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Dubai Expo 2020 Projects Report

A comprehensive overview of the project opportunities in Dubai in the

run-up to the 2020 Expo

A MEED Insight report

The Dubai Expo 2020 Projects Report

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Table of contents Table of contents ............................................................................................................................................. 2

List of tables .................................................................................................................................................... 4

List of figures ................................................................................................................................................... 5

1. Preface .................................................................................................................................................... 6

2. Executive summary ................................................................................................................................. 7

3. The Political Context ............................................................................................................................... 9

3.1 History .............................................................................................................................................. 9 3.2 Government.................................................................................................................................... 11 3.3 Foreign relations ............................................................................................................................ 13 3.4 Financial crisis ................................................................................................................................ 13 3.5 Dubai .............................................................................................................................................. 15

3.5.1 The historical context ............................................................................................................ 15

3.5.2 Expo 2020 ............................................................................................................................. 17

4. Economy ............................................................................................................................................... 19

4.1 Economic impact ............................................................................................................................ 19 4.1.1 Job creation ........................................................................................................................... 20

4.2 The UAE economy ......................................................................................................................... 20 4.2.1 UAE Federal budget .............................................................................................................. 22

4.3 Dubai economy .............................................................................................................................. 23 4.3.1 Travel and tourism................................................................................................................. 23

4.3.2 Dubais budget ...................................................................................................................... 24

4.3.3 Debt ....................................................................................................................................... 25

4.3.4 Banking ................................................................................................................................. 25

4.3.5 Post Expo 2020 risks ............................................................................................................ 26

5. Dubai Projects Market ........................................................................................................................... 28

5.1 The UAE and regional context ....................................................................................................... 28 5.2 Dubai .............................................................................................................................................. 31 5.3 Sector analysis ............................................................................................................................... 33 5.4 Top contractors .............................................................................................................................. 35 5.5 Future projects ............................................................................................................................... 36 5.6 Forecast ......................................................................................................................................... 39

6. Construction .......................................................................................................................................... 42

6.1 Expo 2020 Preparatory Committee ................................................................................................ 42 6.2 The Expo site ................................................................................................................................. 43 6.3 Leisure and tourism ........................................................................................................................ 45

6.3.1 Tourism ................................................................................................................................. 45

6.3.2 Leisure facilities ..................................................................................................................... 49

6.4 Transport infrastructure .................................................................................................................. 51 6.4.1 Metro ..................................................................................................................................... 51

6.4.2 Rail ........................................................................................................................................ 53


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6.4.3 Ports ...................................................................................................................................... 56

6.4.4 Aviation .................................................................................................................................. 56

6.4.5 Roads .................................................................................................................................... 60

6.5 Real estate ..................................................................................................................................... 63 6.6 Preventing another bubble ............................................................................................................. 67 6.7 Funding .......................................................................................................................................... 67 6.8 Disputes ......................................................................................................................................... 68 6.9 Construction costs .......................................................................................................................... 69

7. Power & desalination ............................................................................................................................ 71

7.1 Power ............................................................................................................................................. 71 7.1.1 Existing facilities .................................................................................................................... 73

7.1.2 Fuel and alternative energy ................................................................................................... 76

7.1.3 Renewable energy ................................................................................................................ 78

7.1.4 Transmission and distribution ............................................................................................... 79

7.2 Desalination.................................................................................................................................... 80 8. Wastewater ........................................................................................................................................... 83

8.1.1 TSE ....................................................................................................................................... 84

9. Industry .................................................................................................................................................. 86

9.1 Aluminium ....................................................................................................................................... 87 9.2 Cement ........................................................................................................................................... 88 9.3 Other industrial projects ................................................................................................................. 89

10. Appendix A Dubais transport links ................................................................................................. 90

...................................................................................................................................................................... 90


