PPP offers budget and efficiency routes

7 May 2024

 

The procurement of the multi-utility packages for the Red Sea and Amaala developments, as well as for the staff accommodation packages at Neom, used a public-private partnership (PPP) model, opening up an alternative route for Saudi Arabia to finance and ensure the efficiency of its gigaprojects.

In the case of the Red Sea and Amaala schemes, bundling the utility elements of these greenfield projects – including renewable energy generation, cooling, water desalination and treatment and waste recycling – makes sense for both the procuring entity and the utility developers and investors.

Instead of dealing with several developers or suppliers, the client – which does not necessarily specialise in providing utility services – only has to deal with the selected developer, which then manages the contractors and operations and maintenance companies.

Complex infrastructure takes a long time to procure. This is a fact, particularly when quality is a focal point"

Cost and operational efficiencies are also incentives, given that each component of the project is relatively small and may require a bigger budget if they were to be procured as separate contracts.

PPPs serve both as a solution and challenge to perceived budget and liquidity issues that are facing the official gigaprojects as they enter the execution phase, not to mention their tight delivery timelines.

Neom, for instance, is pursuing both PPP and conventional procurement models for the renewable energy and water desalination facilities it requires for the SR1.9tn ($500bn) development.

“Complex infrastructure takes a long time to procure. This is a fact, particularly when quality is a focal point," note Jason Gouveia and Joanna McGuire, senior associates at UK-headquartered legal consultancy Ashurst. 

"There will, therefore, always exist a natural tension between urgency and procurement duration in the context of PPP deals, and it is important to keep a tight handle on the efficiency of the procurement process.”

This requires procurers and their advisers to carry out feasibility assessments before going to market, and to address any issues that bidders and their lenders are likely to raise as part of their due diligence on a PPP project, they add.

The kingdom's gigaprojects are contending with 200 other infrastructure schemes that are being planned by various ministries through the National Centre for Privatisation & PPP (NCP), the state PPP procuring authority.

Among the schemes in the NCP’s pipeline are airports, seaports, roads and healthcare facilities, which all cater to Saudi Arabia’s growing infrastructure needs as the population and economy expand.

This pipeline will only grow, as it is anticipated that the procurement models for some aspects of the gigaprojects will be changed in response to budgetary cuts, and more lenient execution timelines may also be adopted, potentially extending the deadlines from 2030 to 2040.

Liquidity squeeze

Some experts cite the overall liquidity of local banks and the willingness of international lenders to participate in future projects in response to the growing PPP pipeline.

“The liquidity levels of local banks are not readily ascertainable. However, given the rate of progress on projects within the kingdom, which assumes committed financing is in place, it seems that local banks, together with the support of their international counterparts and institutional investors, are able to meet the liquidity demands of projects,” say Gouveia and McGuire.

The pair adds that an efficient, robust and safe monetary policy is key to attracting international banks to the Saudi PPP market.

“On the projects we are advising on, international lenders and development investment funds are a common feature, as the international lending market seeks to diversify their books of debt.

“Depending on the complexity and capital intensity of a PPP project, there may be no other option but for the lending market to be a syndication of local and international lenders, to ensure that capital requirements are met.”

Lenders are also most likely to target the more lucrative projects – such as the gigaprojects and those schemes initiated by the Saudi sovereign wealth vehicle, the Public Investment Fund (PIF) – over others in the PPP ecosystem.

“Given that the capacity of the market is naturally limited in terms of resourcing, there is a potential danger that the NCP's PPP programme may find itself suffering in comparison to those other market segments,” the two lawyers warn.

A senior PPP transaction expert does not entirely agree, noting that PPPs account for only a small percentage of the pipeline of gigaprojects.

The impact of the budget shift and the scope for the gigaprojects to move parts of their projects to a PPP model remains limited.

He agrees, however, that developers do tend to prefer to be associated with the gigaprojects over the NCP projects.

Within the gigaprojects sphere, concerns about who ultimately bears the payment risk in a PPP project become relevant. Ashurst’s Gouveia and McGuire say it is always preferable for the entity with the greater financial wherewithal to bear the burden of payment.

"Often, there may be certain governmental-level letters of comfort or support provided by the finance ministry that are added as a supplementary means of payment protections and credit support," they explain.


