A new venture looks to plug into mid-range power provision
For a utility, building capacity before there is demand is a big gamble. If demand doesn’t grow as predicted, peak capacity goes to waste and expensive infrastructure sits idle. On the other hand, wait for demand to outpace supply and accusations of poor planning will follow soon after.
It is a problem faced throughout the Gulf, where development of urban and industrial centres has dramatically raised peak demand. This has had three distinct side effects.
Firstly, there has been a flurry of bidding and tenders from multi-national giants for big additions to regional capacity. Secondly, companies offering temporary power solutions – business speak for portable generators – have flourished.
The third is a no-man’s land of opportunity, sitting somewhere between the 20 MW generator and the 1000 MW capacity expansion. However, the gap has started to attract attention. Manara Wartsila Power (MWP), a joint venture between Bahrain’s Manara Equity Partners and Finland’s Wartsila, is looking to take a slice of the action.
“We have some interesting solutions to offer the market, provided utilities are willing to do something a bit different,” said Nauman Ahmad, Wartsila’s regional director for Middle East power plants.
Ahmad cites demand for power across the region, from Pakistan to Lebanon, as a catalyst for the JV.
“In most of these markets we’re playing catch up with a shortfall that already exists,” he said. “Various countries in the region are flirting, in different ways, with the idea of liberalisation and privatisation.”
Ahmad sees two clear segments in operation: municipal utilities and industry. But he also sees a neglected third segment, the independent power projects (IPPs) which want to buy a power plant and sell the electricity, either to a utility, or a cluster of industrials.
Although there were a number of IPPs active globally a decade ago, crises have reduced their numbers and those active in this region, says Ahmad, are all focused on projects in the 1 000 MW-plus range.
“They are trampling over each other, trying to out do one another,” he said. “MWP came about because there’s a gap in between the 20-1 000 MW range. This segment is interesting because with an IPP, people may be interested in a kWh solution and may buy power from a smaller plant, with advantages, such as position, fuel and technology.”
What Ahmad suggests is a way for utilities to avoid that premature development gamble. By having smaller plants, close to where the power is required, the capital outlay for transmission can be avoided.
“What we’re trying to do is create an awareness of the usefulness of decentralised power solutions,” he said. “The delivered cost is actually cheaper and we don’t see much competition at the moment. I would say it is a matter of time before the big guys realise that fewer and fewer big tenders are coming in.”
If Manara provides the deep pockets, then Wartsila has the technology. The MWP plan revolves around the ability to generate power by the lowest-cost fuel available. Wartsila kit can run on heavy fuel oil, gas or even crude.
Vitally, it can also switch between heavy fuel oil and gas.
“As an infrastructure fund the power sector is key to us,” said Saadia Khairi, senior partner and chief investment officer for Manara Equity Partners. “We like it because it offers growth, along with predictable and steady cash flow.”
“Partnering with Wartsila is a good way to get in on the ground floor, when the product is starting out and we don’t have to pay a premium for our equity. There is definitely a gap in the market.”
In six months MWP has tendered for a 300MW project in an industrial city in Saudi Arabia. It is also developing two ‘group captive’ projects and investigating possibilities in Yemen.
“We hope to see MWP as a leader in this unaddressed market niche of mid-sized projects at 50-300 MW,” said Ahmad. “Our fear is that the big guys will also take an interest.”
Nauman Ahmad is also hoping none of the big guys are reading.