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List of tables Table 1: The UAE government and cabinet .................................................................................................. 11 Table 2: UAE oil production .......................................................................................................................... 21 Table 3: UAE key economic data .................................................................................................................. 21 Table 4: Foreign Direct Investment ............................................................................................................... 22 Table 5: Dubai GDP growth (percentage) ..................................................................................................... 23 Table 6: Dubai GDP by sector, 2012 (percentage) ....................................................................................... 23 Table 7: Dubai budget 2013 core principles ................................................................................................. 25 Table 8: Total Dubai debt - maturing bonds and syndicated loans .............................................................. 25 Table 9: Annual change in credit (%) ............................................................................................................ 26 Table 10: Annual change in deposits (%) ..................................................................................................... 26 Table 11: Dubai top 20 largest projects under execution ............................................................................. 34 Table 12: Top 20 un-awarded projects in Dubai by net value ...................................................................... 38 Table 13: Top 30 Dubai projects due to be awarded in 2014 ....................................................................... 39 Table 14: Top 30 Dubai projects due to be awarded in 2015 ....................................................................... 40 Table 15: Dubai hotel sector performance .................................................................................................... 45 Table 16: Dubai room supply as of 5 January 2014 ..................................................................................... 46 Table 17: Abu Dhabi room supply as of October 2013 ................................................................................. 46 Table 18: Dubai hotel room supply ............................................................................................................... 47 Table 19: Dubai hotel projects planned and under way ................................................................................ 48 Table 20: Dubai theme parks planned and under way ................................................................................. 50 Table 21: Dubai Mall projects planned and under way ................................................................................. 51 Table 22: The existing Dubai Metro .............................................................................................................. 53 Table 23: Contracts won at Al-Maktoum International airport ....................................................................... 57 Table 24: Dubai International airport timeline ............................................................................................... 58 Table 25: Dubai road and bridge projects planned and under way .............................................................. 63 Table 26: Dubai planned mixed-use and residential projects ....................................................................... 66 Table 27: Dubai power sector key facts, 2012 .............................................................................................. 71 Table 28: Dubai existing power plants .......................................................................................................... 74 Table 29: Selected major power projects, 2005-13 ...................................................................................... 74 Table 30: Dubais targeted sources of generation, 2030 (%) ....................................................................... 78 Table 31: Dubais key transmission and distribution infrastructure, 2011-12 ............................................... 79 Table 32: Existing desalination capacity in Dubai ......................................................................................... 82 Table 33: Dubai Municipality STPs, 2012 ..................................................................................................... 84 Table 34: Selected cement plants and production capacities in Dubai ........................................................ 88 Table 35: Dubai current and future industrial projects .................................................................................. 89


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List of figures

Figure 1: Map of the UAE and the seven emirates ....................................................................................... 10 Figure 2: GCC total contract awards 2007-13 .............................................................................................. 29 Figure 3: Value of GCC contract awards by country, 2007-13 ..................................................................... 29 Figure 4: Breakdown of GCC contracts awarded by sector, 2009-13 .......................................................... 30 Figure 5: GCC contracts awarded by sector, 2009-13 ($m) ......................................................................... 30 Figure 6: Value of projects put on hold on cancelled in Dubai 2004-13 ....................................................... 32 Figure 7: Dubai contract awards 2003-13 ..................................................................................................... 32 Figure 8: Dubai contract awards by sector, 2005-13 .................................................................................... 33 Figure 9: Dubai contract awards by subsector, 2005-13 ($m) ...................................................................... 34 Figure 10: Dubai top 15 contractors by value of work awarded 2011-13 ..................................................... 35 Figure 11: Dubai value of planned projects by sector ($m) .......................................................................... 36 Figure 12: Dubai breakdown of planned construction projects by subsector ($m) ....................................... 37 Figure 13: Dubai top 10 future clients based on announced projects .......................................................... 38 Figure 14: Dubai projects market forcast 2014-2020 .................................................................................... 41 Figure 15: Location of the Dubai 2020 Expo ................................................................................................. 43 Figure 16: Breakdown of Dubai hotel rooms by star rating ........................................................................... 47 Figure 17: Dubai metro map ......................................................................................................................... 52 Figure 18: The planned Etihad Rail map ...................................................................................................... 54 Figure 19: Dubai airport passenger growth ................................................................................................... 59 Figure 20: Dubai Island Projects ................................................................................................................... 65 Figure 21: UAE contract cost index .............................................................................................................. 70 Figure 22: Dubai peak demand growth, 2005-12 ......................................................................................... 72 Figure 23: Dubai peak power demand and installed capacity, 2005-12 ....................................................... 73 Figure 24: Dewas fuel bill, 2004-08 .............................................................................................................. 77 Figure 25: Annual growth in Dubai water demand, 2005-12 ........................................................................ 80 Figure 26: Installed desalination capacity and peak desalination demand, 2005-12 ................................... 81 Figure 27: Demand outlook for desalinated water, 2011-20 ......................................................................... 85

Copyright 2013 MEED Media FZ LLC

All rights reserved. No part of this publication may be reproduced, stored in any retrieval system, or

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without the prior permission of the copyright owner. While every care has been taken in completing this

report, no responsibility can be accepted for any errors or omissions that may occur.