MEED's April 2024 special report on Saudi Arabia includes:

> GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
> BANKING: Saudi lenders gear up for corporate growth
> UPSTREAM: Aramco spending drawdown to jolt oil projects
> DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector

> POWER: Riyadh to sustain power spending
> WATER: Growth inevitable for the Saudi water sector
> CONSTRUCTION: Saudi gigaprojects propel construction sector
> TRANSPORT: Saudi Arabia’s transport sector offers prospects

 

https://image.digitalinsightresearch.in/uploads/NewsArticle/11734003/main0304.jpg
Jennifer Aguinaldo
Related Articles
  • UAE firm wins contract for battery storage project

    10 October 2025

    Etihad Water & Electricity (EtihadWE) has won the award to develop the UAE’s largest grid-side energy storage project to be awarded through open tender. 

    Its subsidiary, Emirates Utilities Development Company (EUDC), will develop and operate the project, its first since its establishment.

    Chinese firm Dongfang International has been appointed as the EPC contractor.

    Called Bess 1, the project closely follows the model of Abu Dhabi’s independent power project (IPP) programme, in which developers enter into a long-term energy storage agreement (ESA) with Ewec as the sole procurer.

    The contract was signed at the Ministry of Energy in Abu Dhabi in the presence of senior officials from Dongfang Electric Corporation, EtihadWE and EUDC. 

    In April, MEED reported that Ewec had received proposals for the facility, which is expected to provide a total storage capacity of close to 1GWh across two sites, Al-Bihouth and Madinat Zayed. It will also include supporting booster stations.

    It is understood that the ESA will be for 15 years, commencing on the project’s commercial operation date, which falls in the third quarter of 2026. 

    The overall capacity of deployed bess globally is expected to reach 127GW by 2027, up from an estimated cumulative deployment of 36.7GW at the end of 2023, according to a recent GlobalData report.

    The report named Chinese companies BYD and CATL and South Korean companies LG Energy Solutions and Samsung SDI among the top battery technology providers globally.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14843641/main.jpg
    Mark Dowdall
  • Ashghal seeks firms for sports facilities upgrade

    10 October 2025

     

    Qatar’s Public Works Authority (Ashghal) has tendered a contract inviting consultants to bid for post‑contract professional consultancy services for the upgrade and renovation of Ministry of Sports & Youth facilities in the south sector.

    The assets include Qatar Bowling Centre, Al-Ahli Sports Club, Al-Arabi Sports Club, Al-Sadd Sports Club, Qatar Sports Club, Al-Wakrah Sports Club, Gharrafa Sports Club, Duhail Sports Club and Al-Khor Sports Club.

    The notice was issued on 5 October, with a closing date of 26 October.

    The contract duration is two years and seven months, which includes a 400‑day maintenance period.

    The latest notice follows tendering for the construction of roads and infrastructure in the town of Smaisma.

    The contract covers package two in the south area of Smaisma, located 52 kilometres (km) north of Hamad International airport.

    Market overview

    After 2019, there was a consistent year-on-year decline in contract awards in Qatar’s construction and transport sectors. The total value of awards in that year was $13.5bn, but by 2023 it had fallen to just over $1.2bn.

    In 2024, the value of project contract awards increased to $1.7bn, bucking the downward trend in the market in the preceding four years.

    Of last year’s figure, the construction sector accounted for contract awards of over $1.2bn, while transport contract awards were about $200m.

    There are strategic projects in the bidding phase in Qatar worth more than $5bn, and these are expected to provide renewed impetus to the construction and transportation market, presenting opportunities for contractors in the near term.


    READ THE OCTOBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Private sector takes on expanded role; Riyadh shifts towards strategic expenditure; MEED’s 2025 power developer ranking

    Distributed to senior decision-makers in the region and around the world, the October 2025 edition of MEED Business Review includes:

    > AGENDA 1: A new dawn for PPPs
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14843114/main.png
    Yasir Iqbal
  • Tendering begins for $1bn Sal Riyadh logistics centre

    10 October 2025

    Saudi Arabia’s Sal has started the tendering process for its upcoming SR4.2bn ($1bn) logistics zone in Falcon City, north of Riyadh.

    The tender for the earthworks package was issued on 21 September, with a submission deadline of 7 October.

    UAE-based Global Engineering Consultants is the project consultant.

    Earlier this week, the firm signed a lease agreement for the project, which will span about 1.57 million square metres (sq m). 

