Bahrain, awarded the title ‘Middle East City of the Future 2006-2008’, is certainly living up to its name. The innumerable cranes, bulldozers and scaffolding dominating the landscape along the northern coastline appear as if they are working on a single, enormous building project entitled ‘Bahrain’. At the extreme northeastern tip of this burgeoning nation lies arguably the most important project of all: the desalination expansion, or phase III, of the Al Hidd independent water and power plant (IWPP).
Hidd Power Company (HPC), a consortium of International Power (40 per cent), Suez Electrabel (30 per cent) and Sumitomo (30 per cent) bought Al Hidd from the Ministry of Electricity and Power in January 2006 for $738.2m. The deal, Bahrain’s largest privatization sale, will see HPC provide the Kingdom with power and water for 20 years from November 2007, when the phase III desalination expansion is due to be completed.
Once finished, phase III will triple Al Hidd IWPP’s current desalination capacity from136 million litres per day (MLD) to 409 MLD. Al Hidd will then account for 75 per cent of Bahrain’s daily water consumption of 120 MIGD. This is being achieved via the construction of ten multiple-effect distillation (MED) units of 27 MLD each, which at 272 MLD will comprise the world’s largest MED facility.
These colossal units, which are being built in the UAE by Italian firm Bellili on behalf of contractors Sidem, are shipped in by barge on a four-day journey from Sharjah to Al Hidd. With water consumption set to soar in the summer, two of the ten expansion units will commence operation in April, immediately giving Bahrain an extra 54 MLD. The remaining 218 MLD will come on-stream in November.
It is, of course, no secret that Bahrain is anxious to expand its power and water facilities and the Ministry of Energy and Water (MEW) did not waste any time in handing over control of the plant to HPC just a day after the Power and Water Agreement was signed. This just barely one month after HPC was given preferred bidder status.
HPC managing director David Hadfield explained, “In July 2005, the MEW issued the requests for proposals. On 14 December 2005, MEW announced that HPC was the preferred bidder. On 23 January 2006, we had signed the deal. We took over the plant on 24 January. It was an interesting time to manage – whenever we tried to do certain things, we were reminded that we didn’t actually own it.”
But that was soon to change. The financing, underwritten by the Japan Bank for International Co-operation, was in place by 4 April and HPC was able to make the necessary payment on 11 July.
“The very short period between preferred bidder status and signing the deal was down to high quality documentation and a consistent approach,” said Hadfield. “There was no changing of the mind or deciding that Phase III wouldn’t be 272 MLD as the technology started to change. There was definitely a momentum that meant things would change – that was very helpful.
“Some of the issues you will come across are much easier to manage if you establish good relationships with the various ministries from day one. We had weekly liaison meetings with the MEW to sort out a broad range of issues. You also need good relationships with the existing staff and existing management,” said Hadfield.
Driving down costs
Having been there in the pre-monetarist days of the UK public sector, Irishman Hadfield was all too familier with the kind of inefficiencies that can arise in state entities and he immediately set about reducing the operating costs of Al Hidd. Within just six months of taking over the plant in January 2006, HPC was making a profit.
Hadfield said: “We reduced staffing levels by 70 per cent, from 155 to below 100. We did that in the space of six to eight months – not an easy task but we made huge cuts in a short space of time. MEW put in place a secondment agreement. After that point, having worked with them for six months, we could choose who we wanted to keep and reluctantly who we had to let go.
“The people who we let go could then turn to the MEW and the ministry offered them the option of severance pay or relocation. The employee secondment agreement was key to reducing the costs of operating the plant.”
Driving down staffing and other operating costs has been key to the success of Al Hidd and HPC. Hadfield explained: “One of the main differences being in private hands from being in the public sector is that downtime costs us money. In the first year we ended up doing three major inspections.
“We are paid for capacity and the shorter the outage, the better. It’s worth paying contractors to come in, providing the economics are right, if the outages are shorter. We have a target of reducing outage from 31 days to 20-25 days every four years.”
Phase II of Al Hidd, which entered full commercial operation in 2004, currently has a power capacity of 675 MW (in condensing mode). It consists of three 13E2 gas turbines manufactured by Alstom operating in combined-cycle, whose exhaust gas flows into a vertical natural circulation HRSG with supplementary firing.
The gas turbines are capable of operating in open or combined-cycle by the use of diverting dampers and a guillotine plate. The Alstom steam turbine has an extraction on the IP/LP turbine cross-over pipe for the desalination plant. The LP section exhausts into a condenser.
Phase III will use steam and power from Phase II to produce the 272 MLD of potable water. There will also be a further equipping and upgrading of the existing seawater supply system, including a new electro-chlorination plant for normal and shock dosing of all seawater entering the intake.
The fuel that powers the Al Hidd IWPP, natural gas and condensate, is provided by the Bahrain Petroleum Company under a separate 20-year natural gas and condensate supply agreement. The price is fixed and the cost is indexed in the Power and Water Purchase Agreement.
“Phase II was constructed with Phase III in mind, so the connectors were already there to supply steam to Phase III,” said Hadfield. Phase II was actually designed to accommodate MSF (multi-stage flash distillers) but this is not critical.
Two of Phase III’s ten multiple-effect distillation units, which will each have a capacity of six million gallons per day
“MEDs use less auxiliary power, so we have more electricity to sell than we would have with MSF units. MEDs are also less corrosive. As the capacity of MEDs increase, we may see a swing in the Middle East to MED from MSF.”
Safety in numbers
Strolling around Al Hidd, one is confronted by a bilingual sign, in Arabic and English, stating, “Safety and good housekeeping is everybody’s responsibility.” HPC’s management is acutely aware of the Al Hidd’s responsibility to the environment.
HPC comfortably meets Al Hidd’s NOx emissions limit of 25 parts per million (ppm) at 65 per cent of load. However, Al Hidd cannot always operate at this level and at below 65 per cent load, NOx emissions have risen above permitted levels, at around 100-110 ppm. Following a recent reconfiguration, however, HPC can now meet emissions limits at 40 per cent load.
HPC’s electricity and water production director Daniel Pellegrini said: “By the end of March, all our machinery will meet emissions targets and in April there will be online 24/7 emissions monitoring. We have an internal commitment to make electricity without harming the environment. My bonus is related to the efficiency of the plant, so I am really committed!”
Positive environmental impact
An interesting aspect of the Phase III expansion is the possible positive impact on Bahrain’s environment. Pellegrini explains: “Once the phase III expansion is complete, Bahrain’s use of groundwater will be minimized, so the subterranean channels will get the chance to recover naturally, which could help turn Bahrain greener.”
In time, it is hoped that wildlife and vegetation will gain from the expansion. In the short term, of course, 700 000 Bahrainis, used to somewhat brackish water derived from groundwater, will have a ready supply of improved drinking water. Furthermore, the construction of a new 220 kV transmission system should make power cuts, which have blighted Bahrain in recent years, a thing of the past.
The transition of Al Hidd from state-controlled utility to profit-making IWPP in just six months has been remarkably smooth, but there are no special tricks here. The age-old business practices of effective management, cultivating relationships and pulling in the same direction apply just as much in the Middle East as they do elsewhere.