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1. Preface

Until 2008, Dubai was the dominant projects market in the region. However, the

crash of its real estate sector and the subsequent drying up of activity saw an

exodus of contractors as they sought opportunities in new markets. The effects of

this sudden slowdown are still being felt today.

Yet the award of the 2020 Expo to the emirate has provided a strong stimulus for

projects market growth. Combined with rising property prices, new project

announcements and the reactivation of on hold projects, there is a renewed sense

of optimism in the market.

As a result, tor the first time in half a decade contractors, suppliers and consultants

alike are again looking seriously at Dubai as a growth market. It will not be easy.

Competition is intense, and funding options remain fairly limited. At the same time,

the government is keen to avoid a repeat of the boom-bust conditions that

enveloped the market in 2008.

Nonetheless, the outlook for the Dubai projects market following the Expo award is

stronger than it has been at any point in the past half-decade. In this latest MEED

Insight report, we assess the impact of the 2020 Expo and the commercial and

project opportunities it will bring, directly and indirectly.

The report is the latest by MEED Insight, the research and consultancy arm of

MEED, and thanks go to everyone who contributed to it.

Ed James, Head of MEED Insight

Dubai, January 2014


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4. Economy

The announcement on 27 November 2013 by Paris-based Bureau International

des Expositions (BIE) that Dubai had been selected to host the World Expo 2020

provided an immediate confidence boost to an economy that was already

recovering strongly following the late 2008 global financial crisis and subsequent

real estate crash.

Concern had been growing that another bubble was forming in the emirates real

estate and construction sectors, as property sales prices climbed by more than 20

per cent in the second quarter of 2013. News of the win immediately allayed those

fears, lifting confidence in the sustainability of Dubais recovery.

With a major international event to host in 2020, economic growth is now expected

to be more sustained. The Expo builds on the core sectors of Dubais economy,

namely trade, tourism and transport and hosting the event will draw further

investment into these areas. It will not just be Dubais economy that will benefit,

neighbouring emirates, particularly Sharjah and Abu Dhabi, will also likely see an

increase in visitors during the event, which will be held between October 2020 and

April 2021. The UAE will also be celebrating the 50th anniversary of its founding in

1971, making 2021 a focal year for the entire country.

4.1 Economic impact

The potential direct economic impact of Expo 2020 on Dubais economy was

detailed in the bid documents, which estimated that over the six months of the

event, 25 million people would visit, with more than 70 per cent coming from

outside the UAE.

The cost of constructing the Expo site and related infrastructure (including

extensions to roads and the Dubai Metro) was put at 5.2bn ($6.9bn) and it was

said that more than 277,000 jobs would be created in the run-up. The total

economic impact of staging the event was estimated at 28.8bn. But with building

work on the Expo site only expected to begin towards the end of 2015, the real

boost to the economy is only expected from 2016 onwards.

The main sectors that will directly benefit from staging the event are the

construction and hospitality industries. For the construction sector, there is firstly

the building work on the Expo site itself. This will involve the development of a 4.4-

square-kilometre plot at Dubai World Central (DWC) next to the new Al-Maktoum

International airport in Jebel Ali. The work will include building 700,000 sq metres

of pavilions and other venue space, and 500,000 sq m of permanent structures.

But the impact will be much broader than this.

Winning the event will also spur the wider development of the property industry. It

was already recovering strongly, with many projects that had been derailed by the

financial crisis being revived and new ones being launched over the past year.

Those schemes will have been given fresh impetus by the 27 November

announcement, and analysts expect in particular to see a step-up in activity to

complete projects in the new Dubai end of the emirate. The construction sector

The main

sectors that will

directly benefit from

staging the event are

the construction and

hospitality industries


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will also benefit from a massive expansion in Dubais hotel capacity that is now

expected to follow in order to accommodate the hoped-for 25 million visitors.

