop will enhance localization and training, while providing new services that are faster and more flexible than any other in the Kingdom.
The JV will be a limited liability company incorporated under the laws of the Kingdom with a registered office in Jeddah.
Both Alstom and Arabian Bemco will take a 50 percent stake.
Following technology transfer, the JV will be the exclusive licensee of Alstom HRSG technology in Saudi Arabia.
It will afford Alstom and Bemco a strong local base across the Middle Eastern region, which represents around 25 percent of the global market.
In addition to Saudi market, this facility will also cover key territories such as Iraq, Bahrain, Kuwait, Qatar, Oman, the UAE, Yemen, Jordan, Syria, Lebanon and Egypt.
Abdellatif said: “Building the new workshop in the Western Region enhances Alstom’s local presence and brings its world-class technology within easy reach to our main customers, primarily Saudi Electricity Company. It complements the Jebel Ali facility in the UAE to double Alstom’s service workshop capacity in this part of the Middle East.”
Alstom is also in considering further possible investments in the GRID sector.
Abdellatif said Alstom is carrying on R&D initiatives with SEC, Saudi Aramco and The King Abdullah University for Science and Technology (KAUST) for better utilization of fuel oil in their power plants. A similar key research and development (R&D) initiative is ongoing with Saudi Aramco for joint development in oxy-combustion (carbon capture).
A diversification toward renewable energies is expected in the Kingdom: Wind and solar energies will have a growing part in future energy mix.
“Alstom smarter solutions integrate power generated by these sources by actively managing power flow, guaranteeing network stability and better managing load,” he said.
About labor force, Abdellatif said Saudi Arabia is raising the level of labor pool (employment pool) with improved education, vocational training and student scholarship (abroad).
“Saudi Arabia is going in the right direction by promoting education in the sectors that are growing very fast.”
He said recent labor regulations did not have any major impact on Alstom projects whereby “we managed to absorb the change in labor laws very well”.
But he said: “There remain to be obviously some difficulties in accommodating some of these policies going forward, but we are managing to carry out various upstream initiatives such as training programs for university graduates to help in their quicker integration and to continue smooth flow of work on various Alstom projects.
“Two key elements of the course, we are hopeful, for is to see these investments by companies like Alstom and others being met by the suitable localization incentives in the launched future tenders.
“This, combined with more accommodating company establishment regulations will definitely even attract more and more investments into Saudi Arabia’s huge and increasingly business-friendly market.
“In the end, our outlook on the Kingdom is clearly highly positive, and we are keen on having our own small and humble contribution to the amazing growth story that the Kingdom is currently witnessing.”