Riyadh to sustain power spending
12 March 2024
Latest news on Saudi Arabia’s power sector:
> Neom to start qualification for $2.7bn hydropower scheme
> Saudi power buyer holds Remah and Nairiyah meetings
> Enowa gives extra day for Gayal and Shiqri bidders
> Gayal and Shiqri bidders race to meet deadlines
> Neom extends Duba Energy Park bid deadline
> Data centre activity soars in Saudi Arabia
> US firm wins Al Kahfah solar tracker package
> Saudi-Omani team to set up transformers plant
The project pipeline in Saudi Arabia’s power generation sector continues to expand unabated.
The value of projects in execution or about to start construction has increased by 17% to $34bn compared to six months earlier, according to the latest available data from regional projects tracker MEED Projects.
The value of projects in the pre-execution phase similarly increased by 16% to reach $51bn during the same period. New schemes are expected to be announced in the coming 12-18 months, including power generation projects catering to the $500bn Neom development.
Two key factors underpin the ramp-up of both conventional and renewable energy generation capacity in the kingdom, notes a Dubai-based senior executive with an international developer.
“Saudi Arabia intends to become the renewable supplier of choice on the GCC grid,” the executive said, referring to the regional network linking the electricity grids of Bahrain, Kuwait, Oman, Qatar, the UAE and Saudi Arabia.
The second factor is the kingdom's push for industrialisation and urbanisation, including the adoption of electric vehicles and data centres.
“Saudi Arabia has very strong regulations to keep data within its domicile and the digitalisation needed to achieve the kingdom’s modernisation plans needs large data centres and corresponding electricity supply,” she notes.
Overall, Saudi Arabia awarded power generation contracts worth more than $16.1bn in 2023, which is higher than the total value of contracts awarded in the preceding eight years and nearly six times the value of contracts awarded in 2022.
The kingdom’s principal buyer, Saudi Power Procurement Company (SPPC) and its sovereign wealth vehicle, the Public Investment Fund (PIF), awarded the bulk of these contracts.
Shrinking renewables share
The share of renewable energy in the total value of awarded contracts shrunk to 28%, from about 82% in 2022, due to the award last year of the first gas-fired independent power producer (IPP) projects since 2016.
SPPC awarded a consortium comprising Saudi Electricity Company and Saudi utility developer Acwa Power the $3.9bn contract to develop and operate the Qassim 1 and Taiba 1 IPP projects in November 2023. Each combined-cycle gas turbine (CCGT) plant has a capacity of 1,800MW.
A team comprising the local Al Jomaih Energy & Water, France’s EDF and the local Buhur for Investment won the contract to develop the other pair of CCGT-based plants – the Taiba 2 IPP and Qassim 2 IPP schemes, each of which has a capacity of 1,800MW.
SPPC also awarded the contracts for the solar photovoltaic (PV) schemes under the fourth procurement round of the kingdom’s National Renewable Energy Programme (NREP).
A consortium that includes France's EDF Renewables, Abu Dhabi Future Energy Company (Masdar) and the local company Nesma won the contract to develop the 1,100MW Hinakiyah solar IPP project. A consortium led by China's Jinko Power won the contract to develop and maintain the 400MW Tubarjal solar IPP scheme.
The PIF, meanwhile, awarded contracts last year for the development of three solar PV schemes with a total combined capacity of 4.5GW to Acwa Power and its partner Water & Electricity Holding Company (Badeel). The 2GW Al Rass 2, 1.1GW Saad 2 and 1.4GW Al Kahfah solar PV IPPs require a total investment of about $3.4bn.
Unawarded projects
Following the award of these contracts, SPPC started the procurement process for four solar PV schemes with a total combined capacity of 3.7GW under the NREP fifth round, and four new CCGT schemes with a total combined capacity of 7.2GW.
Bids are due on 10 June for the 2GW Al Sadawi, 1GW Al Mas, 400MW Hinakiyah 2 and 300MW Rabigh 2 solar PV IPP schemes.
Bids are also due in late June for the Remah 1 and 2 and Al Nairiyah 1 and 2 gas-fired CCGTs.
As of early March, Neom’s utility subsidiary, Enowa, had received bids for two renewable energy engineering, procurement and construction (EPC) contracts, the 1.2GW Gayal wind farm and 800MW Shiqri solar farm.
Enowa is understood to be preparing a site for two CCGT plants to be built on a fast-track basis at Duba Energy Park. The first phase comprises a transportable gas turbine generator (GTG) with a capacity of 300MW, which is designed to deliver emergency power to Neom.