Translated into Dubais gross domestic product (GDP) growth, the US Merrill

Lynch forecasts a modest increase of 0.5 percentage points in 2016-19 and a

more substantial 2 percentage-point boost in 2020-21. It estimates that the total

boost to the economy over the 2015-21 period will be $23bn or 24.4 per cent. The

UKs Barclays has forecast the Expo win could boost Dubais economic growth to

average 6.4 per cent a year from 2014 to 2016 and potentially to 10.5 per cent by

2020.

Many of the major investments that will support Expo 2020 were already planned

as part of the emirates Vision 2020 for economic development and were due to go

ahead regardless of the win, but the victory adds to the governments confidence

in the sustainability of economic growth and will spur it to fast-track certain

schemes.

4.1.1 Job creation Dubais bid documents estimated that hosting the Expo would create 277,000 new

jobs by 2021, with 40 per cent in the travel and tourism sector and 30 per cent in

the construction sector. Ninety per cent of the employment opportunities would be

generated between 2018 and 2021. The documents also said for every Expo

employee a further 60 additional jobs would be sustained in the wider UAE and

regional economy.

4.2 The UAE economy

Expo 2020 will provide a lift to the non-oil economy across the UAE, particularly

the travel, tourism and transport sectors, and is projected to see the UAEs

economy growing by up to 10 per cent a year by the end of the decade.

Blessed with substantial oil and gas wealth, the UAE economy has traditionally

been highly dependent on income generated from its natural energy resources,

largely concentrated in the emirate of Abu Dhabi, the seat of the federal

government. The oil sector has been particularly vital to the UAE economy over

the past three years, as non-oil GDP struggled to recover from the 2009 global

recession and debt crisis.

But with volatility in global oil prices and Abu Dhabis oil production set to slow, the

government is accelerating its long-term drive to diversify the economy. Based on

current oil production levels, Abu Dhabis oil reserves will continue to be

productive for another 90 years. But weaning the UAE economy off its

dependence on energy exports is also intended to help the country become self-

sustainable by the time it runs out of oil.


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Table 2: UAE oil production, 2011-18

2011 2012F 2013F 2014F 2015F 2016F 2017F 2018F

Exports of oil, oil products

and gas ($bn) 111.6 118.1 115.5 116.0 112.8 110.6 109.7 109.9

Average crude oil export

price ($ a barrel) 109.6 112.0 108.1 101.5 97.3 94.1 92.0 90.9

Crude oil production (million

barrels a day) 2.6 2.6 2.7 2.8 2.8 2.9 2.9 3.0 F=forecast

Source: IMF

Abu Dhabis oil sector will continue to be the mainstay of the UAEs growth, but the

emirate is expanding new sectors in parallel, such as science and technology,

renewable energy and petrochemicals. It is also promoting itself as a regional

centre for culture in order to attract larger revenues from tourists.

Dubai, which hosts the worlds second-busiest international airport, is focused on

growing its services and tourism industries while strengthening its transport and

trade businesses.

Table 3: UAE key economic data, 2011-18

2011 2012 2013 2014 2015 2016 2017 2018

Nominal GDP ($m) 349 377 387 398 414 431 450 474

Real GDP growth (%) 3.9 4.3 3.6 3.7 3.8 3.5 3.4 3.5

Real hydrocarbon GDP growth

(%) 6.6 5.2 2.1 2.6 3.1 2.1 1.8 1.8

Real non-hydrocarbon GDP

growth (%) 2.6 3.8 4.3 4.2 4.2 4.2 4.2 4.2

CPI inflation (average) 0.9 0.7 2.0 2.4 2.5 2.7 2.9 3.0 GDP=gross domestic product

Source: IMF

The UAEs GDP was about $377bn in 2012, slightly higher than in 2011, when it

stood at $349bn. In 2013, GDP is forecast to rise further, to about $387bn,

according to the US-based International Monetary Fund (IMF).

In October 2013, both the IMF and UAE Economy Minister Sultan al-Mansouri

projected GDP growth of about 4 per cent in 2013, a similar level to the previous

year, with the oil sector growing by 2.1 per cent and the non-oil economy by 4.3

per cent. A slight increase in overall GDP growth was projected for 2014.

But following Dubais Expo 2020 win in late November 2013, several leading

economists revised up their GDP growth forecasts for 2014, with the main drivers

being Dubais resurgence and the expansion of the non-oil sector.

