Saudi construction project ramp-up accelerates
8 March 2023
Saudi Arabia’s construction projects market is charting an ever-more dynamic growth trajectory, underpinned by progress on the kingdom’s mega and gigaprojects.
The country was the GCC’s most active projects market for construction contractors for the third year running in 2022, with $32.4bn-worth of construction and transport contracts awards, according to MEED Projects.
It was also the third consecutive year of growth for Saudi construction contract awards, which rose by 58 per cent last year, up from $20.6bn in 2021. This, in turn, was up 38 per cent from the $14.8bn-worth of awards in 2020.
Construction sector awards accounted for 58 per cent of the total $55bn-worth of Saudi contract awards in 2022 across all sectors.
Gigaprojects drive
After the 2022 reveal of The Line, the 170-kilometre-long structure planned for the $500bn Neom project, February 2023 saw the kingdom launch New Murabba, a masterplan to create the world’s largest modern downtown in Riyadh.
As its centrepiece, the masterplan will feature a cubic skyscraper titled the Mukaab, a Najdi-inspired landmark that will be one of the biggest buildings in the world upon completion, at 400 metres high, 400 metres wide and 400 metres long.
The overall development will cover an area of 19 square kilometres, nearly five times the size of Dubai’s downtown, which spans two square kilometres and was built at an estimated cost of AED73bn ($20bn). While the total budget for the Riyadh scheme is not yet announced, its estimated cost could exceed $100bn.
Saudi Arabia's sovereign wealth vehicle, the Public Investment Fund (PIF), is also considering plans for a 2km megatower in Riyadh. The proposed tower would be more than double the height of the world’s tallest building – Dubai’s Burj Khalifa, which is 828 metres tall. Depending on the final design, contractors that have priced megatall towers in the region say a 2km-tall structure could cost about $5bn to construct.
New Murabba will be developed by the New Murabba Development Company, which is backed by the PIF. It could also be added to the official list of PIF gigaproject developments, alongside Neom, the Red Sea Project, Qiddiya, Roshn and Diriyah Gate.
According to MEED’s Saudi Gigaprojects report, the kingdom's gigaprojects could award up to $569bn-worth of contracts from 2021 through 2025, financing and contracting capacity permitting.
However, even a fraction of such a total would be a step change for the regional projects market, which saw $172bn-worth of work awarded from 2016 to 2021.
Saudi Arabia’s contract awards in the last quarter of 2022 were dominated by Neom’s infrastructure and earthworks packages. Five of the top 10 largest construction awards in 2022 and 2023 so far have been for Neom projects.
Other dynamic projects include the $30bn King Salman International airport; the $15bn Al-Ula development; the Royal Commission for Riyadh City's $23bn King Salman International Park, Green Riyadh and Sports Boulevard projects; Saudi Entertainment Ventures' (Seven) $5bn entertainment complexes; the $3bn Asir project; and Neom's $2bn Trojena lake project known as ‘The Vault’.
Urban regeneration
Alongside the redevelopment of Riyadh, the kingdom is also pursuing a much broader series of regeneration schemes across its major cities as part of Saudi Vision 2030.
In February, the country kicked off a major Jeddah waterfront project, part of a 15-year Historic Jeddah Revitalisation programme. The same month, US-headquartered Parsons was awarded a $15m contract to provide construction project management consultancy and contract administration services (PMCM) for the Rua al-Madinah project in Medina city.
The Rua al-Madinah project represents the first phase of the Madinah Central Area development and is projected to add $37bn to Saudi’s GDP and create 93,000 jobs. Rua al-Madinah Holding Company, another PIF subsidiary, is developing the scheme.
Last October, PIF invited firms, through its Saudi Downtown Company (SDC), to submit bids for contracts to provide project management services for 12 $500m urban downtown redevelopment schemes in cities across the kingdom.
Prospects for 2023
With more than $120bn-worth of projects in the pipeline for 2023, the outlook remains strong for the construction and transport sectors. Alongside Saudi Arabia’s masterplans, there are also a variety of public transport projects, logistics platforms and railways in the procurement process as part of the kingdom’s National Transport and Logistics Strategy.
The planned rise in government capital expenditure to SR1,114bn in 2023, up from SR955bn in 2022, supports the ramp-up in project activity.
