RIYADH, 7 November — In a major move to further privatize the power sector, the government has announced that power transmission will be thrown open to local and foreign investors.
"Power transmission will be open to the private sector," Minister of Industry and Electricity Dr. Hashim Yamani told an energy conference. "Very soon transmission will be removed from the negative list." He was referring to the "negative list" of sectors closed off to foreign investment.
Yamani said restructuring of the power sector — where demand for electricity is set to soar by 150 percent between 1999-2023 — was about to be completed, thus providing momentum to the privatization drive.
Dr. Yamani said a major milestone in the Kingdom’s economic restructuring program was reached with the amalgamation of the regional power companies into a single entity.
A proposal for a regulatory authority for the power sector, in the making for the past two years, will be put to the Supreme Economic Council next Sunday for consideration, he said.
"This will complete the basic restructuring," said the minister.
"Now we are ready to talk to any investor on the generation side."
He said the regulatory body will seek to balance the interests of both suppliers and consumers. It will also regulate the tariff structure as part of its supervisory role.
Investment in power generation could generate a 12 to 15 percent rate of return, he reckoned. Other steps to restructure the power sector were already well under way.
"Little by little we have reduced the need for government intervention and subsidies," said Yamani. "This is a major objective of restructuring to prepare for private sector involvement."
Additionally, the Kingdom modified its tariff system in April 2000 "so that the sector could sustain itself," he said.
Yamani said the sector is full of lucrative opportunities for local as well as foreign investors especially once the transmission field is opened up.
Rapid expansion in the power sector will require some SR340 billion ($90 billion) in investment from 1999-2023, with generation needing SR177 billion, transport SR92 billion and distribution SR71 billion, Yamani said.
The minister said the number of power connections, currently at 3.7 million, was projected to reach 8.5 million by 2023. Similarly, power consumption will increase from 25,000 MW to 66,000 MW, while the length of the transmission cables will reach 31,000 km during the period.
Speaking on behalf of the Ministry of Petroleum and Mineral Resources, Prince Faisal ibn Turki, advisor to the ministry, stressed the need to channel into the economy huge funds that are currently being spent on the import of goods and services required for the power and petrochemical sectors.
