Dewa expects to grow between 6% and 11% despite slowdown
Demand for electricity and water in Dubai will continue to grow, albeit at slower level compared to last year. Dubai's electricity demand last year grew by 15 per cent, while water demand increased by 12 per cent. For this reason, Dubai Electricity and Water Authority (Dewa) will continue with its expansion plans. In an interview with Emirates Business, Saeed Mohammed Ahmad Al Tayer, Chief Executive and Managing Director of Dewa, said all projects are going on and are on track as per their original schedules, except for the bidding of the Hassyan power and desalination plant, which was deferred until September next year.
The state-owned utility company, he said, is currently constructing Dh70bn worth of projects due for completion in the next three years. All these projects, he added, have "no problem" in funding.
He said Dewa is in talks with government backed-European banks to finance its ongoing expansion projects and is also looking at talking with financial institutions in the US.
He reiterated Dewa has been able to supply all the requirements of the emirate and was still able to keep a 15 per cent reserve capacity. These surpluses, he said, can be exported to the Northern Emirates – which are in dire need of more power supply – in case of an emergency.
Al Tayer, also a member of Dubai Executive Council, noted that Dubai's economy will continue to grow positively.
"If you compare Dubai to Europe, the growth here is high. Germany last year had one per cent growth and this year they will have negative growth. The UK last year had zero growth and this year they will have negative growth. In Dubai we will have positive growth, which we are very proud of," he said.
Last year, you mentioned Dewa's electricity demand has been growing at 15-20 per cent, while water demand has been increasing at 12 per cent every year. Shall we see a slow down in demand considering the global recession taking its toll in Dubai as well?
The electricity consumption growth for last year was about 15 per cent and water about 12 per cent. This year, definitely there will be a reduction in the peak cycles but our forecast is that demand will be higher than all the emirates nearby. That is because we have about 50 substations under construction. We are also going to take over nearly 30 substations. We expect that there will be a growth in Dubai but not in line with last year.
Would you be cancelling any project?
No, there is no cancellation of any project in Dewa. We are deferring some of the projects but most of the projects are ongoing. In fact the only project that we deferred for about eight months is the Hassyan power station. This deferment happens because we have sufficient surplus and reserves. There is no shortage of water and power in Dubai. Last year, we already met the peak requirement with about 1,200MW as a reserve.
You said last year you would invest Dh100bn over the next five years. Is this plan still on track?
All our investments are on going.
Are you having difficulty in raising money to fund your projects?
No. Our performance is excellent, most of the banks have committed positively to Dewa.
You said last year you are looking to raise more funding. Are you looking at more sukuks these days?
Yes, but now is not the right time but in due course, we will.
Within this year?
How much would that be?
You will know in due time.
Are you getting more loans?
Yes. You will know in due time.
How do you plan to refinance your $2.2 billion (Dh8bn) Islamic loan, which was signed in April 2008?
It depends because some of the projects are being deferred therefore the requirements will be different. The timeframe of the requirement will be different. For example, we deferred Hassyan project – along with Hassyan we also deferred 400KV stations – this is a big amount that we are deferring.
What are the implications of these deferments?
It's good actually. Because we are meeting the requirement we don't want to have huge reserves. Usually we should have around 15 per cent of our capacity as reserves.
Previous reports say Dewa is aiming to invest more than $19bn on raising electricity-generating capacity by 150 per cent by 2012 from 5,000MW. Dewa is also expected to add 15.5GW of additional generation capacity by 2017. Is this still the plan?
I don't have the exact figures but projects as planned will continue. Only the power station Hassyan has been deferred, and deferred only for about eight months. What we stated in the past is correct but maybe the stage-wise or the phase-wise induction will be different.
What is the total worth of projects you have now?
Presently under construction and what's going to be finished within the next three years is Dh70bn – it will be in different stages.
Is the financing secured?
So far we don't have any problem. We always go by either syndication or sukuk or bonds. Now we are introducing a new facility – export credit facility – which is new for Dubai and we are discussing with the banks and firms in their respective countries. This is also one of our strategies. It is under discussion.
Shall we see it within this year?
How big is this?
This is very big. It depends for each project and respective country. This is a new thing for funding.
How does this work?
We are approaching the banks in their respective countries. I will not name the company but each company has government support from each respective country. The loan will be long term – maybe 12 years – this is from Europe mainly. We didn't seek banks in the US but we have explored Europe.
But you are looking at talking to the United States?
It depends on the project, on the material or the equipment.
