Electricity Network Connectivity Between the GCC Countries Presented By: Adnan I. Al-Mohaisen May 17, 2005

2 BIRTH OF THE GCC POWER GRID Originated in the early 1980’s by a local GCC committee from the electricity sector. In 1986 the first project study was conducted by a committee from the GCC in coordination with the Kuwait Research Institute and King Fahad University of Petroleum and Minerals. The study was updated in 1990 by Gulf Investment Bank and SNC-Lavalin to confirm the interconnection was economical and financially viable. In 2003 another study update was undertaken as a final preparation for the project financing and tendering, in which the following topics were covered: Techno-Economic Analysis Market Study Financial Analysis Interconnection Agreement Implementation Strategy

GCC INTERCONNECTION AUTHORITY Established in July 2001 by a Royal Decree No. M/21. Owned by the six GCC Countries the authorized share capital is ($US 1,100,000,000) divided into (1,100,00) shares of ($US 1,000) each share. The Authority is managed by a (twelve member) Board of Directors; each member country is represented by two members. The Chairmanship is rotated among the member states every three years. The official domicile of the Authority is Dammam, with the Control Center to be located in Ghunan, Saudi Arabia. The primary objective of the Authority is to: link up the power grids of the six GCC countries operate and maintain the interconnection

INTERCONNECTION SHARE CAPITAL FoundersNo. of SharesNominal ValuePercent United Arab Emirates169,400$169,400, % Kingdom of Bahrain99,00099,000, 9.00% Kingdom of Saudi Arabia347,600347,600, % Sultanate of Oman61,60061,600, % State of Qatar128,700128,700, % State of Kuwait293,700293,700, % 1,100,000$1,100,000, % Total Based on the 1990 Project Study it was determined that the share of the cost of the interconnection will be the present worth of the capacity savings.

INTERCONNECTION LINK The interconnection is to be constructed in 3 phase, namely: Phase I Phase III Phase II Phase I will interconnect Al-Zour (Kuwait), Al-Fadhili, Ghunan, Salwa (KSA) and Doha South (Qatar) with a 400 kV OHL, and a 400 kV Land & Submarine cable with Al-Jasra (Bahrain). Phase III will interconnect Salwa and Shuwaihat with 400 kV OHL and Al- Ouhah and Al-Waseet in Oman with a 220 kV OHL. Phase II will integrate the UAE system with a 400 kV OHL from Shuwaihat to Al- Ouhah.

INTERCONNECTION CRITERIA

SINGLE-LINE DIAGRAM

Upon the completion of Phase-I and the reduction of generation capacity the total cost savings rate of return after 4 years from operations is 2.5 billion US Dollars. BENEFITS & COSTS

Upon the completion of Phase-III the total cost savings rate of return after 3 years from operations is 3.35 billion US Dollars. PHASE I&III:CUMULATIVE PW OF BENEFITS AND COSTS IN $ Year Cumulative PW of Benefits and Costs Phase I & III BenefitsPhase I&III Costs BENEFITS & COSTS

PROJECT ECONOMICS The capital cost of constructing Phase I estimated at US$ 1,189 million is depicted below: It is further estimated that it will cost approximately $ 30 million annually to operate and maintain the Grid: Total O&M Cost Lot Transmission Lines Cable System Substations Converter Station Control Station Total1, Capital Cost The estimated cost for constructing Phase III is $US 137 million. Although the construction of Phase II is not under GCCIA task it is estimated that its construction to be approximately $US 300 million.

PROJECT ECONOMICS The GCC Grid is expected to reduce the amount of new generation capacity required by the GCC member states by sharing the reserve capacity that needs to be maintained by each system to ensure reliability and provide protection against outages. The capacity benefits to Year 2028 are shown below: Load (MW) Total Installed Capacity Reserve (MW) MW Isolated System Interconnected System Load (MW) Total Installed Capacity Reserve (MW) MW6 945 The cumulative benefit in MW of the interconnected system as opposed to isolated systems will be 5,113 MW.

INTERCONNECTION BENEFITS Reduce generation reserves; Provide power exchange and strengthens supply reliability; Improve the economic efficiency of the electricity power systems; Strengthens operational efficiency; Promoting utilities to construct larger generation units to share extra generated power; Provide opportunities for industrial customers and utilities to shop around for more attractive supply of power; Adopt technological development and use the best modern technologies; Providing long-term environmental advantages by reducing waste emissions from increasing generation plants.

GLOBAL INTEGRATION The technical and economical feasibility study for the GCC Interconnection has been proven. The GCC Interconnection will enhance the Power Systems of the GCC Countries. The GCC Countries will be a significant part of the Pan-Arab Grid. The GCC Interconnection is the main gateway towards a Regional and Pan- Arab Power Pools. The Power Grid is a fundamental step leading to the liberalization of regional power market.

PROJECT STATUS September 2004 SNC-Lavalin of Canada was hired to perform the Tendering and Adjudication for the Phase I Project. Thirty three (33) out of the sixty five (65) companies were pre-qualified; where some companies qualified for only one lot and some qualified for all five lots Pre-qualified companies were from local GCC and international countries. GCCIA will engage an international consulting firm affiliated with a local GCC firm for the Supervision of the Construction of the Phase-I Project.

PROJECT SCHEDULE TASKSDATE Pre-Qualification ExerciseAugust 2004Pre-Tender MeetingsMarch 2005Tender SubmittalsJune 2005Technical Bid OpeningJune 2005Commercial Bid OpeningTBAEvaluationsAugust 2005Contract AwardingOctober 2005Operations Commencement1 st Qtr 2008

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