The Ministry of Finance’s key 2023 budget spending objectives in construction include building affordable housing for 120,000 families, developing nearly 1 million sq m of parks, and building 176 ready-made industrial units together with the infrastructure for a further 56 million sq m of industrial plots. The affordable housing plans are part of a Ministry of Housing Sakani programme to raise the home-ownership ratio to 70 per cent by 2030.
The Saudi budget also affirmed that by 2025, PIF plans to invest SR1tn in new projects.
Amid subdued activity in neighbouring countries, Saudi Arabia has become the prevailing focus for GCC contractors, with local and international contractors pivoting towards the kingdom and away from Qatar and the UAE.
“We are focusing on projects in Saudi Arabia. The job is there, not elsewhere anymore,” says a contracting source from a UAE national company.
Locally, the build-up of construction activity will be spearheaded by the creation of national champions in the contracting sector, with PIF investing $1.3bn in four local construction companies: Al-Bawani Holding Company, Almabani General Contractors Company, El-Seif Engineering Contracting Company and Nesma & Partners Contracting Company.
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5 December 2024
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According to the company, the plant will have a capacity of 500 million litres a day, equivalent to supplying 2 million people with drinkable water, and has a budget of around $500m (€475m).
MEED previously reported that the integrated facility’s water desalination package will have a capacity of 110 million imperial gallons a day (MIGD), while the power generation plant will have the capacity to generate 2,415MW of electricity.
The contract Acciona won is part of the $2.8bn overall engineering, procurement and construction (EPC) package of the Facility E IWPP, which South Korea’s Samsung C&T will implement.
Japan's Sumitomo Corporation leads a consortium that will develop and operate the Facility E IWPP. The team includes fellow Japanese utility developer Shikoku Electric, Seoul-headquartered Korea Overseas Infrastructure & Urban Development Corporation (KIND) and Korea Southern Power Company (Kospo).
The total project cost is roughly $3.7bn.
Japan’s Mitsubishi Power will supply the gas turbines for the power plant.
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According to Sumitomo, the equity distribution between the project company shareholders is:
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- KIND: 6%
- QEWC: 55%
- QE: 5%
MEED understands that the new target commercial operation date for the Facility E IWPP project has been moved to 2029.
According to Acciona, Qatar achieved its first milestone in reverse osmosis technology at its Ras Abu Fontas 3 plant, with a capacity of 165,000 cubic metres a day (cm/d).
It is understood that Acciona also built the Umm Al-Houl 1 and 2 desalination plants in Doha, which each have a production capacity of 284,000 cm/d.
The state utility’s transaction advisory team includes UK-headquartered PwC and Clyde & Co as financial and legal advisers, respectively, led by Belgrade-headquartered Energoprojekt as technical adviser.
Facility E is Qatar’s fifth IWPP scheme. Completed and operational IWPPs include three projects in Ras Laffan – known as Facilities A, B and C – and Facility D in Umm Al-Houl.
Awarded in 2015 and completed in 2018, Facility D was developed by a Japanese consortium of Mitsubishi Corporation and Tokyo Electric Power Company (Tepco). South Korea’s Samsung C&T was the EPC contractor.
Related read: Facility E award marks key milestone
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GCC grows stronger together
5 December 2024
Commentary
Colin Foreman
EditorRead the December 2024 edition of MEED Business Review
The 2020s have so far been a tumultuous decade, with ongoing conflicts in the Levant and Ukraine still dominating the global news cycle. The decade began with the Covid-19 pandemic battering economies, and with many nations struggling to recover, populist governments with protectionist policies have shunned globalisation.
The decline of US-led globalisation has coincided with the rise of China as the world’s largest economy, and over the past decade Beijing has begun to assert itself more actively on the international stage with its Belt and Road Initiative.
At the same time, climate change has become increasingly difficult to deny.
As the new world order establishes itself, it poses challenges and opportunities for the GCC. Complex issues will not be resolved quickly, and the GCC has chosen to confront them together. After signing the Al-Ula Accords in January 2021, there has been a renewed sense of togetherness across the GCC that has manifested itself in several important ways.
Simply exporting oil from a port to international markets no longer works
Politically, the GCC has more weight on the international stage if it acts together. Economically, as the GCC diversifies away from exporting hydrocarbons with the development of new industries and services, it will need to be better integrated. Simply exporting oil from a port to international markets no longer works. The GCC economies of the future need to be intertwined with their neighbours and global supply chains.