What's the purpose for this facility?
It's for normal funding like what we do with sukuk, to collect money or bonds.
How are you affected by the crisis?
Everybody is affected by the crisis. Growth-wise we don't know how much we are going to be affected. As you know, most of the requirement is based on air-conditioning. If there is less usage then we will be affected. But I think the number of new connection will reduce but not to the extent that most people think.
How do you think will Dubai recover from this crisis and how quick?
First of all, recovery will be very fast. Second thing, there will be a growth in Dubai. This is what we expect. Some of the developers didn't cancel their projects, they are just deferring. And some of the substations are going to be connected this year. As I told you, we have 50 substations going to be commissioned this year so I don't expect there would be a high reduction. Instead, there will be growth in Dubai. Dubai is different from any other country in the world. We registered the highest growth in energy and water so if there is a reduction, it will be minimal. And we expect growth to continue.
According to our planning – based on the information we have – there will be two scenarios. Under the high scenario, we will grow by 11 per cent and under the low scenario, we will have six per cent growth. So growth will be between 11 and six per cent.
And this percentage even if there is a reduction, it is still the highest worldwide considering the situation. If you compare it to Europe, the growth here is high. In Germany, last year they had one per cent growth now this year they will have negative growth. The UK last year had zero growth and this year they will have negative growth. In Dubai we will have positive growth, which we are very proud of.
Dubai is not experiencing gas shortage, according to you. But other emirates are. Are you going to help them out?
This depends – if we have 11 or 12 per cent surplus – then we can export. But we still didn't finalise the time. But we will help other emirates if the resources are available. Maybe help in the winter is more easier than in the summer because there is surplus in the winter. So in the winter it's easy to help other emirates. In the summer, if the growth is not as high as expected then I think it is easy for Dewa to export.
How much will Dewa give?
It's very difficult to say because we have to know whether it will be high growth or low growth. But we can give surplus for emergencies at any time even in the summer. But not for long-term scenario.
How is Dewa dealing with the issue of efficiency?
The power consumption in Dubai has experienced a much higher growth rate and may double possibly in just few years depending on economic growth. This has put continuous pressure on the precious energy and water resources.
These precious resources and protecting the environment should not be mere wishful thinking because for the world it is simply essential for survival in the long-term, while for Dubai it is also essential for sustainable development even in the medium term. Thus it should be the duty of everyone. In this regard, Dewa strives to save energy and water in all its operations. On the supply side, Dewa continuously increases efficiency of electricity and water production facilities and optimises operations. On the demand side, we utilise demand management techniques to optimise our processes, reduce waste and increase efficiency.
On the district-cooling front, what have you done so far?
One of the methods Dewa has adopted to save energy and diversify income is by launching jointly with Tecom – the Emirates Central Cooling Systems Corporation (Empower) – to provide efficient district cooling services to developments in Dubai and the surrounding region. Its establishment was based on our realisation of the importance of the issue and for contributing to the availability of more efficient cooling systems in Dubai. A number of district cooling companies are also currently operating in Dubai.
Is there any downside for this technology though?
—Despite the fact that district cooling systems are efficient on the electricity consumption side, they are consuming huge amounts of water in cooling towers. Taking into consideration that the main source of water in Dubai is the desalinated water that is produced by energy, the district cooling systems are saving energy in one process, while consuming at least a part of it again in another process.
What is Dewa doing to address this issue then?
To maintain a higher efficiency for district cooling systems, Dewa recommended that all district cooling companies in Dubai start using available alternatives of sea water, grey water or treated sewage effluent water in the new developments. Additionally, thermal energy storage gives the opportunity for further optimisation of power demand by means of peak shaving. For the purpose, Decree No 27 has been issued by the Executive Council of Dubai in September 2008 by Sheikh Hamdan bin Mohammad Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council of Dubai.
How soon would this policy be implemented?
It's time to start integrating these issues, and the district cooling companies are expected to collaborate by immediate implementation of these requirements, which constitute best practices worldwide and thus contribute to environment preservation and efficient utilisation of valuable available resources.
PROFILE: Saeed Mohammed Ahmad Al Tayer CEO and MD of Dewa
Al Tayer has been with Dewa for 17 years and has more than 23 years experience in the fields of telecommunication, energy and water. He is also a member of Dubai Executive Council, Dubai Economic Council, Emirates National Grid Committee, Director on Dubal's board, and Chairman of the Infrastructure Committee. He is also the Chairman of Empower
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