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Water sector braces for likely slowdown

27 December 2024

 

Geopolitical tensions, climate change and higher-than-average population growth have exacerbated the water demand and supply gap across the Middle East and North Africa (Mena) region, home to some of the world’s most water-stressed countries.

For example, Jordan, where available water per capita is equivalent to only 12% of the absolute water scarcity level, hosts over 700,000 refugees fleeing wars and conflicts in neighbouring countries.

Most regional governments have developed and started to implement water strategies aimed at narrowing this gap. Subsidies are being phased out, environmental campaigns are being developed and digital solutions are being deployed in order to manage demand and improve efficiency.

Expanding desalination and treatment capacity, increasing treated sewage effluent (TSE) reuse, boosting reservoir capacity and building more efficient transmission and distribution networks are key levers used to improve supply.

Strong spending 

These efforts have prompted significant capital spending on more energy-efficient water production, distribution and storage facilities, typically in partnership with private investors, particularly among the more affluent states.

According to data from regional projects tracker MEED Projects, the Mena region awarded $17bn of project contracts across the water desalination, treatment, transmission and distribution, storage and district cooling subsectors in the first nine months of 2024.

This figure represents about 72% of the contracts awarded in 2023 and is slightly above the average value of annual contract awards in the preceding five years.

With only a few more packages expected to be awarded before the end of the year, 2024 looks set to be one of the best years so far in terms of water project activity, even if it fails to match the record value of contracts awarded in 2023, which reached almost $24bn.

In 2024, Saudi gigaproject developer Neom set the pace in January by awarding a $4.7bn contract to build dams at the Trojena Mountain Resort in Tabuk to Italian contractor WeBuild. 

The contract covers the construction of three dams that will form a freshwater lake for the Trojena ski resort. The main dam will have a height of 145 metres and will be 475 metres long at its crest. It will be built using 2.7 million cubic metres of roller compact concrete.

While this project does not necessarily belong to the band of solutions that aim to narrow the water supply and demand gap, the overall development is part of Saudi Arabia’s drive to boost tourism and diversify its economy away from oil.

Meanwhile, 2024 also saw the award by UAE northern emirate utility Sharjah Electricity, Water & Gas Authority of the contract to develop its first independent water project (IWP), the 400,000 cubic-metres-a-day facility in Hamriyah, to Saudi utility developer Acwa Power, the contract’s sole bidder.

In May, Saudi Arabia’s National Water Company announced that it had completed the award of 10 contracts under the first phase of its privatisation programme. Each rehabilitate, operate and transfer contract involves the retrofitting or expansion of existing sewage treatment plants and associated network, and their long-term operation and management. The facilities are expected to deliver water at the TSE level for irrigation reuse.

On the greenfield sewage treatment front, Saudi Water Partnership Company (SWPC) awarded a $400m contract to develop the Al-Haer independent sewage treatment plant (ISTP) project to a team comprising the local Miahona Company and Belgium’s Besix. The facility is the largest and first to be tendered under the third round of the water offtaker’s ISTP procurement programme.

In September, Chennai-headquartered VA Tech Wabag confirmed it had won a $317m contract to build the Ras Al-Khair seawater reverse osmosis (SWRO) facility in Saudi Arabia using an engineering, procurement and construction (EPC) model. The project client is Saudi Water Authority (SWA), formerly Saline Water Conversion Corporation.

In Oman, Nama Water Services awarded two water distribution network packages, worth a combined $600m, catering to Al-Dhahirah Governorate.

Jordan also appointed a team comprising Paris-based Meridiam, Suez and Vinci Construction Grands Projets, along with Egypt’s Orascom Construction, for the contract to develop the Aqaba-Amman water conveyance and desalination scheme. It is the country’s largest infrastructure project to date and the first phase is valued at an estimated $2bn-$3bn.

The project is crucial to addressing Jordan’s severe water shortage problem, piping desalinated water over 445 kilometres from the southern Red Sea coast to the country’s northern regions. The consortium is talking to lenders and aims to reach financial close for the project in 2025.

Slower momentum

Despite 2024 being a good year for contract awards, it fell short of the expectation built over the past few years, when the region’s largest economies began to execute their long-term water strategies.

For example, in Saudi Arabia, the years-long restructuring of the domestic water sector took a significant turn in 2024, with Water Transmission Company (WTCO), the kingdom’s licensed desalinated water transmission operator, gaining a broader portfolio of projects. As a result, the mandate to procure upcoming water transmission pipelines has been transferred to WTCO from SWPC.

