The UAE Power Cable Market

Edmund O’Sullivan Chairman, MEED Events

Good morning, Thank you very much for inviting me to come here today to share some facts, information and perspectives on the cable markets of the UAE and a little bit on the region as well. I am Ed O’Sullivan, I am the chairman of MEED Events and I will now take you through a presentation on the UAE power cable market. I will talk about: • Review of trends 2003-08

• Key factors affecting the Middle East region to 2012

• Forecast for the Gulf Cooperation Council (GCC)

• A look at the UAE power and energy market

• A look at the UAE cable market

The UAE Power Cable Market – Edmund O’Sullivan – page 15 Middle East growth 2003-07 (%)

25 IMF, June 2008 Current prices Constant prices 20

0 2003 2004 2005 2006 2007

Bahrain, Egypt, Iran, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Syria, UAE, Yemen

On this chart from the IMF the black line shows the real growth in the Middle East as a whole. All these countries listed on the bottom have been in excess of 5% in real terms in the last 5 years. This made the Middle East one of the fastest growing regions in the world on average.

The UAE Power Cable Market – Edmund O’Sullivan – page 16 Current account and external debt 2003-2007 ($ million)

400 Current account 350 International debt

300

250

200

150 Regional indebtedness 100 still growing

0 2003 2004 2005 2006 2007

IMF, June 2008

The black line again, shows that the balance of payments, the financial services in the Middle East as a whole, not just the Gulf corporations, have been heavily in surplus. There was lots of money in the banks throughout the region over the last 5 years, although the red line shows that the international indebtedness has also grown in this period.

The UAE Power Cable Market – Edmund O’Sullivan – page 17 Overview of Middle East 2003-07

Solid growth, improving solvency, rising per capita income. However, Aggregation disguises sharp differences in performance between oil exporters and the rest and between high population nations and rest. Saudi Arabia $380 billion GDP Jordan $16 billion GDP Yemen $972 GDP per capita Qatar $73,000 GDP per capita

In summary, the last 5 years for the Middle East as a whole, looking from Egypt to the Gulf, to Syria and down to Sudan, solid growth has taken place and is improving solvency and raising per capita income. But when you look at the Middle East you should always bear in mind that aggregation of the figures is misleading. There are sharp differences in performance between the oil exporting countries and the rest and between the high population nations and the rest. This is illustrated by one fact: Saudi Arabia, which is part of the Gulf Cooperation Council and is a neighbor of the UAE, has a GDP this year approaching $400 billion. Jordan, which has the smallest economy in the region has an economy of $16 billion. Yemen, the poorest country in the region with a GDP per capita of $972. Qatar, probably now one of the richest countries in the world has a GDP per capita of $73,000. There are enormous differences in these countries. It is wrong to treat them as one unit. .

The UAE Power Cable Market – Edmund O’Sullivan – page 18 UAE is at the heart of the GCC (1)

• Six nation association of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE created in 1981 • Fourth growth factors • Energy • Economic diversification • Population growth • Globalisation

GCC economic and business trends When I look at the Middle East, I start with the Gulf Cooperation Council, that means with the 6 countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. They have formed an association amongst themselves, which was created in 1981. It is a loose association, it is not like the European Union. There is no sacrifice of sovereign powers to the center. Each of these independent states is fully sovereign, they don’t have a council or a bureaucracy like that in Brussels. The decisions are made by the national governments on the national level. And yet they are beginning to coordinate their policies quite effectively. These 6 countries which occupy the majority of the Arabian Peninsula, are driven economically by 4 key factors: Energy. These 6 countries of the GCC have 40% of all the world’s proven crude oil reserves and 20% of all the world’s gas reserves. This alone is a very powerful impulse for growth. Since energy demand and world oil and gas demand is forecast to continue rising for the indefinite future, this remains one of the most important impulses for growth in the region. It is supplemented, however, by economic diversification. This is happening because the governments of the region need to do two things: One, they need to reduce their dependency upon oil and gas export and production.

