The trend towards private involvement in the Middle East power sector took another turn last month with the announcement that the Jordanian government had finally sold a majority stake in its power generating concern, the Central Electricity Generating Company (CEGCO). This is an important step forward in the privatization programme that Jordan has ambitions to implement.
Jordan has been looking to find a partner to run its power production for some while. It launched a tender process in 2003, but despite getting into protracted negotiations with a consortium, the bid ultimately foundered. A second tender process for CEGCO was commenced at the start of last year and this time it has been successful. While no financial terms have been released, the asset value of CEGCO is reckoned to be around $625 million.
Jordan has found its partner in the form of new entity, Energy Arabia (Enara), a company established by JD Energy, the energy investment arm of Jordan Dubai Capital (JD Capital). Enara was established in partnership with Malakoff, the Malaysian electricity giant and Consolidated Contractors Company (CCC) of Greece. This consortium is therefore able to offer Jordan both the technical expertise and the financial muscle to develop CEGCO and provide for the expansion in capacity that is needed.
Malaysia’s Malakoff has a 25 per cent stake in the consortium and its entry into Jordan follows its involvement in power and water projects in Saudi Arabia, Oman and Algeria, and is part of the group’s global expansion strategy into the water and power business in the Middle East. Malakoff is able to bring to the table its experience in power plant operation, while CCC has considerable local knowledge and management expertise. The backing of JD Capital adds much needed financial resources and investment capability with origins in the region.
Enara plans to operate the power plants like IPPs, supporting the existing management and focusing on efficiency of operation, ensuring the use of state-of-the-art technology and international operating standards. Enara’s chairman, Samir Z. Al Rifai, told attendees at the signing ceremony for the deal that the investment in Jordan was a critical component of the company’s continued growth and prosperity. “We realize the increased [energy] need in Jordan and the region for environmentally-friendly and sustainable alternative energy resources, which Jordan Dubai Energy aims to provide.” Enara has ambitions to extend its scope of activity to provide technical services for both its own power plants and those in neighbouring countries to Jordan, in addition to offering consultancy services to existing and potential investors in the power generation industry.
Enara has a 51 per cent stake in CEGCO with the Jordanian government retaining 40 per cent and the remaining nine per cent being transferred to the Social Security Corporation. CEGCO is the largest generator of electricity in Jordan, supplying around 95 per cent of the country’s power. It owns and operates eight thermal power plants with a total installed capacity of 1680 MW throughout Jordan. It supplies power to Jordan’s National Electricity Power Company (NEPCO), which is then fed to consumers through three separate electricity distribution companies.
In the coming years, however, Jordan anticipates that energy demand will grow rapidly – it is already increasing by around six per cent annually and Jordan expects it to increase by 50 per cent over the next 20 years. Jordan’s economy is enjoying strong growth and many new construction projects are either planned or underway. Foreign investment is increasing as is the tourist trade. All this activity stokes demand for electricity whether it is for industrial use or more air conditioning. A recent additional factor has been the influx of migrants from Iraq swelling the population.
The need for more power has been a major spur to bringing in a commercial approach to power production and the resources to expand in order to meet the growing demand. This was anticipated several years ago when the Jordanian government took the decision to separate the roles of CEGCO and NEPCO in anticipation of a division of ownership. The expectation is that attention will now turn to the privatization of Jordan’s three electricity distribution companies.
Jordan has joined the ‘private’ club, and plans to fully justify its membership.