OBG talks to Anil Sardana, Managing Director, Tata Power

Interview: Anil Sardana

In what way has the recent establishment of the Ras Al Khaimah Electricity and Water Authority (RAKEWA) affected the investment prospects of the emirate’s utilities sector?

ANIL SARDANA: Investors firmly believe that RAK offers good opportunities with its well-established port and road infrastructure, but are unsure about large capital investments unless they see a firm and competitive blueprint for power and water in place. Sheikh Saud bin Saqr Al Qasimi, the ruler of RAK, has thus taken a commensurate and bold step of setting up RAKEWA – a step in the right direction that announces to the world his intentions and belief in the emirate’s prospects.

RAKEWA has been modelled as a regulator for power and water, balancing developer and consumer interests. This will test the appetite of independent power producers and other participants under a public-private partnership (PPP) model in the utility services sector. RAKEWA will manage the sector as an independent regulator, offering a level playing field to all parties involved. Experienced players from the private sector will be keen to see the way RAK intends to structure the opportunities, and first movers will definitely gain support through PPPs. The market certainly has potential and space for a few significant players.

How easy is it to get credible statistics and projections of electricity demand in RAK?

SARDANA: The detailed data pertaining to generation capacities in the emirate, consumption patterns, the system’s historical peak and lows, and overall demand and growth prospects needs to be updated and brought together in one place for well-informed decision making. The complete network connectivity must also be plotted, updated and made available for future planning. RAK’s demand was around 725-750 MW in 2012, growing at around 8-10% year-on-year.

RAKEWA will have to ordain a detailed planning exercise for the emirate’s electricity sector, with historical figures and future demand projections based on anticipated growth, town planning and industrialisation plans. This exercise is crucial to aligning the expectations of economic growth, industrialisation and job creation. By collecting the most reliable data sets, one can then use technical tools to assess the expected demand of power with very reasonable accuracy.

Does unbundling generation, transmission and distribution (GTD) offer a more secure investment option given the current state of the sector?

SARDANA: Any move to full or partial unbundling of GTD could bring the needed focus, without creating an unwieldy setup. Each of the aspects related to GTD and associated retail services ultimately have to be seen from the customer’s perspective, as different investment options, and perhaps more prudent ones, might become available. One, therefore, assumes that the current reforms would not just look at the structure of how GTD is organised, but also how it can be made more relevant and meaningful from the customer’s perspective, duly keeping development needs in mind.

Do you think the UAE should look at different fuel options to improve competitiveness?

SARDANA: The region has been overly dependent on oil and natural gas. The global market still offers good prices for gas and oil, and thus it is a product for monetisation rather than just consumption. There is also pressure on the extent of gas availability and consumption in this region. Hence, gas prices in RAK are higher than what we see in many countries across the globe.

Another option is to utilise other cheaper fuels.

Today, despite its bad reputation, coal is burned worldwide and contributes significantly to the electricity needs of many countries. With modern technology providing more efficient emissions control systems and breakthrough concepts like carbon capture, the use of coal in electricity generation is gaining support once again. The use of alternate fuels in RAK will ultimately lead to competitiveness in tariffs as well.