New Bid to Revive Ailing Power Sector

Syrian government turns to private sector to ease electricity shortage.

New Bid to Revive Ailing Power Sector

Syrian government turns to private sector to ease electricity shortage.

Saturday, 28 November, 2009
After years of battling to increase the output of the power sector in Syria to meet the growing needs of the population, the government looks set to give the job of building a new generating plant to a private company.

The decision was seen by analysts as part of the government’s effort to overhaul ailing public establishments by turning to private investors as the country moves from a socialist-type economy to a more market-oriented one.

Electricity ministry officials say the Syrian-Kuwaiti firm Marafeq is likely to win bidding to build the country’s first private power plant in decades for about 200 million euro.

The company, a joint venture between Cham Holding owned by Syrian business mogul Rami Makhlouf, and the Kuwaiti conglomerate Al-Kharafi, is expected to generate 240 megawatts, which is much needed to reduce the severe shortfall in supplies.

Syrian electricity output falls short of demand by up to 1,000 MW, according to official figures, and the deficit is expected to increase in the coming years.

Marafeq's chief executive officer, Mahmoud al-Khoshman, told local media that the project will be implemented in a consortium with Finnish engineering company Wartsila, which will help with the design and the construction of the power plant.

The consortium is expected to get a 25-year build, operate transfer contract.

Under the new deal, the government will provide free fuel for the plant, which will be located in Nassiriyeh, northeast of Damascus, and will then buy and distribute the electricity generated.

Eyad al-Nasser, an economics expert based in Damascus, believes that the partnership between the private and the public sectors aimed at solving the shortage of electricity was necessary.

“Syria is in desperate need of developing services and infrastructure for its electricity sector and this requires a very large budget that the government is not able to provide,” Nasser said.

In August, the electricity ministry said that current electricity production ranged between 5,500 MW and 6,200 MW while peak demand was about 6,500 MW.

The situation is expected to worsen with demand growing by seven to ten per cent a year, officials said.

Syrian households have been suffering power cuts of up to five hours daily in the capital as the authorities share out the burden of the cuts.

The reasons behind the shortfall have been given officially as fast population growth and an increase in private investment in the economy as well as industrial and agricultural activities, theft of electricity, and the lack of maintenance of old power stations.

Electricity Minister Ahmad Kussay Kayyali told the November issue of Syria Today magazine that Syria was importing electricity from Egypt and Turkey.

Officials and analysts have also claimed in state-run newspapers in recent months that the crisis has been aggravated by United States-imposed sanctions against Damascus, because the measures have discouraged many international companies from building power plants in Syria.

With the improvement of relations between Damascus and the West, the Syrian-Kuwaiti company plans to borrow most of the money to be invested in the power plant from European financial institutions.

Nasser, the economist, hailed the government’s decision to seek assistance of the private sector in the current crisis.

The partnership would allow the government official to acquire new skills and expertise from the private sector, he said, as well as helping create new job opportunities.

But some analysts raised fears that the new wave of privatisation would push up the price of electricity.

Poorer people are especially worried that power will become too expensive, said Mustafa al-Kafari, a professor at Damascus University’s economics department. Syrians pay a lot less than the world price for power, even after a tariff increase four months ago, thanks to a government subsidy.

Other experts say that the government has not been transparent enough in seeking to sign contracts with the private sector.

Mohamad Awad, a columnist in an economic publication in Damascus, said the government should create a regulatory body where all parties, including producers and consumers, are represented before moving ahead with privatisation.

He said such a body would be essential to “supervise, regulate, and control the transparency of contracting and the implementation of projects”.

Other critics believe that the government should focus attention on generating alternative energy, such as wind or solar power, which are not only cleaner for the environment but could also be more economical as oil prices remain elevated.

In recent months, Damascus has signed agreements with a number of European firms to establish solar energy power plants.

Kayyali told Syria Today that 1,000 MW of generating capacity was already under construction, half of which should come on stream within four months. Five other projects already planned aside from Nassiriyeh would add 3,000 MW by 2012.

Meanwhile, Syrians continue to complain about the recurrent power cuts.

Oussama Mardini, a 55-year-old physician from Damascus, said that power cuts could affect the quality of the treatment he gives his patients. He recently “panicked” when an unexpected blackout happened while he was administering an injection to a patient.

Amal Ali, a 30-year-old teacher in Damascus, said that her wedding celebration was lit by candlelight because of a prolonged power cut. Any thoughts that that might make it more romantic turned to dismay because there wasn’t enough light for the photographer, leaving Ali “very sad”.
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