Boston, MA -- (SBWIRE) -- 08/17/2012 -- BMI View: Dubai's commitment to private models of delivery in the utilities sector has been thrown into doubt following its Q212 decision to cancel a long-planned IPP. Consequently, should the emirate ever seek to implement the PPP model to bring new desalination capacity on-stream, it may well find that developers are now unwilling to take on the risk. This does not, however, negate Dubai's decision to rationalise water usage through the implementation of slab tariffs, which have had an immediate impact on the emirate's demand situation.

Key themes to highlight for UAE's water sector:

- In early Q212, Dubai Electricity & Water Authority (DEWA) scrapped the emirate's debut independent power project (IPP) at Hassyan, claiming that the authorities had simply overestimated the need for additional generating capacity. For those companies who went through the laborious process of submitting bids, such a peremptory move - one that should have been foreseen by DEWA - will be highly frustrating and is representative of a flawed business climate. For international water companies cautiously eyeing the market in Dubai - as opposed to private investor-friendly Abu Dhabi - it will confirm their worst suspicions about the emirate's supposed conversion to a public-private business model.
- Abu Dhabi's continued commitment to developing independent water and power projects (IWPPs) - with a new tendering process for the planned Mirfa power and water plant having been launched in Q212 - suggests that other parts of the seven-emirate federation are accommodating places in which international investors can to do business in the water sector. Abu Dhabi Water & Electricity Authority (ADWEA) is readying requests for qualification (RFQs) for construction of the new plant - which will have 60mn gallons a day (g/d) capacity - for release early in Q3. First up, it will solicit financial, legal and technical proposals.
- Evidently, Dubai has become better at water conservation, meaning there is less need to rely on international developers. Equally evident is that the UAE's experiment with water tariffs, first levied on nationals in 2011, appears to be having an impact on water usage rates. This will clearly affect demand going forward, and the way in which DEWA and others will plan for expansion. For developers, this will clearly be significant when calculating investment decisions.

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