This requires more infrastructure. One article of the Al-Ula Accords commits the GCC to develop its railway network.
Regional integration also supports the fight against climate change. For power grids to operate more efficiently, the GCC needs to connect its electricity grids so that when areas have a surplus of power, they can support other areas.
These projects will build resilience, which should shield the GCC from much of the upheaval the world faces today.
Must-read sections in the December 2024 issue of MEED Business Review include:
> AGENDA:
> Cooperation strengthens Gulf markets
> Transport links stitch GCC together> CURRENT AFFAIRS:
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> Kuwait hopes new oil minister can push projects forwardINDUSTRY REPORT:
MEED's 2024 ranking of regional EPC contractors
> Italian firms are top EPC contract winners
> Contractors battle chronic problems> CONSTRUCTION: Saudi Binladin Group makes a comeback
> DATA CENTRES: Khazna expects to build more 100MW-scale data centres
> GREEN HYDROGEN: Abu Dhabi bullish on green hydrogen
> INTERVIEW: Sener eyes role in evolving Middle East infrastructure
> LEGAL: Navigating energy disputes through international arbitration
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> GOVERNMENT & ECONOMY: Bahrain’s economic growth momentum falters
> BANKING: Bahrain banking works to scale up
> OIL & GAS: Bapco Energies sets sights on clean energy goals
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> Riyadh may turn to different CEOs to run its projects
> Warming Riyadh-Tehran ties herald regional shift
> Decarbonising steel is hard to resist
> Saudi Arabia power sector unlikely to disappoint> GULF PROJECTS INDEX: Gulf projects market returns to strong growth
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> OPINION: Middle East faces a reckoning
> BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts
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Mubadala acquires stake in $17bn US healthcare platform
5 December 2024
Abu Dhabi-based Mubadala Investment Company has agreed to purchase a minority stake in Zelis, a US-based healthcare technology solutions provider.
Mubadala Investment Company is the lead investor, alongside a group of investors including Norwest and HarbourVest, both US-headquartered private equity firms.
Parthenon and Bain Capital remain the majority owners of Zelis.
Mina Hamoodi, head of Healthcare Investments at Mubadala, said the deal is “the largest investment that we have made in the healthcare space”.
In October, Bloomberg reported that Mubadala was nearing a deal to buy a minority stake in the private equity-backed company, reportedly valued at $17bn at the time.
“Zelis is helping to streamline the US healthcare financial experience, which is complex and in need of technology-driven solutions that can unlock efficiencies and create better outcomes for everyone engaged in the care journey,” said Hamoodi.
Zelis is “modernising the healthcare financial experience” by providing a connected platform that bridges the gaps and aligns interests across payers, providers and healthcare consumers.
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Goldman Sachs & Co and JP Morgan Securities served as financial advisers and Kirkland & Ellis acted as legal advisers to Zelis.
Evercore served as financial adviser and Akin Gump Strauss Hauer & Feld acted as legal counsel to Mubadala.
The transaction closed on 26 November.
Photo credit: PIxabay (for illustrative purposes only)
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Saudi Arabia seeks Taif airport PPP interest
5 December 2024
Saudi Arabia’s Matarat Holding, through the National Centre for Privatisation & PPP (NCP), has invited firms to express interest in bidding for a contract to develop and operate a new international airport in Taif in the country’s Mecca province.
The new Taif International airport will be located 21 kilometres southeast of the existing Taif airport, with a capacity to accommodate 2.5 million passengers by 2030.
Matarat and NCP expect to receive expressions of interest from companies by 10 January 2025.
The invitation is open to interested private sector entities via a public-private partnership (PPP) model under a 30-year build-transfer-operate (BTO) contract, including the construction period.
The BTO project scope includes the new airport. The proposed design features a runway with a full-length parallel taxiway connecting to a single commercial apron.
The scope includes facility buildings, utility networks, car parks and access roads, as well as provisions for additional expansions to meet future subsystem requirements.
The new Taif International airport is expected to meet the projected increase in demand by 2055 and contribute to the economic development of Taif city and its surrounding areas, in line with the kingdom’s National Aviation Strategy.
It is also expected to meet the needs of Umrah pilgrims as a viable alternative within the region’s multi-airport system, which includes King Abdulaziz Airport in Jeddah, Prince Mohammed Bin Abdulaziz Airport in Medina and Prince Abdulmohsen Bin Abdulaziz Airport in Yanbu.
