Saudi Arabia’s $2bn water pipeline expands private sector role

19 September 2023

Commentary
Jennifer Aguinaldo
Energy & technology editor

The $2bn Rayis-Rabigh independent water transmission pipeline (IWTP) project in Saudi Arabia further expands the role of private companies in developing and operating public infrastructure assets within the kingdom.

It could have been just another water pipeline project if not for its scale – it extends 150 kilometres and can transmit up to 500,000 cubic metres of water – and its structure as a 35-year public-private partnership project.

It also links major municipalities in Medina and Mecca, further increasing the project's strategic importance. 

The project is reminiscent of the Rabigh 3 independent water project and the Dammam independent sewage treatment plants, which were procured between 2018 and 2019 by the state-backed offtaker Saudi Water Partnership Company (SWPC), formerly known as the Water & Electricity Company.

The levelised water transmission tariff of SR1.256 ($0.33) a cubic metre is without any precedent, since the project is the first of its kind.

The Rayis-Rabigh IWTP will utilise the build-operate-transfer model, rather than the build-own-operate project structure employed by the private sector water desalination and water treatment plant projects in the kingdom.

The project demonstrates the private sector's appetite to win new work that does not necessarily fall within its comfort zone, since all water transmission pipeline projects in the kingdom have previously been procured using the conventional engineering, procurement and construction model.

A total of 31 companies, including 14 that are locally domiciled, expressed interest in bidding for the Rayis-Rabigh IWTP contract in December 2021.

The contract was tendered in August 2022 and SWPC received bids in March this year from three teams, including one led by Nesma Company and another led by Vision International.

Alkhorayef Water & Power Technologies, which leads the winning consortium for the project, said it will now work with the relevant stakeholders to reach financial close on the project.

If successfully implemented, the project paves the way for seven IWTP projects that the kingdom is planning to procure in 2022-28.

The market will now focus on the award of the contract for the kingdom's first independent strategic water storage project, also in Mecca, as Saudi Arabia continues to push the limits for private sector participation in previously state-dominated assets.

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Jennifer Aguinaldo
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