The UAE Power Cable Market – Edmund O’Sullivan – page 19 UAE is at the heart of the GCC (2)

So they are diversifying for that reason. Secondly they need to create jobs. This is particularly pressing in Saudi Arabia, Bahrain and Oman. But it is a general issue. These economies need to create jobs. The third element is population growth. The natural growth in the 6 countries of the GCC is in excess of 2% a year, one of the highest in the world. This is being supplemented by a high rate of long-term migration into the region here in the UAE. The majority of people living here have been born elsewhere and will return eventually to their home countries. The fourth factor and the most important one, I believe, is globalization. Arabia sits perfectly halfway between the European Union, the largest economy in the world, and China and the Far East with the fastest growing economy in the world. The countries of Arabia are developing transport and logistic hubs to service the globalized flow of trade and services between these two great markets. I believe in due course logistics will be the largest employer of people in Arabia.

The UAE Power Cable Market – Edmund O’Sullivan – page 20 The GCC is the world’s fastest growing economy

1100 $ billion 1000 900 Growth of 18 per cent recorded in 2008 800 700 600 500 400 300 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: MEED

A quick snapshot on the economic trends in the last 5 years shows that the economy of the GCC is now almost $1 trillion. This is almost a tripling in dollar terms in the economy in the last 5 years, principally but not exclusively due to the very sharp increase in oil prices and the persistent increase in demand for Gulf oil. Growth this year in dollar terms may be 18%, in real terms, factoring out inflation and other factors, we talk about 6%. So this is the sixth consecutive year of very strong growth in the GCC.

The UAE Power Cable Market – Edmund O’Sullivan – page 21 GCC oil production to 2012 (million b/d)

16.80 MEED August 2008 16.60 16.40 16.20 16.00 Capacity to be lifted to more than 20 million 15.80 b/d 15.60 15.40 15.20 15.00 2007 2008 2009 2010 2011 2012

The oil production in these countries in 2008 will be about 16 million barrels a day (b/d) of crude oil. The majority is exported. The GCC is the largest supplier of crude oil and refined products in the world market. It is likely that the world’s oil demand will be rather contained and because the market share accounted for by non-GCC countries will rise. My forecast is that oil production will not rise significantly over the next 4 years. Nevertheless, the countries in the region are investing in the largest energy capital investment program the world has ever seen, which will increase the oil production capacity in the 6 countries of this region to more than 20 million b/d. Very nearly 20% of all the crude oil production capacity in the world in about 5 years time will be in the countries of the GCC to insure there is going to be enough crude oil and refined products to meet world oil demand for the indefinite future.

The UAE Power Cable Market – Edmund O’Sullivan – page 22 GCC population to 2012 (million)

46.00 MEED August 2008 44.00

42.00

40.00

38.00

36.00

34.00

32.00 2007 2008 2009 2010 2011 2012

This forecast, MEED has done, is based on the assumption that demand for Gulf oil will be flat and the oil price will hold at around $80 a barrel on average during the next 4 to 5 years.

The UAE Power Cable Market – Edmund O’Sullivan – page 23 GCC GDP forecast to 2012 ($ million)

1,400 MEED August 2008 1,200

1,000

800

600 $ 1 trillion economy this year? 400

200

0 2007 2008 2009 2010 2011 2012

This shows that the GCC economies will grow from about $1 trillion this year to about $1.2 trillion in 2012. The growth will principally come from the non-oil economy. This means that the GCC economies will remain a growing market for goods and services.

The UAE Power Cable Market – Edmund O’Sullivan – page 24 GCC budget surplus to 2012 ($ million)

200,000 MEED August 2008 180,000 160,000 140,000 120,000 100,000 Surpluses to peak this year. 80,000 60,000 40,000 20,000 0 2007 2008 2009 2010 2011 2012

Now the really good news is that the governments of the region are very healthily in surplus. The surpluses will peak this year. They will fade, but on the assumption we make about the oil price, the region is entirely solvent. Even if the oil price would fall to $60 or $50 a barrel, the GCC as a whole is comfortably solvent and the governments will not need to borrow a penny.

