Areva T&D (Transmission and Distribution) in the UAE has started work on its Dh1 billion contract signed with Dewa, which involves the supply, installation, testing and commissioning of 11 gas-insulated substations (GIS) across Dubai, according to a senior official.
"While the contract was awarded in December, we signed it formally at the recently held Wetex in Dubai. We expect to complete the work in around 18 months. Our responsibility stops at installation and commissioning on site," said Mazen Hamadallah, Regional Vice-President, Areva Near East and Middle East. He told Emirates Business in an exclusive interview that it is the division's biggest contract ever signed in the UAE.
"It reinforces our positioning as a main supplier of sub-stations for Dewa," he said.
A Dewa source told this newspaper that the project locations include Marine Club, Oud Al Muteena 2, Bird, Kifaf, Jebel Ali Industrial North and Khawaneej 2. Hamadallah also told this newspaper how the company was involved with the GCCIA (GCC Interconnection Authority) and its T&D division is today one of the top three global leaders in electricity transmission and distribution, with at atleast 72 industrial sites.
Could you outline the scope of the Dewa contract? Can you also elaborate on the nature of your relationship with utility providers in UAE?
The 11 substations will mainly serve the demand in the newly developed residential areas. Others will reinforce the service in existing areas in Dubai. We have worked with Dewa for more than 10 years and have supplied sub-stations to them be it in the 132Kv range or 400Kv range. In the latter, we have supplied nine substations from 2003 to date and they comprise a big chunk of the existing market for this product. We have already done considerable work in the 132Kv segment too and this new contract will reinforce our current market share in UAE.
What is the time frame for the contract and have you started construction?
We started the civil works and the aim is to finalise them in a period of 18 months starting from the time of being awarded the contract.
What is your turnover in the region?
The 2009 turnover for Areva Group was €14 billion (Dh69bn). Areva T&D constitutes 38 per cent of the total figure. This region (Near East and Middle East) represents more than 10 per cent of the global market and ranks third after China and India in terms of business of the 15 countries that we operate in. This region represents 14 per cent of our global worldwide business.
In terms of intense competition in the region in the utilities sector, why are you pushing the smart grid concept?
There is a heavy spending on infrastructure for sure in this region but the concept for smart grids is relatively new in this region. At this point, we cannot say that the big investments planned are niche in the region but there is a lot of interest. It started in the Europe and US.
Today there is a case for smart grids in the Middle East. While existing grids are smart in today's context in that they match demand to the offer in terms of featuring automated networks, what we are saying is that we are moving into a phase where we are aiming for smarter grids.
One of the current drivers is energy efficiency and savings can vary from one place to another. The issue that we face is that electricity cannot be stored and demand varies depending on the time of the day or night. Yet all utilities so far have built for capacities to match peak consumption. The network does not run on peak all the time and the idea is to reduce the reserves that the network has to build into the generation.
And that is where smarter grids will educate the market to smoothen its consumption. Summer and daytimes see an increased reliance on air conditioning.
Another driver is the interconnection between networks and this is increasing in the world, including the GCC. The third driver is renewable energy.
But when you introduce this into an electrical grid, there is a major change, which brings its own challenges. This includes how to regulate the stability of the networks since all sources of renewable energy are not stable such as wind or solar. That is where you need master grids.
Renewable energy is a trend in the UAE, especially after Abu Dhabi becoming the headquarters for Irena. We are looking at participating with Masdar City as well as working with the different utility providers in the UAE in terms of smarter grids.
Could you tell us more about the GCCIA and your involvement with the organisation?
The GCCIA is an organisation dedicated to creating integrated and sustainable energy economies among the Gulf states. It selected us to work on Phase 1 of the project. The scope of work involved design, engineering, manufacturing and construction of a 1,800 MW HVDC (high voltage direct current) back-to-back converter station, which is a first in the region.
Phase 1 involved Qatar, Bahrain, Kuwait and Saudi Arabia and is operational.
Our scope involved connecting Saudi Arabia to the rest of the countries. We energised the project last year. The technical challenge was that Saudi's network runs at 60Hz while the rest of the countries run at 50Hz. It was the first HVDC station in this area and was inaugurated in December. The total project contract value $500 million (Dh1.8bn) and our portion was half of that. We also got a contract to supply a central control centre in Gunan, which can control the energy management systems for the entire network.
Are you participating in Phase 2?
Not in a major way. But we will look at Phase 3, which will connect Phase 1 to Phase 2. It will be energised in 2011.
Is there any tie up in the pipeline in terms of projects?
We are looking for a partner in this region who will work with us on a particular project concept. This will include understanding which aspect of the smarter grid concept can be of immediate interest to the utilities. We are not in Europe or US and hence this concept will take a while to pick up in terms of whether they are interested in efficiency or renewables.
What are the different forms of finance that you explore?
We have not seen any stringent situations here and energy is at the heart of the Middle East. Hence finance is not an issue. Besides, projects are for long term and the financial crisis did not show any adverse effect on our particular sector.
What are your projections for 2010?
We expect two to three per cent growth in the coming year when compared to 2009. We have 12 sales offices around the region. The Saudi market is the biggest market but yet all other countries show strong potential. Iraq is developing since there is a shortage of electricity. We are working on various 400 KV projects in 2010 in the GCC. We estimate a market potential of around six billion euros in this region and are hoping to gain our own market share.