Abstract
Saudi Arabia is the third largest consumer of water per capita in the world,
but has limited groundwater to
tap. The country has been plagued by
shortages in recent years, and with consumption from a rising
population
and economic growth set to soar, the government has needed to act quickly to
stave off
potential disaster and civil unrest.
Desalination forms the
backbone of the government’s water strategy. Some 30 desalination plants
have
already been built by the state, but these have barely been able to
keep pace with rising demand.
Building on a master plan drawn up in 2002,
some US$6bn a year has been committed by the government
to bolstering the
water sector over the next two decades. This was regarded as too big a task
for stateowned
utilities alone, so, for the first time in Saudi Arabian
infrastructure outside the hydrocarbons
sector, the programme involves
massive input from the domestic and international private sector.
Saudi
Arabia’s regulatory system for the power and water sectors was
overhauled to make it more
investor-friendly and to enable the creation of
bodies such as the Water and Electricity Company
(WEC) and the National
Water Company (NWC) to manage the transition and provide state partners
for
investors
The main vehicles are independent power and water
projects (IWPPs) in which the private sector can take
stakes of up to 60%.
Over US$15bn worth of IWPPs have been sanctioned. They are set to add over
1bn
cubic metres per day (m3/day) to the country’s water supply and
nearly 10GW of power capacity.
The first of these IWPPs, the US$2.45bn
Shuaibah facility, sought funding in 2004 and – after initial
mistrust among foreign investors then unfamiliar with the Saudi Arabian market
– eventually received
financing from a Saudi-Malaysian consortium.
The success of this financing paved the way for a number
of other IWPPs to
successfully seek funding, as international capital markets gained confidence
in Saudi
Arabia.
Shuaibah became operational in February 2009. Four
others currently under construction or seeking
funding should follow in
the next two or three years, built by consortiums made up of high-profile
international engineering firms. Another four projects could emerge by 2016,
if the government’s
blueprint is followed through.
The programme
has not escaped the impact of the global downturn. The Ras Al Zour power and
water
scheme, conceived as a US$5.5bn IWPP, is now being converted into a
state-run project, after the
winning consortium failed to raise enough
equity finance.
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