The UAE Power Cable Market – Edmund O’Sullivan – page 25 The Gulf is now a $2 .5 trillion project market

3,000 $2.2 trillion worth of projects under way in the GCC 2,500

2,000

1,500

1,000

500

Source: MEED Projects 0 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08

Now let us look at the projects and what opportunities they present. MEED compiles data about the major projects in the Gulf region. That is Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE plus Iran and Iraq. Our information shows that there iare around $2.5 trillion worth of major projects under way or announced in the Gulf region. Of the $2.5 trillion worth of projects, around $2.2 trillion is due to the countries in the GCC. This is one of the largest potential project markets in the world on a per capita basis, particularly because a very high proportion of the services and materials being used in these projects will have to be imported.

The UAE Power Cable Market – Edmund O’Sullivan – page 26 Project issues

• Capacity constraints in all areas.

• Rising costs.

• Need for new sources of finance.

• Environment and energy efficiency becoming core issues.

It is an enormous market and it continues to grow. There is no evidence that major projects will be cancelled in this region. I have not heard that the credit or equity crunch is slowing down the project boom yet. There are issues facing anybody dealing with projects. One is, there are capacity constraints. The majority of the labor has to be imported. All the steel and the majority of the building materials of every kind in the UAE are produced outside the UAE. There are great constraints in the capacity of the construction industry to deliver the projects they say they will. This summer costs were rising precipitously. In July of this year, the UAE was the most expensive market in the world of steel. More than $1500 per ton were paid. Price has been falling since then, but generally costs are on the rise and are likely to continue. There is a need for financing these projects. A high proportion of projects will be privately financed. The question is: When there is a credit crunch, where is the money to come from and will it come more from government? Finally, and this is becoming increasingly pressing, anyone involved in projects needs to bear in mind the environmental issues by preserving the natural environment as much as possible in this region and increasing energy efficiency to reduce carbon admission and the per capita consumption of energy in this market.

The UAE Power Cable Market – Edmund O’Sullivan – page 27 GCC power capacity plans and requirements to 2015 (MW) 80,000 70,000 59,000 MW of power new generation capacity needed by 60,000 2015 50,000 Estimated cost: $50,000 million 40,000 30,000 20,000 Existing capacity New capacity additions by 2015 10,000 0 Saudi UAE Kuwait Qatar Oman Bahrain GCC Arabia Source: Power & Water in the GCC, MEED Insight, March 2008

GCC power demand forecast to 2015 I will now briefly give you a snapshot how we feel the energy market of the GCC is going. If you look at the two right-hand columns you see in summary that MEED forecasts by 2015 nearly 60 GW of new power generating capacity installed in the GCC countries. The red columns show the installed capacity. The black columns show how much we think need to be installed in the next 7 or 8 years. They are almost equal. You can see in the UAE, our forecast is, that more capacity to generate power has to be installed than is already here. The estimated budget for that is about $50 billion.

The UAE Power Cable Market – Edmund O’Sullivan – page 28 GCC power issues

• Energy supplies. How will GCC states deal with the soaring demand for gas? What are the alternatives?

• Pricing. Will the GCC be able to use price to contain power and water demand?

• Finance. How will the GCC finance power and water capacity expansions?

• District cooling. The third utility. Project market could be worth $100 billion in 10 years.

• Nuclear. Is it a sound option?

Here I list a few of the issues the GCC power generation faces. It is not all plain sailing! Energy supplies: The fact is that the Gulf states are curiously facing energy shortages. Only Qatar is comfortably protected against limited supplies. Where is the supply to come from? Secondly, pricing: Will the GCC increase prices to reduce demand for electricity in their economy. It is another big issue, which is not settled. Finance: Will private finance be available or will the government chose to finance the projects directly. I have a feeling that we will see more directly government financed power projects. Another interesting point is district cooling. One of the best ways of preserving energy in this market is to produce air-conditioning on a mass basis. The district cooling market alone could be worth a $100 billion in the GCC in the next 10 years. Finally, the big question that is going to tax the mind of the leaders of the region: Is there a role for nuclear power generation in the GCC. The answer is not yet provided, but the GCC is moving towards large scale nuclear civil power generation projects.

The UAE Power Cable Market – Edmund O’Sullivan – page 29 The UAE is the second largest economy in the GCC

4.5 million people now 12 million in 2027?