The second phase is a permanently installed 500MW facility comprising heavy-duty GTGs. Both are considered fast-track projects, with the first phase due for completion in early 2024 and the second phase in early 2025.
The first phase of a multi-gigawatt programme to build renewable energy capacity in Neom using a public-private partnership model is also expected to start soon.
Soaring costs
The raft of new projects coming to the pipeline is exerting pressure, particularly for the CCGT supply chain, experts tell MEED. “On average, the EPC prices have more than doubled since before the Covid-19 pandemic began,” says an executive working for an original equipment manufacturer (OEM).
The average EPC cost per kilowatt for CCGT plants with a capacity of over 1.5GW is understood to have reached approximately $750 a kilowatt in 2023, which is more than twice the average cost in 2019. EPC costs for smaller plants have similarly posted significant increases.
Industry sources say the turbine supply chain problem arises from the decision by some OEMs to reduce capacity over the past few years, driven by a combination of the Covid-19 pandemic and the threat of curtailed demand due to the push to decarbonise electricity systems.
The post-Covid-19 recovery, as well as the resurgence of demand for gas-fired power plants in the Middle East – and even in some countries in Europe – along with the expressed preference by most GCC clients for European-made gas turbines, has resulted in a seller’s market.
A Dubai-based OEM executive told MEED last year that its EU-made turbines are booked for several years, but order deliveries can still be shuffled between customers, so they do not expect major delays in delivering to clients. "It's definitely a seller's market right now for turbines. We have capacity in other regions like China, but customers prefer [turbines made in] EU factories”.
In comparison, the jury is still out on solar PV costs, although historical tariff data indicates a general upward trend between the record-low tariffs seen in 2021 and those submitted last year.
Transmission and distribution
Transmission and distribution (T&D) contracts exceeding a total of $12bn are under execution in Saudi Arabia, with an estimated $22.4bn in the pre-execution phase.
The value of contracts awarded in 2023, which sits at $4bn, exceeded the previous year’s total by 41%. The contract to build a high-voltage, direct current transmission system between Neom’s Oxagon industrial cluster and Yanbu is the largest T&D contract to have been awarded last year.
Volume-wise, 59 T&D contracts were awarded in Saudi Arabia last year compared to 64 in 2022.
Saudi Arabia has been gradually expanding the reach of its grid, both domestically – due to the development of new communities and industries and the growth of renewable energy capacity – as well as internationally.
Projects to link with Egypt and other countries in the GCC, as well as with Iraq and Jordan, are under way, while preliminary studies are ongoing to link the kingdom’s power grid further afield, including to the grids of India and Greece.
Energy storage and nuclear
A new project activity segment within Saudi Arabia’s power sector is emerging. SPPC intends to start the procurement process this year for the 2GW first phase of a project to procure 10GW of battery energy storage system (bess) capacity by 2030.
Bess comprises rechargeable batteries that can store and discharge energy from various sources when needed.
Saudi Arabia plans to locate its bess facilities near demand centres to boost the electricity grid's spinning reserves as more renewable energy is expected to enter its electricity production mix.
The 2GW first phase of the project entails building several plants at different locations, with individual capacities ranging from 50MW to 300MW each.
Finally, the procurement process is moving – albeit slowly – on the Duwaiheen nuclear power plant, Saudi Arabia’s first large-scale nuclear power project. Bids for the main contract are due in late April, following several deadline extensions since the kingdom invited selected companies to bid for the contract in 2022.
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Exclusive from Meed
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Neom cancels $1.5bn desalination plant project17 May 2024
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Neom receives bids for schools PPP15 May 2024
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Ewec plans new independent water project15 May 2024
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Saudi Arabia expands PPP pipeline14 May 2024
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Rua Al Madinah seeks construction partners14 May 2024
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Neom cancels $1.5bn desalination plant project
17 May 2024
The joint development agreement (JDA) for a project to develop a zero liquid discharge plant in Saudi Arabia's Neom has expired and has not been renewed, leading to the cancellation of the project, sources familiar with the scheme tell MEED.
A consortium of Neom subsidiary Enowa, Japan’s Itochu and France’s Veolia signed a JDA for the scheme in December 2022, approximately six months after they signed a memorandum of understanding to develop the renewable-energy powered advanced seawater reverse osmosis project in Oxagon, Neom’s industrial cluster.
