Funding remains the biggest challenge for companies operating Independent Water and Power Projects (IWPP) in the GCC countries, as well as for large-scale projects to meet the growing demand for electricity and water in the region which have already been announced. However, the role of the private sector continues to be misunderstood or viewed with skepticism.
Nick Carter , Director General of the Regulation and Supervision Bureau (RSB), an independent body responsible for regulating the water and electricity sectors in Abu Dhabi, believes that private participation can help to complete, on time and with fewer risks, all the big projects announced by governments in the area.
The IWPP have emerged as key players in the water and electricity sectors in the GCC countries where they have almost all the projects of power generation and desalination. Most of these independent projects fund their expenditure by raising debt and equity capital.
Daniel Zywierz, managing director of Ambata Capital Middle East and CEO of Enerwhere, believes that funding a government-backed IWPP is relatively easy in countries like Oman and Saudi Arabia because local banks have a lot of liquidity and there is investor confidence in the success of the projects. In addition, according to Zywierz, even in countries where funding is more expensive or riskier because there is less experience or less stable government finances, funding for these projects is also possible because many investors seek high yields that projects in less established markets can offer.
According to recent estimates, the GCC countries could need about 80.000 MW of additional electrical capacity and 290 million gallons of water per day by the end of 2015. According to the MENA’s Electric Power Supplies to 2020 report, the estimates are based on an average annual growth of 7% in electricity demand in the MENA region until 2020 due to low rates , population growth and investment in new projects.