After the announcement, Egypt-based investment bank EFG-Hermes upgraded its

2014 forecast for real GDP growth in the UAE to 5.4 per cent from 4.5 per cent

with the country projected to have the second-strongest real non-oil GDP growth

in the region after Qatar. The bank estimates real non-oil GDP growth for the UAE

at about 5-6.5 per cent until around 2015, increasing to about 6.5-8 per cent in

2016-18 and 8-10 per cent in 2019-20.


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5. Dubai projects market

5.1 The UAE and regional context

The UAE projects market has experienced a momentous few years since the

collapse of its real estate sector in 2008/09. Saudi Arabia overtook the UAE as the

largest projects market in 2010, and the federation has seen declining levels of

activity since then. Recently, however, the market has shown some signs of

recovery, recording $26bn-worth of contracts in 2012 and $32bn-worth in 2013,

ensuring that it remains the second-largest market in the GCC.

The strength of the UAE and Saudi Arabia projects markets combined is

significant. Together they accounted for a total of 73 per cent of all project awards

in the period 2006-13. In the same period, the UAE awarded an estimated total of

$350bn-worth of projects, representing 35 per cent of the total contract awards in

the GCC. In fact, the value of awarded contracts in the UAE was 30 per cent

greater than Bahrain, Kuwait, Oman and Qatar combined.

Despite its historical strength, the UAE projects market has until recently been in

decline since 2008. In 2011, the market experienced its worst performing year

since 2005, when a little over $23bn-worth of contracts was awarded.

The principal reason for the contraction in the market can be attributed to the

collapse of the construction and real estate sector, particularly in Dubai. Following

a total of $34bn-worth of construction-related contracts awarded in the UAE in

2008 alone, only $45bn-worth of similar deals was awarded in the period 2010-12.

The collapse of the construction sector was offset by increased government

expenditure in the oil and gas sector in 2009, when almost $28bn-worth of

hydrocarbons contracts was awarded. This coincided with Seoul-based firms

winning the majority of contracts in the oil, gas, power and desalination sectors.

South Korean contractors have been making their presence felt in the region

since.

From a sector perspective, the largest over the past five years has been

construction despite its issues with just over $75bn-worth of contracts signed,

although only 12 per cent of that total ($16bn) was awarded in 2013,

demonstrating the declining influence of the sector.

Unsurprisingly, the power, water and transport sectors have been very resilient,

with almost $68bn-worth of contracts awarded since 2008. As the UAE strides to

provide infrastructure to keep up with its rapidly growing population and economy,

there is an expectation that the volume of contract awards will increase in the

future.

The power,

water and transport

sectors have been very

resilient with almost

$68bn-worth of

contracts awarded

since 2008


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Figure 4: Breakdown of GCC contracts awarded by sector, 2009-13

Source: MEED Projects

Figure 5: GCC contracts awarded by sector, 2009-13 ($m)

Source: MEED Projects

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2009 2010 2011 2012 2013

$m

Chemical, 39,461, 6%

Construction, 215,847, 32%

Gas, 48,299,

7%

Industrial, 26,072, 4%

Oil, 77,427, 12%

Power, 86,146, 13%

Transport, 144,203, 22%

Water, 26,974, 4%


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5.6 Forecast

While Dubais projects market has languished at between $5bn and $11bn-worth

of contract awards over the last five years, the general expectation is that there will

be considerable growth over the years ahead. The 2020 Expo has provided

confidence and impetus to this optimism. However, it should be noted that a

revival in the markets fortunes was already evident prior to the award

announcement.

Rising property prices and major project launches such as the Mohammed bin

Rashid City schemes, the extension of Dubai Creek and Al-Habtoor City gave

credence to the view that the Dubai projects market had recovered and was on the

path to growth again. Regardless of whether the Expo had been awarded to Dubai

or not, the market would have likely grown in any case. That said, there are

specific projects directly associated with the Expo, such as the site infrastructure

and additional hotel rooms required, that will contribute to the long-term project

pipeline. For real estate investors too, the Expo win will perhaps have provided the

additional push required to proceed with their projects.

The MEED Insight forecast for the Dubai projects market anticipates significant

future growth on a year-by-year basis. For 2014 alone, there is visibility on more

than $27bn-worth of projects that are scheduled to be awarded this year. Of this,

there is $9.5bn-worth of projects currently under bidding.