Other airport PPPs
Three other airports, in addition to the Taif International project, comprise the first stage of Saudi Arabia’s latest plan to modernise and privatise its international and domestic airports.
The other planned airport PPP schemes are in Abha, Hail and Qassim.
Matarat and NCP recently prequalified three consortiums and one company that can bid for a contract to develop and operate a new passenger terminal building and related facilities at Abha International airport.
The companies that have been prequalified to bid for the Abha airport PPP contract are:
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- VI Asyad DAA: Vision International Investment Company (local) / Asyad Holding (local) / DAA International (Ireland)
Located in Asir province, the first phase of the Abha International airport PPP project is set for completion in 2028. It will increase the airport terminal area from 10,500 square metres (sq m) to 65,000 sq m.
The contract scope includes a new rapid-exit taxiway on the current runway, a new apron to serve the new terminal, access roads to the new terminal building and a new car park area.
The scope also includes support facilities such as an electrical substation expansion and a new sewage treatment plant.
The transaction advisory team for the client on the Abha airport PPP scheme comprises UK-headquartered Deloitte and Ashurst as financial and legal advisers, respectively, and ALG as technical adviser.
Previous tenders
The Taif, Hail and Qassim airport schemes were previously tendered and awarded as PPP projects using a BTO model.
Saudi Arabia’s General Authority of Civil Aviation (Gaca) awarded the contracts to develop four airport PPP projects to two separate consortiums in 2017.
A team of Tukey’s TAV Airports and the local Al-Rajhi Holding Group won the 30-year concession agreement to build, transfer and operate airport passenger terminals in Yanbu, Qassim and Hail.
A second team, comprising Lebanon’s Consolidated Contractors Company, Germany’s Munich Airport International and local firm Asyad Group, won the BTO contract to develop Taif International airport.
However, these projects stalled following the restructuring of the kingdom’s aviation sector.
The latest plan entails transferring the ownership of 35 airports from Gaca to the Public Investment Fund (PIF).
This is in line with transforming Gaca, which previously managed and operated the airports, into a legislator and regulator.
The construction, operation and management work for the airports is being referred to Matarat, prior to being transferred to PIF.
Matarat Holding Company is a subsidiary of Gaca.
Saudi Arabia has already privatised airports, including the $1.2bn Prince Mohammed Bin Abdulaziz International airport in Medina, which was developed as a PPP and opened in 2015.
Related read: Saudi Arabia to issue third national carrier licence
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Oman and Belgium expand hydrogen collaboration
5 December 2024
Hydrogen Oman (Hydrom) and the Belgian Hydrogen Council (BHC) have signed a memorandum of understanding (MoU) to further strengthen their collaboration in green hydrogen.
According to an official statement, the MoU sets the stage for enhanced cooperation across the hydrogen value chain, reflecting the “shared commitment of both nations to advance the global hydrogen economy”.
Signed in the presence of Sultan Haitham bin Tarik, the MOU seeks to align policies, promote knowledge exchange and technological advancements, as well as explore opportunities across hydrogen production, infrastructure, transportation and utilisation.
In 2023, Hyport Duqm, an alliance between Oman’s OQ Alternative Energy and Belgium’s DEME, signed a 47-year project development agreement with Hydrom for a project to produce and export green hydrogen.
This was further supported by the 2023 declaration of intent between Oman’s Ministry of Energy and Minerals and Belgium’s Ministry of Energy to advance hydrogen certification and trade frameworks.
The first joint milestone under the MoU will focus on key areas of collaboration including knowledge sharing, technology development, and infrastructure planning for hydrogen production, shipping, and terminal facilities.
It will also expand on pathways to broader cooperation with other European countries as a part of the MoU promise to address legislative challenges and explore new opportunities for research and development.
Salim bin Nasser Al-Aufi, Oman’s Minister of Energy and Minerals and Chairman of Hydrom, said, “Oman’s potential capacity as a hub for green hydrogen production, combined with Belgium’s role as a promising hydrogen-based industrial hub and strategic connection point to European markets, will strengthen energy security and create a seamless hydrogen supply chain.”
Tom Hautekiet, Belgian Hydrogen Council chairman, noted that Oman’s competitive renewable energy resources and Belgium’s strategic position as a hydrogen hub for Europe will enable “a powerful platform for innovation, investment and growth in the hydrogen economy”.
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