Cablegate: Bahrain Set to Begin Utilities Privatization

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A

1. SUMMARY: The Government is looking to partial
privatization of its power and water sector to meet rising
demand when the GoB cannot support the construction of new
power plants. Beginning with a new power plant currently
under tender, the GoB intends to privatize subsequent power
and water production and management, while maintaining
control over supply. There is some concern among experts
that the details--subsidies and competition between state
and private companies--have not been worked out
sufficiently. Nevertheless, the GoB needs to undertake
measures now to meet increasing demands in the near future.
It is using two concurrent conferences, Water Middle East
and Power-Gen Middle East, to drum up interest in the
sector. These conferences will also afford U.S. companies
access to this important regional market. END SUMMARY

Utility Considerations

2. Power demand in Bahrain has been growing approximately 8
percent per year, Minister of Finance and National Economy
Abdulla Saif told the Shura Council at their weekly session
on April 5 according to local April 6 press reports. This
growth in demand requires the state to invest in new power
facilities every 2 to 3 years, according to statistics
published by the Ministry of Electricity and Water.
Likewise, current fresh water supply just meets demand, with
essentially no excess capacity. The current building boom,
population growth and economic activity are expected to
drive demand higher. An Ernst and Young study commissioned
by the Crown Prince in 2003 indicated that Bahrain would be
in urgent need of a new power generating facility by 2006.

3. Increasing concerns over spiraling costs, strains on the
national budget, and interests in energy security have been
driving the Government of Bahrain (GOB) to consider
seriously the privatization of its power and water utilities
as it strives to meet rising demand, former Undersecretary
of Electricity and Water and current President of the
Business Promotion Center Jamil Al-Alawi told EconOff March
27. In keeping with the suggestions of the Ernst and Young
study, the GOB is embarking on an incremental privatization
strategy beginning with the construction in 2006 of a new,
third power plant in the town of Hidd. From then on, new
power or power/water facilities would be privately financed
and managed, with the GoB retaining control over
distribution, Dr. Nabeel Al Muskati, Assistant
Undersecretary for Planning and Projects at the Ministry of
electricity and Water, explained to Econ FSN on March 29.

4. Plans to privatize the sector have not completely
factored in commercial interest and profit motives, Al-Alawi
explained to EconOff March 27. Since power cannot be stored
long term, a private facility would have little interest in
building up production capacity beyond the minimum
requirements, leaving the government to find ways to meet
demand during the peak summer season. Al-Alawi maintained
that a nimble private-sector provider will be able to reduce
operating costs by 30 percent over that of ungainly
government management, thus offsetting the GoB subsidy.
Efficient sector management ensure sufficient distribution
of power and supply stability, he said. The current Ministry
of Electricity and Water privatization plan approved by
Bahrain's Cabinet in December 2003 allows for a tender to
construct a privately managed 1000MW power-only facility
known as Al Azel in the Northeast town of Hidd on Muhurraq
Island, Al Muskati told EconFSN March 29. The Ministry has
stipulated its intention to retain authority over
distribution while reserving the authority of production and
management to the private company under a 20-year power
selling agreement.

5. COMMENT: GoB interest in power and water innovation is
underlined by two upcoming trade shows. Bahrain will host
Water Middle East for the second year, from September 13 to
15, this time in conjunction with Department of Commerce
approved Power-Gen Middle East. U.S. Embassy Manama, in
conjunction with the U.S. Consulate Dhahran and U.S. Embassy
Doha, will host a catalog show at this event, to facilitate
U.S. company presence at this event. Together with the
upcoming FTA with Bahrain and regional interest, this
exhibition will provide an excellent opportunity for
companies seeking to operate in the sectors, potentially in
areas of consulting, construction, management, and
distribution, alongside the associated logistical and
support related equipment required. END COMMENT

© Scoop Media

World Headlines


Myanmar: Military Must Stop Murdering And Jailing Protestors – Bachelet

UN High Commissioner for Human Rights Michelle Bachelet on Thursday said security forces in Myanmar must “halt their vicious crackdown on peaceful protestors,” following another day of deadly violence across the country on Wednesday... More>>

Syria: Economic Decline, Rising Hunger And Surging Humanitarian Needs

Syria’s fragile economy has “suffered multiple shocks” over the past 18 months, with its currency plummeting and joblessness swelling as people struggle to cover their basic needs, the UN Emergency Relief Coordinator told the Security Council ... More>>

OECD: Final Quarter Of 2020 Shows Continued Recovery In G20 International Merchandise Trade

G20 international merchandise trade continued to rebound in the fourth quarter of 2020 ( exports up 7.2% and imports up 6.8%), following the sharp falls seen in the first half of 2020, as lockdown measures affected trade globally. Although growth ... More>>

Focus On: UN SDGs

UNFCCC: Greater Climate Ambition Urged As Initial NDC Synthesis Report Is Published

UN Climate Change today published the Initial NDC Synthesis Report, showing nations must redouble efforts and submit stronger, more ambitious national climate action plans in 2021 if they’re to achieve the Paris Agreement goal of limiting global temperature rise by 2°C—ideally 1.5°C—by the end of the century... More>>

2021: Critical Year To ‘reset Our Relationship With Nature’ – UN Chief

During this time of “crisis and fragility”, the UN chief told the United Nations Environment Assembly on Monday that human well-being and prosperity can be vastly improved by prioritizing nature-based solutions. Painting a picture of the turmoil ... More>>

Paris Agreement: UN Secretary-General António Guterres To Mark U.S. Reentry With Envoy For Climate John Kerry

Watch live at UN Secretary-General António Guterres will join U.S. Special Presidential Envoy for Climate John F. Kerry at an event marking the United States’ reentry into the Paris Agreement this Friday. The discussion with the Secretary-General ... More>>