The UAE energy balance I will now look specifically at the UAE. It is the third largest economy in the Middle East. It is made up of 7 sovereign emirates. The largest of which is Abu Dhabi, which is by far the most richly endowed emirate with 10% of world’s proven crude oil reserves and with more than $800 billion in the banks. The population of the UAE is now around 4.5 million. If you project forward and look at all the plans, that have been announced, we should be looking at a population of the UAE of 12 million people by 2027.

The UAE Power Cable Market – Edmund O’Sullivan – page 30 Source: MEED estimates based on ADWEA 2007 figures Abu Dhabi Region Peak demand 3,300 MW

Western Region Al Ain Peak demand 600 MW Region 572 MW

The sum of regional peaks is not equal to the system peak because of timing differences.

Abu Dhabi power generation plans We will now look at Abu Dhabi. Abu Dhabi is the principle market for power generation, distribution and transmission and therefore the largest market for power cables. I have divided the UAE up into 3 parts: One in pearl blue, one in green and one in brown. The pearl blue area is called Al Ain Region. Al Ain is Abu Dhabi’s second city and it is located on the fringes of the Hajar mountains. It is slightly higher than the rest of the UAE and therefore rather cooler in the summer. For that reason, it is a very popular place for people from Abu Dhabi to go to in the hot months. In the west, the brown area, is mainly desert. It is called the Western Region. It extends right up to the Saudi Arabian border. This takes you into the first part of the Rub’ al Khali, one of the largest sand deserts in the world. But in terms of demand, the most important area is the green area, which is the Abu Dhabi Region, which surrounds Abu Dhabi Island, where the overwhelming majority of the population of Abu Dhabi lives, and the surrounding area from where the majority of the new demand will come. If you add this up, we see about 5 GW of peak power demand in 2007, comfortably satisfied by the installed capacity.

The UAE Power Cable Market – Edmund O’Sullivan – page 31 Additional population of 3.3 million identified in Abu Dhabi by 2030

I will now take you a little further into what is going to happen. This map was compiled by the Abu Dhabi Water & Electricity Company (ADWEC) early this year. All the colors show you the new development areas of Abu Dhabi. The Abu Dhabi Island is where at present the majority of the population lives. Abu Dhabi chose to concentrate population development on the island. Over the last 4 years Abu Dhabi has unveiled developments such as one of the largest ports ever built in the world, a major aluminum smelter, complete new zones for industrial developments, a new international airport and vast areas which will be devoted to residential developments. According to the figures from ADWEC, by 2030 more than 3 million potential new residences have been identified in this area alone.

The UAE Power Cable Market – Edmund O’Sullivan – page 32 Ras Al Khaimah

Khowr Abu Dhabi power system: available Umm Al Quwain Khawer

capacity now about 10,000 MW 641 MW

4,395 MW Ajman RAK

A Fujairah W k Tawian EMAL E or 2,220 MW F w Qidfa et (2010) N Abu Dhabi is the main/reserve power 2,435 MW Saja i uba on) Dhaid o D ecti H Station T onn supplier for the whole of the UAE terc Al Aweer G in (EN W Sharjah 50 M 1,1 W M 0 5 0) ,1 01 1 (2 Taweelah Dubai 9 0 Bahia Samha 0 Hayer 250 MW – 1,615 MW (2008) 1, Delma ADPS Airport Shahama Sweihan Al Oha/Al ( 1 186 MW 400 MW 201 5 Foa 0 0 E48 UAN (2010) ) M X X 520 Dahma Shamkha 256 MW W Jebel MW Dhabiya To GIC i S Dhanna (ADCO Load) nt a Wathba To Al Wassit (GCC er lw X Ramah Zakher co a Ruweis X Khazna n (G Takreer interconnection) ne C Mirfa Mussaffah c C Sila (ADNOC) Al Ain tio Shuweihat Central Salamat n) Tarif Sanaiya Rumaitha (ADCO Load) Al Ain SW Mazyad

