UNCLAS DUBAI 000229

SIPDIS

DEPARTMENT: NEA/ARPI BAGWELL AND MASILKO

E.O. 12958: N/A
TAGS: ECON EINV ETRD BTIO PGOV ENRG AE
SUBJECT: CONTINUING POWER PROBLEMS IN RAK

REF: A. DUBAI 166; B) 07 ABU DHABI 1927; C. DUBAI 101; D) ABU DHABI 405

SENSITIVE BUT UNCLASSIFIED


1. (SBU) Summary. The power problems plaguing the ambitious
northern emirate of Ras al Khaimah (previously reported ref A)
continue to escalate. According to local press reports, the
newly completed up-scale Safeer Mall and "dozens of recently
finished buildings" have been unable to open due to lack of
electricity. While power to the northern emirates has been
provided by the Federal Electricity and Water Authority (FEWA),
FEWA acknowledges severe capacity constraints and has cabinet
authorization to focus power provision to residential customers
at the expense of "mega projects" (Ref B). End Summary.


2. (SBU). In a June 11 full page article, 'The National' (the
new Abu Dhabi-based English language daily newspaper, already
recognized for its relatively objective reporting) revealed that
the newly completed, up-scale Safeer Mall (150,000 sq. feet of
leasable space) and "dozens of recently finished buildings" in
Ras al Khaimah have been unable to open due to lack of
electricity. Not only are the commercial buildings dark,
lenders who financed the mortgages are now questioning owners as
to when they will start repaying the development loans on their
empty buildings.


3. (U) According to 'The National', last year the Federal
Electricity and Water Authority (FEWA, which is responsible for
supplying energy and water to the smaller northern emirates of
Ras al Khaimah, Fujairah, Umm al Qaiwain and Ajman) notified the
emirates' municipal governments that while FEWA would retain
responsibility for residential power supply, local governments
would need to assume responsibility for power/water supplied to
all commercial projects. The municipalities contend, how can
they exercise control over the electricity, when all the
generation facilities are owned and operated by FEWA?


4. (U) FEWA's expansion plans had been based on an estimated 7%
growth rate, while the actual growth in energy demand from its
consumer base has averaged 19%, according to a March 11th 'Gulf
News' report, leaving many of the northern emirates unable to
implement their ambitious development goals (almost all of the
five northern emirates have lined up multi-billion dollar
development plans for the next five to ten years). At present,
according to 'The National' and post's observations (ref A),
businesses in RAK have turned to liquid natural gas and diesel
run power generators to provide highly inefficient but
desperately needed electricity.


5. (U) In what may be an indirect attempt to resolve the power
issue at the individual emirate versus the federal level, the
Federal National Council (FNC) in May passed a resolution
allowing private companies to establish and run power generation
and water production facilities under the supervision of FEWA.
As of yet, there are no new plants.


6. (SBU) Comment. While local facilities could ultimately ease
the pain, power/water generation plants take time to build and
feedstock to run (reftel C), both of which are in short supply
for the power-hungry northern emirates. In the image conscious
UAE, the simple fact that the shortfalls in power are making
full page news, signals the importance and breadth of the issue.
The issue of power generation in the UAE, especially in the
poorer northern emirates has highlighted both the lack of
natural gas as a feed stock and rapid economic development. The
problem is exacerbated by the relative lack of coordination
between emirate and federal authorities on development plans as
well as subsidized electricity costs, which in FEWA's case are
considerably under the cost of production. End Comment.

SUTPHIN