Saudi Arabia Water Report Q1 2012

BMI View: Saudi Arabia’s water sector is poised for a period of significant activity over the next year, as the government – under pressure to deliver better public services – implements a major spending programme designed to ramp up access to water. Throughout H211, senior Saudi water officials announced plans to beef up investment and – positively for international developers – make the sector more attractive to investors. We expect Saudi Arabia to maintain an attractive competitive landscape with the authorities looking to grant long-term management contracts for the operation of the water sector in key urban areas. These are likely to offer improved risk/return rewards under plans announced by the National Water Company. Meanwhile, competition between the major Western water developers such as Veolia and Suez and the growing Asian presence will be fierce, with Korea’s Doosan Heavy Industries particularly active in desalination projects.
The key themes to highlight for Saudi Arabia’s water sector: 􀂃 The flurry of investment from state-owned water companies should ensure a steady rise in water desalination output in the five years to 2016, and if the Saline Water Conversion Company (SWCC) orchestrates a planned privatisation programme during 2012, this should trigger even greater activity in the world’s largest desalination market. In 2012, BMI anticipates a 4% increase in desalination output to 1.27bn cubic metres (m3) and by 2016 output will increase to 1.47bn m3. The main problem will be keeping pace with demand. We anticipate a sharp increase in water consumption over the next five years, rising from 7.86bn m3 in 2012 to 11.16bn m3 in 2016 – a faster rate than the planned growth of desalination capacity. As an indication of the kind of spending that will emerge in Saudi Arabia’s water sector, National Water Company (NWC) will commit to outlays of US$66bn on water and wastewater developments in the 2012- 2020 period. Around US$30bn of this will be capital expenditure (capex), with much of the spending targeted at wastewater projects – water recycling is a major focus for the authorities.
􀂃 NWC is preparing to commence the bidding process for consultants to work on the kingdom’s treated sewage effluent programme during Q112, and is to form special-purpose vehicles with private sector partners to undertake wastewater projects under the build, own, operate, transfer (BOOT) model. The kingdom is still attracting financing for key water and power projects. In November 2011 ACWA Power completed a US$300mn corporate credit raising exercise with international banks, structured on a Murahaba (Islamic) basis. Average water consumption per capita stands at around 250 litres (0.25m3) a day, according to Ministry of Water and Electricity (MoWE) data, making Saudi Arabia one of the world’s heaviest water users – third only to the US and Canada in per capita terms. With just 2bn m3 of proven groundwater reserves, Saudi Arabia has nowhere near enough water to serve its future needs..