Business | Investment

Utico plans to invest Dh2b in UAE projects

The RAK-based power company is currently developing the largest full service private utility in the region

  • By Saifur Rahman, Business Editor
  • Published: 00:00 November 6, 2011
  • Gulf News

A Utico plant
  • Image Credit: Supplied
  • A Utico plant. The company hopes to undertake a number of investment projects in the UAE to meet the needs of the growing population.

Dubai: Ras Al Khaimah-based independent water and power producer (IWPP) Utico said it is committed to a Dh2 billion investment that could expand the utilities supply in Ras Al Khaimah and other emirates in the UAE's northern region.

"For the year 2011, Utico has proposed to the governments of Ras Al Khaimah and Dubai several attractive investment projects to meet the growing needs of the emirates [and] to support the initiatives of the governments to build sustainable business models and lower consumer tariffs for water and power," the company said in a statement.

"Utico hopes that these will be approved soon and implementation will start soon. The total investment outlay exceeds D2 billion."

The company is developing the largest full service private utility in the region which includes a large integrated membrane system.

Ideal partnership

"This 245,000 cubic metres per day UF plant with 93,000 cubic metres per day SWRO plant, BWRO plant, 50 megawatt power plant, transmission and distribution — including 105 kilometres of transmission line, 200 kilometres of distribution network, chilled water system with reservoirs, pumping stations, billing and collection, and a 24x7 customer service facility — collectively makes Utico a unique private sector undertaking and demonstrates the ideal public-private partnership that can be emulated in other areas of the region and the world," a spokesperson said.

"Utico is currently constructing one of the largest integrated water desalination and power plants in the Middle East at Ras Al Khaimah."

Utico, part of the Dh7.3 billion conglomerate Ghantoot Group, is one of the first IWPPs in the UAE that has been granted a concession by the Ras Al Khaimah Government to produce electricity and desalinated water for the emirate's growing customers in the new industrial areas and free zones.

The company currently operates four plants with 200 professionals including 80 engineers. The company's valuation through professionals is now around Dh1 billion, said a spokesperson.

It has built a utility plant in Al Hamra in Ras Al Khaimah, with a capacity of 110,000 cubic metres per day of water and 80 megawatts of power generation feeding more than 150 industries, a golf course, Al Hamra port, five-star hotels and households. Utico has also entered the sewage and industrial effluent treatment business, thus offering various utilities under one umbrella.

The company has invested Dh500 million in projects in Ras Al Khaimah. It was recently awarded ISO 50001 energy management certification, one of the region's first such awards.

"Our latest recognition is further acknowledgement of our customer-oriented policies with a strong emphasis on environment protection," said Richard Menezes, managing director of Utico Middle East. "Achieving this standard is a milestone for the UAE since it involves meeting the stringent conditions in environmental and energy practices in our operations."

Encouraging growth

Utico submitted the lowest bids in a number of tenders sought by the Federal Electricity and Power Authority (FEWA) aimed at increased private participation in new projects to promote economic growth in the northern parts of the country.

In the UAE, utilities have historically remained in the public sector with very limited private participation.

The Abu Dhabi Water and Electricity Authority (Adwea) controls Abu Dhabi's utilities while the Dubai Electricity and Water Authority (Dewa) and Sharjah Electricity and Water Authority (Sewa) control the utilities in Dubai and Sharjah emirates respectively.

The utility sectors in the other emirates — Ajman, Ras Al Khaimah, Umm Al Quwain and Fujairah — have been the responsibility of Fewa. Due to the sudden surge in demand for power and water, driven by the massive property boom in 2005-08, Fewa was forced to consider private participation in utilities in order to fast-track new supplies to catch up with the demand.

As a result, the Ras Al Khaimah Government began to explore the possibilities of granting power and water concessions to private companies. Utico, which has been active in the emirate, was well positioned to accept the challenges.

"The GCC countries are gradually welcoming private sector participation in power projects. PPPs are a good first cooperative step instead of pure privatisation," said an analyst with the Kuwait Finance Centre.

"This model has been used sucessfully in the GCC for a number of years now.

It is true that with surplus revenues and pricing not reflecting the real economics and occasional slow administrations, the environment has not been very conducive to attracting private investment.

"Power was one of the first sectors to be opened up by GCC governments for development by the private sector."

Utico has made steady progress since 2004 in expanding its supply of desalinated water and power to a select customer base.

In recent years, it has completed a special economic zone concession contract for a 90,000 cubic metre per day SWRO including pipeline infrastructure, 50 megawatt gas fired power plant, a 600 cubic metre per day for an island, hotel, irrigation, one MW power plant and 300 cubic metres per day.

Rise in GCC consumption

Power consumption across the GCC has grown at an annual rate of about nine per cent from 2002 — Saudi Arabia and the UAE account for a combined 75 per cent of the total GCC consumption.

Installed power generation capacity has doubled from nearly 46,600 MW in 2002 to almost 98,000 MW in 2009, a compound annual growth rate (CAGR) of ten per cent.

The year 2009 saw a massive 23 per cent increase in capacity as several plants in Qatar and Saudi Arabia started operations.

Currently, the GCC operates with a reserve margin of about 19 per cent with an excess reserve mainly in Qatar and Abu Dhabi (43 per cent and 30 per cent, respectively).

However, the northern parts of the UAE are in need of more power generation capacity.

Demand is expected to grow between seven per cent and eight per cent annually over the coming years, and the GCC countries are expected to spend $45 billion (Dh165.2 billion) until 2015 to add 32,000 MW of capacity.

According to Meed Projects, there are currently 361 power projects (generation, transmission, substations, and so on) throughout the GCC with a total value of $277 billion.

The majority of these projects are in Saudi Arabia and the UAE: a combined contribution of 70 per cent of the total.

Saudi Arabia has the highest number of projects at 161, followed by the UAE at 70 projects.

The global slowdown has impacted the GCC with 11 per cent of projects ‘cancelled' — with a value of $31 billion — while three per cent are currently ‘on hold'. Over half of the cancelled projects (15) are in Saudi Arabia with a value of $17 billion while $5.4 billion worth of UAE projects have been cancelled.

One-third of the projects (with a value of $92 billion) are in the execution phase, and these are mainly based in Saudi Arabia.

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