    According to an official statement: “The lease will extend for 30 years, which is further extendable to an additional 15 years upon agreement of both parties.”

    The logistics hub aims to meet the demand for customised warehouses located near King Khalid International airport and the Riyadh Metro.

    The project is in line with Vision 2030 and the National Transport & Logistics Strategy, which aims to support the kingdom’s logistics sector and enhance Saudi Arabia’s position as a global logistics hub.

    Sal and Sela signed an agreement to develop the project in March.

    GlobalData expects the kingdom’s construction industry to record an annual average growth rate of 5.2% in 2025-28, supported by investments in transport, electricity, housing and tourism infrastructure projects, as well as the $850bn-plus gigaprojects programme.

    Growth will also be supported by government investments in rail, dams, industrial and road infrastructure projects. 

    The industrial sector is estimated to grow by 3.3% in 2025-28, supported by investments in the development of manufacturing, logistics, chemicals and pharmaceuticals plants.


    READ THE OCTOBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Private sector takes on expanded role; Riyadh shifts towards strategic expenditure; MEED’s 2025 power developer ranking

    Distributed to senior decision-makers in the region and around the world, the October 2025 edition of MEED Business Review includes:

    > AGENDA 1: A new dawn for PPPs
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14842592/main.gif
    Yasir Iqbal
  • Oman tenders consultancy for dams and reservoir study

    10 October 2025

    Oman’s Ministry of Agricultural, Fisheries Wealth & Water Resources has opened bidding for consultancy services covering feasibility studies and detailed designs for recharge dams, artificial reservoirs and flood protection dams in Wilayat Mahdah, Al-Buraimi governorate.

    The bid submission deadline is 16 November.

    The selected consultant will conduct a comprehensive feasibility study for 10 proposed sites.

    Based on this study, detailed engineering designs and tender documents will be prepared for five dams and three artificial reservoirs at priority locations to be approved by the ministry.

    The projects are aimed at enhancing groundwater recharge, improving water balance and securing sustainable resources to support future agricultural expansion and investment in the area.

    The work also includes the design of flood protection dams upstream of the Al-Rawḍah Special Economic Zone to reduce flash flood risks and safeguard planned developments.

    In addition, the consultant will study drainage channels from the recharge and flood protection dams to the beneficiary areas. The total channel length is estimated at about 50 kilometres, the authority said.

    Tender documents will be available to purchase until 27 October. A tender fee of RO300 and a bond equivalent to 1% of the quoted value are required.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14842491/main.jpg
    Mark Dowdall
  • Eni restarts oil and gas exploration in Libya

    10 October 2025

    Register for MEED’s 14-day trial access 

    The Italian oil and gas company Eni has restarted oil and gas exploration activities in Libya after a five-year hiatus.

    Eni’s North African unit has resumed work on exploratory well C1‑16/4, located off Libya’s northwest coast, according to the National Oil Corporation (NOC).

    In March 2020, Ensco’s 4005 rig began drilling the C1‑16/4 well and reached a depth of 1,012 feet before operations were halted due to the Covid‑19 pandemic.

    Ensco’s rig has now been replaced with Saipem’s Scarabeo-9, a sixth-generation semi-submersible drilling rig of Frigstad D90 design.

    The Scarabeo‑9 is re‑entering the well to complete drilling operations, aiming to reach a planned final depth of 10,520 feet, the NOC said.

    The exploratory well C1-16/4 is situated in Contract Area D, previously known as MN 41.

    It lies at a water depth of about 743 metres, approximately 95 kilometres from the Libyan coast and around 15km from the Bahr Es Salam gas field.

    Eni’s return to upstream exploration comes in the wake of US-based ExxonMobil signing an agreement to return to the North African country.

    On 4 August, Exxon signed a memorandum of understanding (MoU) with the NOC in London.

    Under the terms of the non-binding MoU, ExxonMobil agreed to conduct a detailed technical study of four offshore blocks located near Libya’s northwest coast and the Sirte Basin.

    Libya is trying to increase its national production capacity to 2 million b/d from the current level of around 1.3 million b/d.


    READ THE OCTOBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Private sector takes on expanded role; Riyadh shifts towards strategic expenditure; MEED’s 2025 power developer ranking

    Distributed to senior decision-makers in the region and around the world, the October 2025 edition of MEED Business Review includes:

    > AGENDA 1: A new dawn for PPPs
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14841969/main4339.jpg
    Wil Crisp