Saudi goes the private way

At a major roadshow last November, Saudi Arabia’s Ministry of Water and Electricity (MOWE) declared it had completed the process of reforming the water sector in the Kingdom. According to Minister Abdullah Al-Hussayen, the major result of this reform process was the establishment of the National Water Company.

The National Water Company, which owns the water assets of the country has been corporatised and prepared for an initial public offering. About 70% of the Kingdom’s drinking water is currently sourced from desalination plants. “We embrace the challenge of transforming the water sector, and creating a world-class water utility,” said the Saudi Minister. “In order to meet this objective, we will engage the private sector through a public-private-partnership approach (PPP). We are confident that the involvement of private operators will help to improve the overall performance,” he said.

This is the biggest PPP initiative for the water and wastewater sector in the Middle East, according to the Saudi government. A first step has been the tendering of a six-year management/O&M contract for water and wastewater services for Riyadh city. The pre-qualification of the bidders has already been carried out and the transaction will be finalised by August. Other cities to go the Riyadh way will be Jeddah, Damman/Khobar and Medina.

As expected, the tendering has attracted the interest of all the top water majors in the world such as Veolia Water, Suez Environment, United Utilities, Saur, Aqualia, Berlinwasser and others.

Water and wastewater is one of the twenty sectors earmarked for an ambitious privatisation programme in Saudi Arabia, which includes telecom, aviation, railways and postal services among others.

At Riyadh, two wastewater treatment plants will be developed on a BOT basis. The Al Hayer plant’s capacity would be tripled to 1,200,000 m3/day while the size of the Al-Kharij facility would be doubled to 400,000 m3/day.

As expected, the water tariffs, which are one of the lowest in the world, are to increase gradually to the level of commercial viability. The Saudis are said to consume twice as much water as Britons in spite of living in one of the world’s driest regions. The government is introducing measures to encourage water conservation.

One of the big challenges faced by water distribution systems in the country is non-revenue water (NRW). The figure for NRW stands at 54% today and many residents receive water only once in four days. One consultant jokes that the NRW is actually helping to recharge groundwater supplies in Saudi Arabia!

However, the government is well-aware of the NRW problem and the privatisation move is expected to bring down the figures. The Deputy Water Minister for Planning and Development, Loay Al-Musallam said in Stockholm last year that reducing NRW would be a top priority for the government.

After the short-term management contracts are completed, the ministry will initiate longer-term concession contracts with private companies. By 2010, private companies might provide water for half the population of Saudi Arabia.

It will be interesting to know the response of the anti-privatisation lobbies around the world.

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