Bidding field splits over Muharraq civil works

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Bahrain’s pioneering effort to incorporate a large network component into its flagship wastewater BOT has proved too risky for some bidders.

The number of groups preparing to bid on Bahrain’s Muharraq wastewater treatment project has been whittled down to seven, following the release in November of a revised sewage treatment agreement (STA) by the ministry of works.

The revised STA failed to allay fears among some of the prospective bidders about the risk profile of the major civil works included in the project. In addition to building, owning and operating a 100,000m3/d wastewater treatment plant, the $250 million contract includes the construction of a 15km deep tunnel sewer (DTS) main and a wastewater connection network which would allow for the decommissioning of 24 existing wastewater pumping stations.

One bidder said to GWI that the flaw in the project’s current configuration lies in the scope of the works. Rather than lumping together the wastewater treatment plant and civil works, the project should be split into separate contracts, he argues.

An executive at another bidding group highlighted construction permitting and the routing of the DTS – which will be a microtunnel – as the particularly risky sticking points in the civil works package. “It’s clear that with the network, the whole scope is quite unbalanced,” he said. A third bidder said that the project is a no-go until the MOW sufficiently mitigates the tunnel construction risk for the chosen developer. “The risk of construction delays on the [deep tunnel sewer] is very high,” he said.

Nevertheless, there was more positive sentiment from the seven consortia that attended a technical conference organised by the ministry of works and the ministry of finance on 16 November: Acciona Agua; Berlinwasser/Metito/Mitsui; Keppel/Veolia/ Mubadala; Samsung Engineering/United Utilities/ADIC; Saudi Oger/ K-Water/ Samsung C&T; Saudi Binladin/Tanqia; and Sumitomo/Degrémont.

Those groups and their lenders are now undertaking due diligence processes on the revised STA, which incorporated bidders’ clarification requests. Around five fully underwritten bids are expected by the 20 January deadline. Bidding sources also emphasised the success of the MOW’s advisory consortium, headed by HSBC, in creating robust project documentation that stands up to close inspection, even if the inclusion of the civil works under the contract has proven unworkable for some.

Muharraq is the first Middle Eastern wastewater BOT to incorporate such a large network component, and it is perhaps reasonable to allow some margin for perfecting the model.