New timeline for Saudi water management

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Saudi Arabia has outlined a new roadmap for managing and privatising its treatment and distribution assets. The crucial details that will determine its appeal to the private sector have still to be decided.

Saudi Arabia’s National Water Company is reconsidering plans for the operation and management of its water treatment and distribution assets as part of its longterm privatisation drive. In the short term this will mean the most pressing wastewater treatment plants will be financed by the government, and that there will be delays in the award of the Medina and Dammam/ Al Khobar management contracts.

In the longer term, foreign operators will have the opportunity to participate in joint ventures with the National Water Company to operate water systems both in the Kingdom and in the wider regional market. The details of this have yet to be filled out, however. NWC chief executive Loay Al-Musallam indicated that there is still potential for BOOs to be offered for wastewater treatment plants. Alternatively, NWC could rely on treated sewage effluent sales to add value to the packages being spun off to joint ventures (see story opposite).

During a special session held after the Saudi Water and Power Forum in Jeddah, NWC said it intends to have business units set up for the 15 largest cities in the country by the end of 2011. These would then be spun off into either regional or city-wide joint ventures during the ensuing 6-15 months. Business units would start with O&M service contracts before taking over other NWC water and wastewater facilities prior to being incorporated into the JVs.

To date, three management contracts have been awarded (for the cities of Riyadh, Jeddah and Mecca/Taif). They all come up for renewal before the end of 2015. Two further contracts for Medina and Dammam/ Al Khobar were due to follow. NWC has now hinted that the ten companies that had been pre-approved for the two upcoming contracts may have to prequalify again. In the week since the forum finished, O&M contractors have been arranging meetings with NWC to try to hammer out details of how and where O&M contracts will become available. A source at one company that had prequalified for one of the management contracts said after the conference: “I think they explained it very hurriedly at the forum and we didn’t get much time to analyse it.”

The other key issue for attendees at the conference in Jeddah was the future of NWC’s capital spending plans. The outfit has plans for nearly SAR30 billion ($8 billion) of spending on water and wastewater treatment facilities in Riyadh and Jeddah alone between 2010 and 2014 (see chart).

NWC has accepted that it will still have to subsidise capital development, although it is hoping to reduce losses on operations and management by increasing the amount coming in through tariffs.

NWC’s executive director for business development, Ibrahim Shirazi, told GWI that there would be opportunities for businesses to get involved with JVs in any or all of the different strands of business. “We have a way forward. Currently it’s still at a macro level, but the path is open now for privatisation.”

The size and scope of any combined packages will be crucial for the market. Too large, and NWC risks scaring off smaller customers and local firms. Too small, and the returns will not be large enough to tempt in big international players.

Anthony Raftopoulos, the business development officer for Saudi-based SETE Energy, said he believes the new privatisation structure would be geared towards including local developers and stopping larger international bidders snapping up the more lucrative parts of the NWC asset base. “Obviously the way they are packaging things is not just to cater to foreign companies coming in for a BOT. They want a local element in my opinion, because at the end of the day the people who will know the TSE market best are the local individuals.”