) 09 Arad Bab OGD III 20 il (ADCO Load) (ADCO Load) pr

Ghayathi (A X Madinat Zayed 109 MW Abu Bu Hasa Wagan (ADCO Load) ExistingExisting 400kV400kV circuitscircuits Dhabi ExistingExisting 220kV220kV circuitscircuits Asab (ADCO Load) Umm El Oush ExistingExisting 132kV132kV circuitscircuits AGD II PowerPower StationStation (ADCO Load) Sub-Station Hameem/Hamim SubSub-Station-Station (ADCO Load) ADNOCADNOC OilOil && GasGas PlantPlant EMAL Smelter EMAL Smelter Liwa West (Eradah) UnderUnder ConstructionConstruction Liwa PlannedPlanned TOTAL Planned line cut X Planned line cut (GROSS MW)

Includes planned extensions as of 31/12/2008 along with ADNOC, ENG, GCC & EMAL interconnections. February 25, 2008

This is a snapshot of the structure of the Abu Dhabi power system. It is complex and well advanced. There are 3 principle centers for power generation (indicated by the yellow-orange columns), in Shuweihat in the Western Region, in Taweelah and Umm Al Nar north of Abu Dhabi. The blue lines indicate the 400 kV connections. The available power capacity is now about 10 GW.

The UAE Power Cable Market – Edmund O’Sullivan – page 33 ADWEA system 2008

Generation 60:40 public/power ownership structure Six IWPPs One non-IWPP Three new IWPPs planned

Transmission 100 per cent state owned Transco More than 5,000 kilometres of transmission lines

Distribution ADDC AADC

Regulation by the RSB

A few words about the Abu Dhabi Water & Electricity Authority (ADWEA). It is the overarching producer of power and water for Abu Dhabi. At present for power generation, it has established 6 independent water and power producing (IWPP) entities, they have a 60:40 split between public and private owners. Abu Dhabi has decided that all large scale power generation capacity is being developed on a private finance basis. We do have some captive power plants as well, associated with power stations in the new industries. The transmission system is 100% state owned with more than 5000 km of transmission lines. The distribution system in Abu Dhabi is in the hands of two state owned companies, the Abu Dhabi Distribution Company (ADDC) and the Al Ain Distribution Company. What makes Abu Dhabi rather unique is that the whole system is regulated by the Regulation and Supervision Bureau (RSB), a semi-independent regulatory body that was formed about 10 years ago.

The UAE Power Cable Market – Edmund O’Sullivan – page 34 ADWEC winter electricity peak demand forecast to 2020 (published March 2008)

20,000 By 2030, Abu Dhabi base demand is forecast to be more than 24,300 18,000 MW. Two thirds will be accounted for by megaprojects.

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

This is the Abu Dhabi Water & Electricity Company (ADWEC) forecast for power demand. As you can see, it is a pretty terrifying story. They forecast that peak power demand will rise to almost 18 GW in 2020.

The UAE Power Cable Market – Edmund O’Sullivan – page 35 Original Dubai megaprojects Port Dubai Rashid Jebel Ali Port 1970s Drydock 1970s JAFZA 1980s

Creek dredging World Trade 1950s Center/exhibition center 1979-

Creek dredging 1950s

Dubai power generation plans We now look quickly at Dubai. This is an aerial map of Dubai, maybe 20 years ago. The first major projects were the Port Rashid, the Creek dredging, the Jebel Ali Port, the World Trade Center and a host of other projects.

The UAE Power Cable Market – Edmund O’Sullivan – page 36 Second generation megaprojects Palm Deira Dubai Palm Burj Al DIFC Marina Jumeirah Arab The World/Universe

Emirates Towers Palm Jebel Ali Downtown

Business Dubailand Bay Airport expansion

In the last 5 to 10 years we have seen a second generation of megaprojects. The Burj Al Arab, the Emirates Towers, the Airport expansion, the Dubai Marina, The Palm Jumeirah, the Palm Jebel Ali, the Palm Deira, The World/Universe offshore island, the Dubailand, the Dubai national financial center in Downtown, Business Bay.

