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PPP activity eases back but remains strong

25 October 2024

 

This package also includes: Region remains global project finance hotspot

Public-private partnership (PPP) activity appears to be easing back in the Middle East and North Africa (Mena) region in 2024, with the total value of contract awards in the first nine months of the year coming in at $24bn, according to regional projects tracker MEED Projects.

This is 6.5% lower than the $25.6bn recorded in the same period a year earlier. The full-year total for 2023 then ended up at $41.3bn after a surge of activity in the final three months of the year.

While there are plenty of contract awards pencilled in for the final quarter of this year, too – including several large power and water projects in the Levant and the Gulf – at this stage, it appears unlikely that the gap to the record 2023 total will be bridged.

Among the projects with main contract awards due to be made before 31 December are a 10GW battery energy storage system (bess) in Saudi Arabia and the 3.7GW fifth round of the country’s renewable energy programme, both planned by Saudi Power Procurement Company.

Other major projects at a similar stage include a 10GW solar power project planned by the Renewable Energy & Energy Efficiency Organisation in Iran; the $4.3bn Aqaba-Amman water desalination and conveyance scheme backed by Jordan’s Water & Irrigation Ministry; and the $3bn, 2.3GW Facility E independent water and power project by Qatar General Electricity & Water Corporation (Kahramaa).

In total, 72 main contract awards are due to be made by the end of 2024 – almost as many as were handed out in the whole of 2023. However, there can be no certainty as to which ones will get over the line before the year’s end and which ones might suffer delays or cancellations.

Even without such projects, though, the number and value of contracts finalised in the first nine months of this year means 2024 is set to be one of the most active for PPP deal-making so far this century.

Other than last year’s record-setting run, the combined value of deals has not been this high since 2009, when a total of $29.6bn-worth of contracts were awarded. In terms of the number of awards, this year has also been among the most active. 

The 45 contracts handed out between January and the end of September is already above the annual average of 44 contracts a year over the past decade. It puts the year firmly on track to be among the top performing years in terms of the number of PPP contracts awarded. The surge in the past three years highlights the popularity that PPP deals are enjoying among Mena governments at present.

The average size of contract awards is also running well above the long-term figure, with the typical deal being worth $533m in 2024. This is down from the $574m figure of last year, but well ahead of any other performance in the past decade save the $556m figure in 2014.

Iraq, Saudi Arabia and the UAE lead

In terms of geography, the standout markets this year have been Iraq, with $11bn of PPP awards, followed by Saudi Arabia with $5.4bn and the UAE with $3bn. Between them, these three countries accounted for a total of 34 contract awards, or 75% of the figure for the whole of the Mena region in the opening nine months of the year.

Key contracts signed in these markets have included the $8bn Al-Faw refinery and petrochemicals complex in Iraq’s southern Basra province, which is being developed by the Southern Refineries Company; and a series of contracts
awarded by the National Investment Commission on seven lines of the $2.5bn Baghdad Metro.

In Saudi Arabia, there have been 15 awards across the transport, power and water sectors, including the 2GW Haden solar photovoltaic (PV) power plant, the 600MW Al-Ghat independent power producer (IPP) wind project, and expansion work at Prince Mohammad Bin Abdulaziz International airport in Medina.

In the UAE, the contract activity has been more varied, with awards in the power, water, transport, construction and industrial sectors. Among the biggest awards so far this year were a $1.5bn contract awarded by Emirates Water & Electricity Company for the 1.5GW Al-Ajban solar IPP in Abu Dhabi and a $682m contract awarded by Sharjah Electricity & Water Authority to Acwa Power for the Hamriyah seawater reverse osmosis independent water project.

Another market with high levels of activity this year is Egypt, where there has been $3.7bn-worth of contract awards, including a $2.2bn strategic warehousing scheme. The Damietta Port Authority also signed a $665m deal to deliver a second container terminal and a $500m award for the 1GW Benban solar PV power plant and 600 megawatt-hour bess in Aswan Governorate.

Bahrain, Oman, Qatar and Tunisia have each seen one or two awards apiece, with the individual awards being generally more modest in value.

Sectoral and contractual shift

On a sectoral basis, this year has seen an even broader spread of awards across different industries compared to last year.

In 2023, the power sector accounted for 55% of the total awards by value, with the water and transport sectors accounting for a further 39% between them.

This year, power has again been the main focus of activity, but its share of the total awards value has fallen to 30%, while the transport sector fell to 15%.

The chemicals and oil industries then inched ahead, with 17% each, split across the planned $8bn combined value of the Al-Faw refinery and petrochemicals complex in Iraq.

The water sector has meanwhile seen a sharp drop-off in awards, with deals in the first nine months of the year accounting for just 6.6% of the total.

These changes have contributed to another significant shift, with the type of contracts proving most popular also undergoing a change this year.

In 2023, most of the awards were either for build, own and operate or build-operate-transfer (BOT) contracts, which accounted for 34% and 32% of the total value of awards handed out, respectively. 

This was followed by build and operate and build-own-operate-transfer (BOOT) awards, worth a further 14% each.

This year, the activity has been led by BOOT contracts, which have totalled $9.2bn, or 38% of the total for the first nine months. This was driven again by the $8bn-worth of contract value accounted for by the Al-Faw Refinery in Iraq.

Following behind are BOT contracts with a total value of $5.4bn, representing 22% of the total, most of which has
been awarded in the power sector. Design-build-finance-operate-transfer contracts worth $5bn accounted for 21% of the total with the value split across the transport and industrial sectors.

The picture could yet change in the final quarter of the year. In recent years, the last three months have been the busiest period for contract signings. In 2021, 38% of the year’s awards were made in Q4, with this figure increasing to 66% in 2022, before receding again to 38% in 2023 – but yet again with more than a third of all awards being made in the last quarter.

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Dominic Dudley

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