CONTINUING POWER PROBLEMS IN RAK

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