$9.33 billion! Saudi Arabia has released more than 60 water project plans

01 Accelerate the privatization of the water sector to help achieve Vision 2030

Recently, during the 3rd Middle East and North Africa Desalination Project Forum held in Abu Dhabi, Saudi Arabia announced more than 60 water projects, including desalination, desalination + cogeneration, sewage treatment, water storage, water pipeline network and other fields
.
The project will be implemented in a public-private partnership investment and development model such as BOO/BOOT, and is planned to be tendered in batches over the next five years, with a total investment of about US$9.
33 billion
.

Khalid Al Quraysh, CEO of the Saudi Water Partnership Corporation (SWPC), said that Saudi Arabia is currently increasing investment
in clean energy, electricity and water.
In the water sector, Saudi Arabia is continuously integrating and upgrading its business capabilities in the desalination and wastewater treatment areas to accelerate the realization of the water privatization development goal
under the "Vision 2030".

After the successful completion of this project:

• By 2027, Saudi Arabia's desalination capacity will reach 7,500,000 m3/day from 2,540,000 m3/day (2021), making it the world's largest desalination market
  .
  

• By 2029, Saudi Arabia's strategic water reserve capacity will reach 45,700,000m3, which can support the country's water
  consumption for several days in an emergency.
  

In addition, Saudi Arabia is planning 147 small wastewater treatment projects and corresponding pipe networks across the country, and plans to conduct bulk bidding
in PPP mode in the future.

02 Saudi Water Cooperation Company, a promoter of privatization in the water sector

Similar to the model of planning and implementation led by REPDO and others in the new energy sector in Saudi Arabia, the planning and implementation and project development of the Saudi water sector are led by the Saudi Water Cooperation Company
.

The company was established by resolution of the Saudi Cabinet Council and is a wholly owned subsidiary of the Saudi Ministry of Finance, administratively under the Saudi Ministry of
Water Resources, Environment and Agriculture.
As the tenderer and exclusive repurchase party for the PPP project in the Saudi water sector, the Saudi Ministry of Finance provided credit endorsement for the long-term repurchase agreement signed by the company for desalinated seawater, treated sewage and reference water
.
Since the implementation of Vision 2030 in Saudi Arabia in 2016 to drive socio-economic transformation, SWPC has played an important role
in the transformation of the Saudi water sector project model.

From 2020 to 2021, the company has successively issued 19 independent desalination or desalination + cogeneration projects, 9 independent sewage treatment projects, 8 independent desalination and cogeneration projects, 14 independent strategic reservoir projects and 7 small sewage treatment projects
.
Thanks to Saudi Arabia's huge market size, privatization reform policy promotion and relatively mature investment and development business model, Saudi Water Cooperation has developed into a leading water PPP project company
in the Gulf region in recent years.
In 2020-2021, the company successfully achieved $2.
5 billion in project development financing
.

In addition to bidding for desalination projects, sewage treatment projects and strategic water storage projects, SWPC is also responsible for business model research and bidding for rainwater/drinking water dam projects and water transmission network projects to be carried out in the PPP mode in Saudi Arabia, and comprehensively promotes the privatization of
the Saudi water sector with investment development and operation models.

03 International enterprises compete fully and local enterprises continue to develop

As one of the earliest, largest and most mature water markets in the world, the Saudi water market has long been the main battlefield
for commercial competition between large international water groups and international engineering construction enterprises.

Before the privatization and transformation of the Saudi economy began in 2016, international water investment and development companies such as Suez, Veolia, French Engie and other enterprises have long been engaged in engineering construction and project operation in the water field in Saudi Arabia
.

Saudi local water sector or integrated engineering conglomerate represented by Vision Invest (ACWA Power's parent company), Marafiq, Mowah, Nesma, Al-Fanar, Tawzea, etc.
, has accumulated technical experience and achieved a certain degree of development
in cooperation with international enterprises.

Since 2016, Saudi Arabia has implemented privatization and transformation
in the national economy, including the water sector.
Encouraged by policies to promote the development of the country's economy and industry, the current water market has three main characteristics:

1.
The business model is mature and the market competition is fierce

The investment and development model in the Saudi water sector basically replicates the contracting model of independent power plants (IPP) and independent desalination plants (IWP) in the early years, and driven by the privatization policy of "everything can BOT", this model has been applied to sewage treatment projects, strategic water storage projects, and even water transmission network projects, with the only goal of using private capital as much as possible to promote the development of
Saudi water.
Under the influence of favorable factors such as a stable investment environment, credit endorsement from the Ministry of Finance, strong policy support, and strong market demand, more and more enterprises have participated in the field of
water investment and development.