The slower pace of IWP contract awards in Saudi Arabia was somewhat offset by a slew of tenders from SWA. The authority received bids for the EPC contracts to build four SWRO facilities in 2024, although as of November it had only managed to award one.

Earlier in 2024, Saudi gigaproject developer Neom also shelved a project to develop a zero-liquid discharge (ZLD) SWRO plant.

“The year may not have been as strong as 2023, but it is still a good year,” says Robert Bryniak, CEO of Dubai-based Golden Sands Management (Marketing) Consulting. “Some projects have been delayed or cancelled – for instance a few in Saudi Arabia – but all in all [2024 has been] a good year for the water business.”

Bryniak adds that Neom’s ZLD scheme is one of the year’s shelved projects that he would like to see revived in the future.

Beyond the GCC states, Morocco and Egypt are endeavouring to move their planned SWRO projects into the tendering phase.

In Morocco, Office National de L’Electricite et de L’Eue Potable (Onee) extended the review of its second IWP in Nador while waiting for its first IWP in Casablanca to reach financial close.

The first batch of renewable energy- powered desalination plants in Egypt has yet to reach the proposals stage despite the Sovereign Fund of Egypt having completed the bid prequalification process in 2023.

Potential contract awards

According to data from MEED Projects, an estimated $34bn-worth of water projects are in the tendering stage across the Mena region. A further $40bn-worth is in the prequalification stage and $57bn is in the design and study phases.

The $22bn Dubai Strategic Sewerage Tunnels (DSST) scheme stands out among the upcoming projects due to its scale, as well as for the chosen procurement approach.

The project aims to convert Dubai’s existing sewerage network from a pumped system to a gravity system by decommissioning the existing pump stations and providing a sustainable and reliable service that is fit for the future.

In April, Dubai Municipality launched the procurement process for the DSST project, which is to be developed as a public-private partnership (PPP).

While a dose of pessimism persists over the chosen PPP model – in part due to the project’s scale and strong civil works orientation, and Dubai’s dismal track record in procuring PPP schemes outside the utility sector – the project has managed to attract strong interest from EPC contractors, as well as from potential investors and sponsors.

Some of those that have sought to prequalify as investors, such as Begium’s Besix, Beijing-headquartered China Railway Construction Corporation and South Korea’s Samsung C&T, have previously been prequalified as EPC contractors for the DSST project, which suggests that the preferred approach of prequalifying EPCs ahead of investors could offer advantages.

In Saudi Arabia, WTCO, SWA, SWPC and Neom’s utility subsidiary Enowa are each expected to let several contracts in 2025, while Bahrain and Abu Dhabi could award one IWP contract each.  

However, a robust overall pipeline does not necessarily guarantee that 2025 will resemble the upward trajectory that the sector has seen in the past two years.

“This year could be a turning point for the water industry throughout Mena,” says Bryniak, alluding to the possibility that, come January, the foreign and climate policies of the new occupant of the White House could affect the trend of water production capacity buildout in the Mena region.

Bryniak says that if US President-elect Donald Trump follows through with his promises, then we may be in store for, among other events, lower energy prices as the US drills more oil; a dampening of world trade as the US places tariffs on imports, especially on Chinese goods and services; less focus on the environment; and, generally, a more isolationist America.

“In my view, much depends on how much oil prices fall,” he continues. 

“A significant drop in oil prices could result in cut-backs in a lot of development projects, and this, in turn, will adversely impact water demand and the overall build programme.”  

However, the impact will not be uniform across asset types and procurement models, Bryniak notes. He expects water PPP projects to continue to grow, especially if capital availability is reduced by lower oil prices, as this is one way to preserve capital for use in other areas. 

“I do not see any reason for tariffs to fall further in 2025. Tariffs, in my view, will remain roughly where they are now or increase slightly,” adds Bryniak.  

However, the executive says that EPC contracts will likely have “a higher opportunity cost”, so there might be a reduced focus on this type of procurement model.  

He concludes: “To the extent that development projects get trimmed down due to less capital being available as a result of significantly lower oil prices, then water procurers and other developers will likely scale back their projects.”

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Jennifer Aguinaldo

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    None of the Maghreb countries seem to understand this better than Morocco, which has been rolling out what might be described as a GCC-style vision for the country. Most recently, in September 2024, it launched the Digital Morocco 2030 strategy to use artificial intelligence to improve access to services in rural and underserved areas.

