Saudi Arabia’s Vision 2030 program of involving international investors and local private sector to meet its growing demand for wastewater and potable water infrastructure has taken off.
A new water ministry has been established, and numerous privatization initiatives have been launched by it under the program, according to BE2C2 Report.
In the early part of 2019, contracts worth hundreds of millions of dollars have been awarded for the Kingdom’s first public-private partnership (PPP) water and wastewater schemes, and more awards and tenders are expected before the end of the year.
Separating power and water has been the key driver behind encouraging signs of PPPs–saudization of human resources and localization of manufacturing being two other drivers.
Saudi Arabia’s desalination sector has historically relied on large cogeneration power and desalination plants to meet the electricity and potable water needs of its growing population–the kingdom is now decoupling power and water production with series of PPPs in both sectors.
Riyadh’s major renewable energy and nuclear energy programs are expected to support the drive for decoupling, with significant power capacity planned to come online in the next couple of decades.
With demand growth rates for potable water expected to remain robust at about 5 per cent a year until 2032, according to regulator Electricity Cogeneration Regulatory Authority (Ecra), there is a requirement for additional desalination capacity.
MEED estimates that Saudi Arabia will need to boost its installed seawater desalination capacity by 785 million imperial gallons a day to meet the predicted demand.
In line with Vision 2030, most of the capital costs involved in the kingdom’s new desalination and sewage treatment capacity will be met by the private sector.
The kingdom’s Water & Electricity Company (WEC), an entity fully owned by the Ministry of Finance and charged with overseeing the development of PPP desalination and wastewater projects, has awarded several contracts for the kingdom’s first independent water project (IWP) and independent sewage treatment project (ISTP) since the end of 2018.
In the last week of December, the WEC signed the water purchase agreement with a consortium led by the local Acwa Power to develop the 600,000 cubic-metre-a-day (cm/d) Rabigh 3 IWP. The developer signed a 25-year concession agreement for the plant, which will serve the cities of Jeddah, Mecca and Taif, and surrounding villages.
This was followed by the signing of the final contracts for the country’s first ISTP, with a consortium comprising the United Arab Emirate’s Metito, the local Mowah and Egypt’s Orascom Construction receiving the mandate to deliver and operate the West Dammam ISTP under a 25-year concession.
The plant will have an initial capacity of 200,000 cm/d, with a design that will allow expansion up to 350,000 cm/d in the future.
Since then, a contract has also been awarded to a consortium led by Japan’s Marubeni to develop the 450,000 cm/d Shuqaiq 3 IWP and a preferred bidder has been selected for the country’s second ISTP, Jeddah Airport 2.
Meanwhile, tenders for the planned 450,000 cm/d Yanbu 4 IWP and the $4.5bn Jubail 3 IWPP are expected in 2019, with the Taif ISTP set to be the next wastewater PPP to reach the market.
US/Indian Synergy Consulting, which was the adviser to the Metito consortium for the Dammam project, said there has been no shortage of interest from international investors in the kingdom’s maiden PPP water and wastewater schemes.
“A number of international lenders have taken part in the recent round of WEC tenders. Furthermore, they have been extremely competitive and, in some cases, more [competitive] than local and regional lenders,” said Krishna Kumar Singh, director at US/Indian Synergy Consulting.
According to experts, if Riyadh is able to successfully manage its ambitious program of utility projects and avoid capacity constraints, its water sector will remain a focal point for investors and contractors in 2019 and beyond.