News digest

Algeria: Despite a devastating explosion at its Skikda LNG plant, Algeria’s Sonatrach has said it will use other supply routes in order to honour gas supply contracts with Italy, Spain and France.

Bahrain: Bahrain’s cabinet has approved privatization of the country’s electricity production, with distribution and supply remaining with the government. The first private sector tender to construct a 400 MW power station has been issued.

Bulgaria: Bulgaria has secured a $300 000 grant from the World Bank to support the creation of an Energy Efficiency Fund. It is also expecting to receive its first $10m instalment from the Global Environmental Facility for energy saving and pollution reduction projects.

East Africa: Work on the Zambia-Tanzania-Kenya interconnector power project is due to start this October. The country’s energy ministers are to look into finance for the project, to cost about $326m.

Estonia: In compliance with a new electricity market law, state-owned energy group Eesti Energia intends to divide its two business units, Põhivõrk (Basic Network) and Jaotusvõrk (Distribution Network), into independent subsidiaries as from 1 April 2004.

Hungary: Hungary’s power system operator has forecast that around 6000 MW of new power generation will be needed over the next 15 years to cope with an annual 1.9 per cent growth in demand and as many obsolete and inefficient units need to be replaced.

Iraq: Jordan and Egypt have agreed to supply western Iraq with electricity by connecting the three country’s power grids. Technical teams are to study the best ways of achieving the connection.

Lithuania: Lithuania has closed the sale of a 77 per cent stake in its VST power grid, one of the five entities spun off from the national electricity utility five years ago, to NDX Energija, for $200m.

Poland: The Polish government looks set to reject the tender from the sole bidder for its G-8 group of electricity distribution companies, domestic investor El-Dystrybucja. The bidder has failed to secure backing for the entire cost of the transaction from its bank.

Romania: Romania has qualified Ruhrgas, Wintershall, Gazprom, Enel and Gaz de France, who may now submit non-binding bids for interests in two gas distribution firms being privatized.

Serbia: Serbia’s electricity prices will rise by 15 per cent in April in order to finance the essential overhaul and repair of the country’s electricity system. Tariffs will still remain among the lowest in the region.

Bechtel wins second Iraq infrastructure contract

The US Agency for International Development (USAID) has awarded a follow-on contract to Bechtel National for reconstruction work in Iraq. The contract, valued at up to $1.8bn, extends Bechtel’s role as EPC contractor in a series of major Iraqi infrastructure projects through to December 2005, having previously won a USAID contract in April 2003.

The contract was awarded following a competitive bidding process and will see Bechtel supporting both the Coalition Provisional Authority and USAID in projects spanning from electrical power to airports.

Separately, Washington Group International and its partner Black & Veatch Corp. have won a contract to perform up to $1.5bn of services in support of the US Army Corp. of Engineers in Iraq and elsewhere. Washington Group is currently working on refurbishing and installing electricity generating plants in Iraq. The country still has an acute power shortage and Iraq’s interim electricity minister has said that proposals will shortly be tabled allowing foreign investors to own and operate power plants.

Bulgaria rejects UES advances

An attempt by Russia’s United Energy Systems (UES) to extend its international interests has suffered a setback its bid to buy a stake in seven Bulgarian electricity distributors. The UES tender has not been allowed to proceed due to the company having insufficient credit rating and because it fell foul of the requirement of the Bulgarian privatization authorities that bidders must have at least a five per cent share in another partially liberalized power market.

The Bulgarian government plans to sell 67 per cent stakes in the electricity distributors, which have been grouped in three equity pools as part of a programme of energy sector liberalization. Candidates are permitted to bid for all three pools but can only acquire one.

The Czech power company CEZ has been advised that it does satisfy the criteria to participate in the privatization. Other interested bidders are reported to include Enel, the Greek Public Power Corp., E.ON and Austria’s EVN.

EIB backs Gulf power grid

The Emirates Industrial Bank (EIB) says that the future development of the electricity sector in the United Arab Emirates (UAE), or the entire Gulf, depends on the development of an internal and cross-regional grid. EIB noted that, despite an abundance of raw materials, the key to increasing installed capacity was the ability to trade excess capacity during off-peak periods.

Although natural gas is the main fuel source for power generation in the UAE and is cheap by virtue of being a by-product of oil production, inadequate distribution infrastructure means that 75 per cent of power produced by plants in the northern Emirates is diesel fuelled.

A GCC power grid is currently under consideration but would be a major undertaking.

Moldova sells power distributors

Moldova’s privatization department has offered for sale 75 per cent stakes in two of the country’s five power distributors, Red Nord and Red Nord-Vest. The tender is open to foreign and Moldovan companies or consortia and a closing date of April 7 has been set for bids.

Bidders are required to have annual sales in excess of $100m.

Five bid for Slovenske Elektrarne

Five foreign investors have submitted bids for a minority stake in Slovakia’s dominant power producer, Slovenske Elektrarne. The privatization is expected to net the Slovakian government at least g440m ($513m) for the 66 per cent interest which is expected to be available.

Two of the bidders, UES and Czech power group CEZ, are thought to be interested in acquiring the nuclear assets of Slovenske Elektrarne.

The remaining bidders, which are mostly concerned with the purchase of the company’s conventional assets, are likely to be E.ON, Austria’s Verbund and Britain’s International Power.

The short-listed investors are expected to carry out due diligence in the power producer during February with final binding bids due in June or July 2004.

Lahmeyer runs Rwandan utility

Lahmeyer International, Germany’s largest energy engineering consultant, has taken over the management of the Rwandan power and water company Electrogaz as part of a privatization programme across several sectors in the country. The handover to the private sector has already resulted in World Bank and other development banks making available finance for large infrastructure projects.