The UAE Power Cable Market – Edmund O’Sullivan – page 37 New Dubai megaprojects

Dubai Waterfront

Jumeirah Gardens Jebel Ali Technopark JAFZA Nakheel Mohammed bin World Tower & Dubai Harbour Rashid Gardens Industrial Central City Mudon Maktoum IA Dubai Metro extensions

Dubailand Arabian Canal Meydan City Development

Now looking ahead 20 years, this is what Dubai might look like from space. At the heart will be the new Al Maktoum Airport with a capacity of a 120 million passengers. Connected to the port, which will be the biggest port in the region by far, will be the Dubai Waterfront project, an offshore development. The Technopark and the Dubai Industrial City with 500 000 residents. 1.5 million people live in the Arabian Canal, the Mudon project, the Dubai Metro expansion, Dubailand aiming to be the largest leisure resort in the world, the Mohammed bin Rashid Environmental Gardens and Jumeirah Gardens, the Nakheel Tower & Harbour, announced last week, which will have the tallest building in the world with 1 km. My estimate is that there will be around $500 billion worth of projects being developed in Dubai. Three quarters of that will be in connection with master plans.

The UAE Power Cable Market – Edmund O’Sullivan – page 38 Dubai projects value to 2032

Dubailand 100 $475 billion market? Nakheel 100 Dubai Properties 100 Meraas/Jumeirah Gardens 90 Shaikh Mohammed Gardens 55 World Central/Maktoum IA 50 Jebel Ali/Jafza 10 Dubai Industrial City 10 Metro expansions 10 Techno Park 5 Roads 5 Other municipality 5 Power/water 20 Others 5 Total 515

Masterplanned megaprojects will dominate

Industrial Road Ports Airport Other

Power water

Masterplan

The UAE Power Cable Market – Edmund O’Sullivan – page 39 Dubai population to 2032

8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1980 1985 1995 2000 2002 2007 2032

Jebel Ali Al Aweer

Hassyan

Lahbab

The UAE Power Cable Market – Edmund O’Sullivan – page 40 DEWA system

DEWA’s power system Jebel Ali D 1,047 Jebel Ali E 602 Jebel Ali G 720 Aweer H 607 Aweer H 279 Jebel Ali K 857 Jebel Ali L 861 Jebel Ali L (phase two) 475 Total DEWA power generation at the end of 2007 5,448

DEWA’s transmission and distribution system Number of substations 400-kV 11 132-kV 88 33-kV 137 6.6 and 11-kV 17,886 Length of transmission lines (kilometres) 400-kV 636 132-kV 518 33-kV 65 Underground 132-kV 663 Underground 33-kV 1,466

Total 3,348 Source: DEWA

The Dubai Electricity and Water Authority (DEWA) is a state-owned fully integrated power and water authority exclusively mandated power and water in Dubai. Around 5.5 GW of capacity is available at present.

The UAE Power Cable Market – Edmund O’Sullivan – page 41 Dubai power generation capacity increases to 2020

25,000

21,907 MW at the end of 2020 20,000 18,331 MW at the end of 2018

Lahab 15,000 R

10,000 P2 5,500 MW at the end of 2008 P1 M2 M1 5,000 Installed Capacity End 2008 0

These are the plans that by 2018 Dubai will have a capacity of 18 GW and by 2020 of almost 22 GW. If you look at the middle column, the black field is used for the installed capacity, the colored fields show the capacity of the new plants. Dubai is looking at a range of options, including hydrogen fuelled power plants and coal fuelled power plants. But Dubai has to import its energy for power generation.

I list some issues for DEWA: Where will the energy supplies come from? Commissioned study into solar power MOU for hydrogen plant DEWA structure: does vertical integration and supply chain monopoly still work? Can the present tariff structure be sustained? How can demand growth be reduced? How should it fit into the national power generation system?

The UAE Power Cable Market – Edmund O’Sullivan – page 42 Sharjah Electricity & Water Authority (SEWA)

SEWA power capacity at the end of 2007 (MW) Layyah 822 Wasit 880 Kalba 107 Khorfakkan 89 Abu Musa island 4 Total 1,902

Source: SEWA, September 2008

Sharjah power generation plans Sharjah has 2 GW of installed capacity. SEWA is a fully mandated vertically integrated power and water authority.

The UAE Power Cable Market – Edmund O’Sullivan – page 43 MEED projection of UAE power demand to 2022

80,000 Fewa What will happen if 70,000 Sharjah present demand trends continue 60,000 Dubai Abu Dhabi 50,000 40,000

30,000 20,000 10,000

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Power & Water in the GCC, MEED Insight, March 2008

UAE power demand to 2022 This is the projection by MEED of total UAE power demand to 2022. It is divided up into 4 elements: DEWA, ADWEA, FEWA and SEWA. You could need 70 GW power generation capacity by 2022. That is unprecedented, nowhere in the world you will see that rate of growth. This is creating challenges for gas demand.