Under such a trend, the winning bid price has been falling all the way, the winning enterprises have begun to concentrate on several mature cooperative joint ventures, and the Matthew effect in the context of full market competition has begun to appear
.

2.
The project participation threshold is high and the localization ratio is required

In the early stage of economic transformation, Saudi Arabia issued policies to attract foreign investment, encouraging large-scale, leading and innovative enterprises to invest and operate in Saudi Arabia, and giving a series of preferential policies
.
Relying on the scale effect of the Saudi market, the government has introduced a "regional headquarters" policy, that is, foreign-funded enterprises operating in Saudi Arabia are required to set up qualified regional headquarters in Saudi Arabia by 2024, otherwise they will not be able to undertake government projects
.
The implementation of similar policies has posed many challenges
for some foreign-funded enterprises to enter Saudi Arabia.

In terms of investment and development of water projects, projects in the past two years have put forward higher requirements
for Saudiization.
For example, the Yanbu-4 seawater desalination project tendered in 2020, the medina-3 sewage treatment project and the Jubail-3B desalination project tendered in 2021 all put forward the localization ratio requirements of "no less than 40% in the construction period, no less than 50% in the first five years of operation, and no less than 70% after five years of operation
".
For international investment and development enterprises, higher localization requirements often mean higher investment costs or more management efficiency problems
.

3.
The trend of innovation development is emerging, or it may become a development opportunity for latecomers

Observing the bidding of Saudi water projects in the past two years, the author found that the traditional cogeneration projects are being replaced by the "photovoltaic +" model, and the Jubail-3A and Jubail-3B desalination projects tendered in the past two years respectively adopt the "desalination + photovoltaic" and "desalination + photovoltaic + water storage" models to reduce traditional electricity consumption; The Tabuk-2, Buraidai-2 and Medina-3 wastewater treatment projects, which were completed around September 2021, also require the installation of photovoltaic power generation facilities to reduce traditional electricity consumption
.
This model replaces some traditional power supply through photovoltaics, which plays a role in reducing costs to a certain extent, and is also an important measure for international enterprises to support the development of new energy in Saudi Arabia, in line with the general trend of
Saudi green development.

At the same time, models such as seawater desalination + water storage, centralized bidding for small sewage treatment projects, and concession of water transmission pipelines have been continuously practiced and applied
.
In February 2021, the 39-kilometer water pipeline project in Yanbu-Rais, Saudi Arabia, was awarded by the joint venture of France's Engie, Saudi Arabia's Mowah and Saudi Nesma, becoming the first Saudi water pipeline project
to complete the tender in PPP mode.
In line with the development trend of Saudi Arabia, focusing on business model innovation may become a development opportunity
for latecomers.

04 Summary

On the basis of Saudi privatization and transformation as the policy driven, with Saudi Water Cooperation Company as the main body, Saudi water market will continue to develop rapidly in the future, with more mature business models, more participating enterprises, lower and lower price trends, higher and higher localization requirements, and the combination of water projects and new energy is a major development trend and development feature, which will also promote the development
of Saudi new energy in the field of water at the same time.

In general, whether in the era of Saudi water engineering EPC or the current period of investment, construction and operation transformation, the absolute number of Chinese enterprises participating in Saudi water projects is still small, and most of the Chinese-funded enterprises we see in the stage of interest letter submission cannot appear on the prequalification list, which on the one hand reflects the strictness of the bidding requirements in the Saudi water sector, and on the other hand, it also shows that there are still problems such as
insufficient qualifications of Chinese-funded enterprises in the water field 。 A small number of enterprises operating in Saudi Arabia have broken through their original business restrictions and entered the Saudi water engineering field through the brand and influence accumulated in other fields, and have achieved good results, which is undoubtedly a good start
.

Take this water project planning as an opportunity to deeply study the characteristics of the market, make long-term business planning, promote more international cooperation, strengthen differentiation, or a good strategy
for successfully opening up the water market in Saudi Arabia and Gulf countries.