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Growth inevitable for the Saudi water sector

14 March 2024

Latest news on Saudi Arabia’s water sector:

> Sepco 3 and Wabag team wins Al Haer EPC package
> Miahona and Besix team signs Al Haer deal
> Ras Mohaisen bids due by end of March
> King Salman Park selects water package bidder
> Bid evaluation for Oxagon cooling continues
> Three consortiums form for Jubail-Buraydah scheme
> Firms to submit Neom water documents
> Neom’s utility projects take shape

 

The water sector is playing an increasingly important role as Saudi Arabia enters the execution phase of Vision 2030.

In the foreseeable future, the momentum to build water desalination, treatment, district cooling, storage and transmission facilities will only accelerate. This is due to the need to ensure security of supply, adopt a circular carbon economy and support the development of sports and tourism destinations such as Trojena at Neom, not to mention the kingdom's aggressive population growth,

Over a 10-year window, the sector had its best year in 2023, awarding contracts with a total value of approximately $10bn, some 50% higher than in 2022.

But 2024 looks to be even better than the previous year if the value of contracts awarded in the first two months is any indication.

Key clients, including Saline Water Conversion Company (SWCC), Saudi Water Partnership Company (SWPC) and National Water Company (NWC), along with Neom, have awarded contracts valued at more than $6.2bn as of mid-March. This equates to 63% of the value of contracts awarded in 2023 and 95% in 2022.

Trojena dams

In January, Italian contractor WeBuild awarded a single contract worth $4.7bn to construct dams at the Trojena mountain resort in Tabuk, Saudi Arabia. The deal includes the construction of three dams that will form a freshwater lake for the Trojena ski resort.

Other schemes awarded so far this year include a package for sewage networks and pumping stations in Al-Khobar as well the expansion of an existing sewage treatment plant in the city; the second phase of the Arda water transmission system and the upgrade of the Hali dam and Shuiba water transmission system; and the Al Haer independent sewage treatment plant (ISTP) project.

2023 highlights

In 2023, water transmission and distribution (T&D) deals accounted for more than half, 54%, of the total contracts awarded in the kingdom’s water sector.

The water transmission segment's impressive performance hinged on the award of a contract to develop and operate the kingdom’s first independent water transmission pipeline (IWTP) project.

The $2.07bn Rayis-Rabigh IWTP project will have a length of 150 kilometres and transmit 500,000 cubic metres a day (cm/d) of drinking water between the two municipalities.

A team comprising the local Alkhorayef Water & Power Technologies Company, Spain’s Cobra Group and Egypt’s Orascom Construction won the contract to develop the Rayis-Rabigh IWTP scheme.

It offered a levelised water transmission cost of SR1.25678 a cubic metre for the build-operate-transfer (BOT) contract, which lasts 450 months, including the 30-month construction period.

The value of awarded water T&D contracts eclipsed those seen in the water desalination and treatment segments, although they individually registered sizeable contract awards uplift relative to 2022.

An estimated $1.3bn-worth of waste desalination contracts were awarded in 2023. These include the Rabigh 4 independent water project (IWP), awarded by SWPC, and the Jafurah IWP, which caters to Saudi Aramco’s gas development scheme.

A more diverse client base boosted the water treatment segment, which awarded over $2.1bn of contracts in 2023. While the kingdom’s potable water distributor and water treatment company, NWC, dominated the water treatment segment, real estate developers such as King Salman Park Foundation, Neom, The Red Sea Development Company and Roshn also awarded water treatment contracts last year as part of their flagship real-estate projects.

Notably, SWPC selected a bidder for the kingdom’s first independent strategic water reservoir (ISWR) project last year. 

A team comprising the local Vision International Investment Company, Kuwait's Gulf Investment Corporation and the UAE's Abu Dhabi National Energy Company (Taqa) proposed to develop the Juranah ISWR project for SRhals18.11 ($c4.83) a cubic metre.

The Juranah ISWR scheme is the first of several reservoir projects that SWPC intends to develop with private sector partners. It has a design capacity of 2.5 million cubic metres. The developer team has yet to reach financial close on the scheme as of March.

Unawarded projects

More than $31bn of projects are in the pre-execution phase across the kingdom’s five water segments, with T&D, desalination and water treatment accounting for over 80 per cent of the projects pipeline.

The three main stakeholders, SWPC, SWCC and NWC, are expected to continue to dominate future contract awards.


Bid evaluation is under way for water desalination engineering, procurement and construction (EPC) schemes tendered by SWCC, including the second phases of the Shuaibah and Yanbu water desalination plants. SWPC's second IWTP project, two IWPs and multiple NWC transmission schemes are in the bid phase and likely to be awarded in the remaining months of 2024.  

However, the trend whereby some of the largest real-estate developers are going ahead with tendering utility projects independent of these state-backed companies is expected to be sustained.

In addition to the SWCC spin-off, Water Transmission and Technologies Company (WTTCO), gigaproject developers such as Neom and its utility arm, Enowa, and the various royal commissions, among others, have sizeable contracts likely to be awarded over the next 12 to 18 months.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11589706/main.jpg
Jennifer Aguinaldo

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    Local developers

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    The exclusion of dominant utility developer Acwa Power in the prequalification process for the NREP’s fifth and sixth procurement rounds has also opened up opportunities for other international and local developers that are keen to win more contracts in Saudi Arabia.

    Aljomaih Energy & Water, Ajlan & Brothers, Alfanar, Algihaz and SEC’s developer arm have been pursuing new contracts, usually in cooperation with an international developer.

    Battery energy storage

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    “We are definitely interested,” says a senior executive with a European utility developer, referring to the first phase of the kingdom’s independent storage provider (ISP) programme.

    In addition to its net-zero merits, the ISPs will follow the same model as an IPP project, where the successful bidders will hold 100% equity in the special purpose vehicles set up to develop and operate the project.

    While such strong interest is expected to benefit the principal buyer, which can expect to receive competitive prices from bidders, an over-competitive or crowded landscape could also be off-putting to developers and investors that are keen to maintain their internal rate of return, or which are shifting their global focus to other geographies.

    “We prefer to wait and see,” one source tells MEED, indicating that their company does not intend to participate in upcoming battery tenders, not only in Saudi Arabia but also in other GCC states.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13466191/main.gif
    Jennifer Aguinaldo