Table 13: Top 30 Dubai projects due to be awarded in 2014

Project Contract value ($m) Status

Meydan Sobha - MBR City - District One 3,000 Design

Meraas Holdings - Dubai Theme Park 2,722 Main contract PQ

Nakheel Corporation - Al-Furjan Development: Villas 2,000 Design

Drydocks World - Water Discus Hotel 1,500 Study Emaar - Downtown Dubai: The Address Residence Fountain Views 1,200 Main contract bid

Link Global Group - Falcon City: The Taj Arabia 1,000 Design

Dubai Municipality - Deira Market Face Lift (Deira Souq) 817 Study

Dubai RTA - Sixth Creek Crossing 817 Study

Dubai Health Authority - Expansion of Rashid Hospital 816 Design

Zabeel Investments - Porto Dubai 700 Study

Dubai Holding - Madinat Jumeirah Expansion Phase 4 680 Main contract bid

Iris - Dubai Maritime City: Iris Mist 680 Design

Nakheel - Palm Jumeirah: Nakheel Mall 680 Main contract bid

DEWA - Hassyan Coal Fired Power Plant: Phase 1 650 Study

Nakheel - International City: Warsan Village 600 Main contract bid

Kensington - Dubai Maritime City: Kensington Krystal 545 Design

Meraas Holdings - Phoenix Mall 544 Study

Sobha Real Estate - MBR City : Sobha Lifestyle 500 Design

Emaar Properties - Downtown Dubai - Westside Phase 1 436 Main contract bid

Nakheel - Palm Jumeirah: Palm Mall Hotel 408 Design

Dubai Municipality - Jebel Ali Sewage Treatment Plant : Phase 2 400 Design

Xtreme Visions - Business Bay: Volante 400 Design

Damac Properties - Downtown Dubai: Prive by Damac 367 Study

Meydan - Entisar Tower 350 Design

Dubai International Real Estate- Jewel of Creek Development: 300 Main contract bid


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There are also plans to extend the Red and Green lines. The RTA is expected to

appoint an external adviser to explore its options for funding the extension of the

Red and Green lines in early 2014.The appointed adviser will look at the possibility

of raising funding from banks and other private sources to finance the project, and

whether the extensions could be structured as a PPP. It will also be asked to look

at the possibility of using the PPP model to develop commercial space around

three existing stations on the metro. Funds raised from this would then be used to

help finance the metro line extensions.

In addition, there are also plans to link Dubai Metro with the federal rail network

being built by Etihad Rail. A railway station will be built in the Meydan area and the

RTA is currently reviewing plans internally for a metro line that would connect the

station with the Bur Dubai area.

In January 2013, Mattar al-Tayer, the chairman of the board and executive director

of the RTA (and also member of the Expo 2020 Preparatory Committee) confirmed

that three new metro lines Blue, Gold and Purple would be up and running by

2030 and that the current Red and Green lines would be extended. The expansion

of the metro will be carried out in three phases 2020, 2025 and 2030. The first

phase will see the construction of a 24.1km-long corridor with 12 stations.

The Green line extension will connect Jadaf to Dubai Academic City with 11

stations, covering a distance of 20.6km. This will bring Dubais metro network to a

total length of 1,009km with more than 70 stations. Work on phase 2 is estimated

to cover 91km with 58 stations and cost an estimated AED45bn. Once Dubais

urban population hits an estimated 4.5 million by 2025, work on the Gold and

Purple lines is to begin.

By 2030, there will be an assessment of the completed projects, and depending

on the passenger uptake of the metro lines, work on the final phase will begin. If

the emirates population exceeds 6 million, a further 221km of lines and 69

stations could be added.

Table 22: The existing Dubai Metro

Red line Green line

Elevated section length (km) 44.1 14.6

Underground section length (km) 4.7 7.9

At grade section length (km) 3.3 0

Total length (km) 52.1 22.5

Number of stations 29 18

Travel time (minutes) 67 37

Source: MEED Insight

6.4.2 Rail About 30 per cent of visitors to the Expo are expected to come from within the

UAE. Many of those might choose to travel from neighbouring emirates using the

federal railway, which is due for completion in 2018.