    Such initiatives are central to Morocco’s broader New Development Model (NDM) strategy, first laid out in 2021 and recognised by bodies such as the Washington-based IMF as a key driver of economic transformation in the country. Key indicators for the NDM include doubling the country’s GDP per capita to $16,000 by 2035, doubling the rate of women in the workforce, raising renewables to 40% of total energy consumption and developing the digital sector to account for 5% of GDP.

    Rabat is also widening the country’s social security net, having expanded family allowances in 2023, and with plans to expand old-age pensions and unemployment benefits in 2025. The government is also improving access to services for Amazigh speakers in answer to loud political calls since the 2016-17 Amazigh-led Hirak Rif movement protests.

    From creating jobs to supporting vulnerable groups and minorities, the common thread in Rabat’s domestic policy is expediting measures to address emerging risks to social and political stability at source.

    Externally, Morocco has meanwhile intensified its diplomatic campaign for international recognition of its semi-autonomy plan for Western Sahara. First proposed in 2007, the scheme initially received little traction, but the situation changed significantly in 2020 with then US President Donald Trump’s recognition of Moroccan sovereignty over the territory as part of a deal to normalise ties with Israel. In 2022, Spain also shifted its stance to one of support for Rabat’s autonomy plan, followed by France in early 2024 and by the UK in June 2025 – each country for their own reasons.

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    President Abdelmadjid Tebboune secured his re-election for a second term in September 2024 with the support of 84.3% of the vote, in a reassuring referendum on the political stability of the country’s post-Bouteflika political order.

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    In a mirror image of Morocco’s diplomatic journey, Algiers has worsening foreign relations with Paris and Madrid due to its staunch opposition to the Western recognition of Moroccan claims to the Western Sahara region.

    In May 2025, Algeria expelled 15 French diplomatic agents, citing their “irregular positions” on the geopolitical issue. The incident matched similarly negative responses by Algeria to Spain in 2022.

    Trouble in Tripoli

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    Borouge Group International

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    MEED understands that the contract is being finalised and is expected to be signed within the next few weeks.

    The tender notice was issued in December last year, and firms submitted their final offers in April.

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  • Hilton signs hotel agreement in Medina

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    US-based hotel operator Hilton Hotels & Resorts has announced the signing of Diyar Ajwa, Tapestry Collection by Hilton, in partnership with local firm Al-Musbah Group.

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    The project is located north of the central Haram area in Medina and offers direct access to the holy mosque in Medina.

    In an official statement, Hilton said that it currently operates 20 hotels across the kingdom. It has a further 77 properties in the pipeline.

    In March last year, Saudi Arabia’s Dan Company, which is backed by Saudi sovereign wealth vehicle the Public Investment Fund (PIF), signed an agreement with Hilton Hotels & Resorts. Under the agreement, Hilton will operate three resorts at Dan Company’s Palm One project in Al-Ahsa.

    Most recently, Hilton signed an agreement with another PIF-backed firm, Ardara, to operate a Waldorf Astoria hotel within the Alwadi development in Abha province.

    According to UK-based analytics firm GlobalData, the construction industry in Saudi Arabia is expected to grow by 4% in real terms in 2025, before recording an annual average growth of 5.4% from 2026 to 2029.

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    The contract was awarded by Sharjah-based real estate developer Arada.

    The development will offer 53 residential apartments designed in partnership with Armani/Casa Interior Design Studio and Japanese architect Tadao Ando.

    The enabling works on the project, which include shoring, piling, dewatering and excavation, are nearing completion and are being undertaken by local firm International Foundation Group.

    The construction works are expected to start immediately, and the project is slated for completion in 2027.

    The contract award follows Arada’s signing of a AED604m ($164m) deal in March to construct the first phase of the Arada Central Business District project in Aljada, Sharjah.

    The contract was awarded to the local Modern Building Contracting Company.

    Arada is the developer behind three masterplanned residential communities in Sharjah. The Aljada, Masaar and Nasma Residences communities are together valued at AED33bn. In Dubai, Arada is developing the Jouri Hills project.

    Covering 24 million square feet in the Muwaileh district, the masterplan for Aljada includes residential districts, as well as retail, hospitality, entertainment, sporting, educational and healthcare components, and a business park.

    The UAE’s heightened real estate activity is in line with UK data analyst GlobalData’s forecast that the construction industry in the country will register annual growth of 3.9% in 2025-27, supported by investments in infrastructure, renewable energy, oil and gas, housing, industrial and tourism projects. 

    The residential construction sector is expected to record an annual average growth rate of 2.7% in 2025-28, supported by private investments in the residential housing sector, along with government initiatives to meet rising housing demand.

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