The proposed plant was to deliver up to 2 million cubic metres a day (cm/d) of desalinated water to Neom, equivalent to about 30% of the gigaproject's expected total water demand once complete.
The entire facility was understood to require a total investment of $1.5bn-$2bn.
The developer team initially indicated that the target commercial operation date for the project's first phase, understood to have a capacity of 500,000 cm/d, was 2025.
In a statement sent to MEED, Enowa said Neom's water requirements have evolved over the last year "leading us to adopt a stepwise approach to expanding capacity".
It continued: "As a result, we've decided to discontinue our joint development agreement (JDA) for this project. This decision was made after open communication and extensive discussions to ensure mutual understanding and commitment.
"Our dedication to delivering sustainable and innovative solutions remains unchanged, and we value our collaboration with international partners as we adjust our approach to best serve Neom's long-term goals."
Advanced technology
In addition to using 100% renewable energy, the proposed state-of-the-art desalination plant intended to use advanced membrane technology to produce separate brine streams, enabling the production of brine-derived products to be developed and monetised downstream.
The plan involved converting brine, the main waste output of desalination, into industrial materials to be used locally or exported internationally.
At the time, Enowa said brine generated from the desalination plant would be treated to feed industries utilising high-purity industrial salt, bromine, boron, potassium, gypsum, magnesium and rare metal feedstocks.
Neom appointed Japan’s Sumitomo Mitsui Banking Corporation as financial adviser for the project. UK-based DLA Piper was the legal adviser and Canada’s WSP was the technical adviser.
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Neom receives bids for schools PPP
15 May 2024
Saudi Arabian gigaprojects developer Neom has received bids for a contract to develop and operate two schools in the SR1.5tn ($500bn) development.
According to a source close to the project, around a dozen local companies submitted proposals for the scheme in late April or early May.
The project is being procured on a build, own, operate and transfer (BOOT) basis.
It is understood Riyadh-based Banque Saudi Fransi Capital is the client's financial adviser for the project.
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Neom recently invited companies to bid for a contract to develop four hotels at Oxagon, the development's industrial cluster.
Neom expects to receive bids for the contract in July. The hotels, understood to have a total of 1,200 keys, will also be developed using a BOOT model.
Most of Saudi Arabia's gigaprojects have been shifting the physical and social infrastructure components of their developments, in addition to their utility infrastructures, to public-private partnership (PPP) models due to budgetary constraints and a need for a more efficient approach to procuring and operating these assets long term.
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> TRANSPORT: Saudi Arabia’s transport sector offers prospectshttps://image.digitalinsightresearch.in/uploads/NewsArticle/11773702/main.jpg -
Ewec plans new independent water project
15 May 2024
Abu Dhabi-based offtaker Emirates Water & Electricity Company (Ewec) is considering procuring a new independent water project (IWP), according to industry sources.
The planned seawater reverse osmosis (SWRO) facility is expected to have a capacity of 90 million imperial gallons a day (MIGD), equivalent to about 409,000 cubic metres a day (cm/d).
Sources have told MEED that the proposed location is either in Al Nouf or Taweelah in Abu Dhabi.
A facility in Al Nouf will require a long pipeline that will connect the plant to Abu Dhabi, and will likely involve the participation of the Abu Dhabi Transmission & Despatch Company (Transco), according to one of the sources.
It is understood that Ewec could seek interest from developers for the new IWP by the end of the year.
This development follows the revision of the scope and capacity of Abu Dhabi's fourth IWP scheme, which is currently in the tendering stage.
The Saadiyat Island IWP will have a capacity of 60 MIGD.
When it was tendered in July 2023, the original scheme – called the Abu Dhabi Islands IWP – comprised two SWRO plants each with a capacity of 50 MIGD, to be located on the Saadiyat and Hudayriat islands in Abu Dhabi.
The current tender closing date for the Saadiyat Island IWP project is 29 June.
"They need this additional planned capacity [in Al Nouf or Taweelah] since the other scheme in Hudayriat has been cancelled," the source added.
Ewec previously said these projects are important to Abu Dhabi’s water security due to their proximity to the load centre of the Abu Dhabi islands, as well as the scheduled decommissioning in 2028 of the integrated power and water desalination plant at Sas Nakhl.
As in previously tendered IWPs, the successful developer or consortium will own up to 40% of a special-purpose vehicle that will implement these projects, while the remaining equity will be primarily held indirectly by the Abu Dhabi government.