The UAE Power Cable Market – Edmund O’Sullivan – page 44 Gas demand is projected to rise by almost 300 per cent by 2025

Total N. Emirates Demand Dubai Demand Abu Dhabi Demand

25,000 Emarat estimate is for UAE gas Annual Average Daily demand to rise by 360 per cent by 2025 ( MMSCFD) . 20,000 This may be conservative!

15,000

10,000

5,000

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Gas shortfall will develop from 2009 and re-emerge after 2nd phase of Dolphin Energy (million scfd)

25,000

20,000 Shortfall

15,000 Dolphin Demand

10,000

Supply 5,000

Source: Emarat February 2008

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

The UAE Power Cable Market – Edmund O’Sullivan – page 45 Gas distribution network is fragmented and insufficient to deal with gas supplies

Danagas 600 million scfd

Dolphin 2 billion scfd

This slide shows the gas distribution network of the UAE. It is very important for the future of the power generation industry. At the top you see the black line coming from the sea into Ras Al Khayma, the pink line is directly going into Sharjah, the yellow lines are the gas collections of Dubai and then you have the onshore connection which starts black and becomes red, which connects Abu Dhabi with Dubai and Sharjah, which is a supplier of gas to Dubai. We have the Dolphin with 2 billion standard cubic feet a day (scfd) and Danagas with 600 million scfd. The conclusion is: The gas distribution network is fragmented and inefficient and it does not satisfy the needs the power system has.

The UAE Power Cable Market – Edmund O’Sullivan – page 46 Challenges for the UAE power sector

•Financing the projects. > Can the government do it all? • Yes, but should it? > Are there enough private investors? • Possibly, but they have to be convinced > Are there enough developers? • Possibly. > Can the present tariff policy persist? • I don’t think so. • Building the projects. > Are there enough turbine suppliers? • Yes, but… > Are there enough EPC contractors? • No, but… > Is there enough labour and skill? • Yes, but…

Challenges for the UAE power sector

•Energy for the projects. > Is there enough gas? • Eventually. > Should the UAE rely on foreign supplies? • Debatable. > Are the alternatives really alternatives? • Not soon. > What is the role for nuclear? • Potentially huge.

•Time for a UAE national energy policy? > Quantifying long-term demand. > Expanding supplies, developer and supplier acquisition, input pricing, energy conservation, tariffs and regulation/governance. > Co-ordination among the EWAs. > National power grid. > Regional grid. > Skill development and export potential

The UAE Power Cable Market – Edmund O’Sullivan – page 47 Emirates Nuclear Energy Corporation (ENEC)

ENEC was formed at the start of 2008 to explore the viability of and building civil nuclear power plants in the UAE. Bids submitted in September for the contract to manage the UAE’s power programme. The view is that Abu Dhabi will take the lead on the programme. Fujairah is a possible site for the first project. Initial thinking has raised the possibility of a 5,000 MW plant.

UAE cable market

•Total market now about 500,000 tonnes+.

•Annual growth of up to 20 per cent.

•Ducab is the largest producer •Cable producers forecast that growth of at least 15 per cent a year is expected for the foreseeable future.

The UAE Power Cable Market – Edmund O’Sullivan – page 48 Issues

•What is the present size and structure of the UAE cable market? •What is the likely size and growth of the market over the next decade and beyond? •How is the UAE going to satisfy its power cable demand? •What role should imports play in the market? •Is there a need for a UAE cable manufacturers association and an associated GCC association to help define the scale and needs of the market? •What role should the consumers and the authorities play in the development of the cable industry including in standards and training?

In conclusion this is a huge, growing, dynamic market, but it is complicated and strategies have to be robust based on long term thinking. Thank you!

Edmund O’Sullivan MEED 20th Floor, Thuraya Tower, Dubai 00 9714 390 0045 Edmund.osullivan@meed-dubai.com

The UAE Power Cable Market – Edmund O’Sullivan – page 49