Etihad Rail is developing a 1,200-km national rail network, which will link major

industrial and urban centres across the UAE as well as providing onward links to

planned lines in Saudi Arabia and Oman. The early focus was on developing the

There are also

plans to link Dubai

Metro with the federal

rail network being built

by Etihad Rail


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7. Power & desalination

7.1 Power

Table 27: Dubai power sector key facts, 2012

Installed capacity (MW) 9,646

Peak demand (MW) 6,637

Peak demand growth (%) 7

Installed capacity requirement by 2020 (MW) 14,840

Source: MEED Insight

Dubais success in winning the right to host the Expo 2020 will result in a number

of infrastructure and real estate projects that stalled during the recession starting

up again, and will ensure that a number of previously proposed schemes such as

the extension of Dubai metro and full expansion of the new Sheikh Maktoum

airport go ahead. The governments forecast that Expo 2020 will create 277,000

new jobs over the next seven years should also lead to sharper population growth,

and, as a result, greater demand for power. In addition to the demand from an

increased population, it is estimated that over 25 million visitors will attend the

Expo event, with 70 per cent of these foreign arrivals. As a result, Dubai is

planning to double the emirates current hotel capacity, which will put an

unprecedented strain on the electricity grid.

In order to ensure that Dubai has enough power to cover demand for new projects

and population growth, it will be imperative that the countrys utility provider Dubai

Electricity & Water Authority (Dewa) delivers planned projects on time and has

contingency plans in place if the rate of demand growth for power is greater than

expected.

Dubais power sector has experienced contrasting fortunes over the past decade.

A population explosion in the period 2005-08, driven by a rapidly expanding

economy and a property boom, led to double-digit demand growth and placed

considerable strain on the emirates power and desalination infrastructure.

However, the late 2008 collapse in the real estate market, coupled with the

emirate commissioning significant new power and desalination capacity, has

transformed the situation with Dewa now having significant spare capacity.

The growing surplus was one of the main factors in Dewa opting to cancel in April

2012 the states first private power project despite being on the verge of selecting

a preferred bidder. However, as peak demand growth rebounded to reach almost

7 per cent in 2012, Dewa announced in August 2013 it was planning to move

forward its maiden independent power project (IPP) scheme as a clean coal-fired

power plant. With the winning of the right to host the Expo, Dewa may have to

launch more projects to cope with a growth in demand over the next seven years.

Dubai is

planning to double

current hotel capacity,

which will put an

unprecedented strain

on the electricity grid


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Figure 22: Dubai peak demand growth, 2005-12

Source: Dewa

The fluctuating fortunes of Dubai and its power sector are clearly illustrated by

recent peak demand growth. Up until 2003, growth was relatively modest

averaging about 4 per cent a year. However, the 2002 decision to allow non-GCC

nationals to own property in the emirate resulted in a surge in population,

construction activity and power demand growth, which averaged 13 per cent a

year in the period 2005-08. The unprecedented growth was brought to an abrupt

halt in 2009 when, following the bursting of the property bubble, it fell to 6.5 per

cent. Despite a recovery in 2010, when it rose to 9.6 per cent, peak demand

growth slumped to a 12-year low of just 0.7 per cent in 2011 before recovering to

6.9 per cent in 2012 when peak demand hit 6,637MW.

To accommodate the high demand growth in the period 2005-08, Dewa embarked

on a major capacity building programme which resulted in installed capacity

almost doubling to 7,000MW. Despite the crash building programme, demand

came very close to outstripping supplies in 2006, when the capacity surplus was

just 86MW. This forced Dewa to import 400MW of power from Abu Dhabi through

the Emirates national grid for the first time.

Since 2006, Dubais capacity surplus has gradually widened, with its reserve

margin reaching 20 per cent in 2009, which allowed Dewa to halt imports of Abu

Dhabi electricity the following year. Indeed, by 2012 and with the full

commissioning of M station, Dubai was in a position to export power, given that it

had a capacity surplus of over 3,000MW and a reserve margin of more than 31 per

cent.

However, as economic growth accelerates and the population grows, Dubai could

see a return of the kind of growth rates seen in the 2005-2008 period. Demand

can be managed somewhat through increases to consumer tariffs thanks to the

fact that the majority of customers are non-nationals. Yet regardless Dewa faces

the prospect of having to invest in more capacity than it may have originally

planned.

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011 2012

%

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Documents

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