Awarded contracts 2023
Ewec awarded the contracts for two IWPs last year. Ewec, Abu Dhabi National Energy Company (Taqa) and France’s Engie signed the water purchase agreement for the Mirfa 2 IWP project in February 2023. They reached financial close for the project, which will have a capacity of 120 MIGD, two months later.
Taqa, Ewec and South Korea’s GS Inima reached financial close on the $444m Shuweihat 4 SWRO IWP in December. Located within the Shuweihat power and water complex, the facility will supply up to 70 MIGD of potable water. Commercial operations are expected to commence in the second quarter of 2026.
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Saudi Arabia expands PPP pipeline
14 May 2024
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Saudi Arabia’s National Centre for Privatisation & PPP (NCP) has seen significant progress in its public-private partnership (PPP) programme in the past year, according to Salman Badr, vice-president of the state PPP procuring authority.
Speaking at the MEED Mena Construction Summit in Riyadh, Badr said that NCP has a “healthy pipeline” of over 200 approved projects in different stages of development.
He noted that another 300 projects are currently under review.
It is understood that the pipeline includes more than 180 schools, following the award of contracts to develop and operate 60 schools each in Jeddah and Medina in 2020 and 2022.
“New sectors like healthcare and education have been opened up for public-private partnerships beyond the traditional water and power sectors,” said Badr.
The kingdom is understood to have awarded more than 60 PPP contracts since 2017, when NCP was formed.
Badr said private sector participation has “allowed the government to deliver infrastructure projects much more efficiently”.
Recently completed projects include the kingdom’s first hospital PPP project in Medina.
In addition to healthcare and school facilities, NCP’s pipeline includes airports, seaports and roads, catering to Saudi Arabia’s growing infrastructure needs as the population and economy expand.
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Rua Al Madinah seeks construction partners
14 May 2024
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Saudi Arabia’s Rua Al Madinah, the Public Investment Fund (PIF) subsidiary tasked with Medina’s tourism and cultural development, has revealed that construction work is under way on the main tunnel that will take all incoming traffic towards the Harem area.
Extensive works are also ongoing to redevelop the airport road and modernise the city’s wider transportation network.
“There are significant opportunities for contractors and partners,” said Abdulsalem Alharbi, projects delivery director, Rua Al Madinah, at the MEED Giga Projects event in Riyadh on 13 May.
“We are looking for capable service providers and strategic partners to support the large-scale infrastructure and construction works.”
Alharbi said five packages of residential towers – comprising over 120 towers in total – are currently in various stages of design and tender.
The superblock 5 package includes 18 towers and is already on the market, while superblock 4, involving 19 towers, is in the design phase.
Packages District 9 and District 10, consisting of 35 towers and 46 towers, respectively, are seeking partners to take on development roles.
Alharbi also highlighted several investment opportunities being developed to support the growing tourism sector, including a central kitchen, cold storage warehouse, commercial laundry and staff accommodation facilities.
“This represents a major chance for local and international companies to participate in the redevelopment of Medina,” he added.
Project background
Crown Prince Mohammed Bin Salman Bin Abdulaziz Al Saud inaugurated the infrastructure works and unveiled the masterplan for the Rua Al Madinah development in August 2022.
Before this, US-based Hill International was awarded a contract in 2021 for the project management of road works at the Madinah Central Area (MCA).
In June 2022, a local media report cited China Railway 18th Bureau as having won a contract to build the Medina tunnel.
The tunnel, valued at $970m, was expected to be completed within 42 months. The work includes building the AH tunnel, the Ali Bin Abi Talib tunnel, the airport tunnel and related projects, including a pedestrian bridge.
Rua Al Madinah Holding Company CEO Ahmed Al Juhani told MEED in February that construction work on the Ali Bin Abi Talib road has been completed, making it the first tunnel to be finished as part of the Rua Al Madinah project.
In February 2023, US-based Parsons won a $15m contract to provide construction project management consultancy and contract administration services (PMCM) for the project. The US consultancy firm will manage the main infrastructure works, including the tunnel, road and utility works.
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> BANKING: Saudi lenders gear up for corporate growth
> UPSTREAM: Aramco spending drawdown to jolt oil projects
> DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector
> POWER: Riyadh to sustain power spending
> WATER: Growth inevitable for the Saudi water sector
> CONSTRUCTION: Saudi gigaprojects propel construction sector
> TRANSPORT: Saudi Arabia’s transport sector offers prospectshttps://image.digitalinsightresearch.in/uploads/NewsArticle/11766934/main.jpg