New market study, "Saudi Arabia Power Report Q2 2013", has been published

With Saudi Arabia sets to remain on a solid growth path through 2013 as the non-oil sector continues to expand on the back of booming household expenditure and another strongly expansionary budget has been approved by the government, the short-term picture for the power sector is bright.

Similarly, a bright outlook for fixed investment and a supportive macroeconomic policy underpin our sanguine expectations for the medium term. We anticipate that the thermal sector will continue to be the main beneficiary of hefty investment plans. However, interest in nuclear and renewable sources is strengthening.

A projected fall in oil production should prove a net drag on economic performance, and our Country Risk team does not see the Saudi economy reaching the growth rates of previous years in 2013; real GDP growth of 4.1% is forecast for 2013, down from an estimated 6.8% in 2012. In comparative terms, Saudi's macroeconomic performance and its demographics continue to impress, with a combination of factors including reliance on energy intensive industries and poor levels of energy efficiency pushing up power consumption and putting significant pressure on Saudi Arabia's existing power generating capacity.

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Hence, while more bearish than the Saudi government, BMI remains of the opinion that these dynamics will underpin the government's attempts to improve on and enlarge the existing power infrastructure, continuing to support a healthy growth outlook for the country's power sector in the coming years. An outlook supported by the fact that:

* The country is already executing an extremely ambitious US$80bn expansion plan for power projects, with the Kingdom's Ninth Development Plan (2010-2014) aiming to raise generating capacity by 20.4 gigawatts (GW) by 2014. Even if BMI adopts a conservative stance and only 70% of the planned capacity comes online, our forecasts show that the country will be able to meet its commitments, with total installed capacity to reach just over 72GW by 2014.
* The Kingdom appears committed to develop nuclear capacity, with plans to invest US$100bn to build 17 nuclear reactors over the coming two decades to produce electricity. In February 2013, the Japanese government offered to provide assistance to the Kingdom in the construction of nuclear power stations in order to free up more oil for exports.
* BMI believes that the very strong track record in the development of power projects bodes well for nonhydro renewables expansion. Plans to tap renewable energy as a way to free more crude oil for export are progressively taking shape in the Kingdom, which now aims to channel US$109bn in investment to create a solar industry that generates a third of the nation's electricity by 2032.
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