Saudi Arabia will look to public-private partnerships (PPPs) for the production and distribution of water, a cabinet minister said.

Minister of Water and Electricity Abdullah Al-Hussayen said the government was interested in private involvement as the current level of performance was “below the generally accepted standard.” The ministry is considering a similar arrangement for the electricity sector.
Al-Hussayen told delegates at the ministry of water and electricity road show in Jeddah in late July that “PPPs are widely adopted internationally and we perceive these are the best option for our local conditions.”
The ministry carried out an in-depth study of international PPP models, looking at the experiences other countries had with PPPs. Based on this study, the ministry then chose the one they felt best suited the requirements of the kingdom while also recognising the criteria for attracting suitable partners. Al-Hussayen said that with the government’s commitment to the reform process and the incentives the kingdom could offer to the private sector, the option of investment was an attractive one for potential partners.
“We are aware that potential operators are looking for a reasonable return on their investment, fair risk allocation between rigorous legal, institutional, regulatory and financial framework, a stable economic environment and a transparent bidding process,” he said.
A burgeoning population means demand for water will remain high in the kingdom, already the highest consumer of desalinated water in the world. The government is keen on improving supply as the birth rate is already 46 per cent higher than the global average.
Currently, consumption is estimated at 240 litres per person day. Waste is excessively high and the government is keen to utilise private investment in a bid to minimise water cuts and meet demand, which has surged five-fold in the past five years and is expected to increase to 12 cu m by 2030.
The Supreme Economic Council’s (SEC) recent approval for bylaws for the National Water Company, a state-owned company that will carry out its operations on a commercial basis, gave a boost to the reform process, and in turn is expected to improve the overall performance of the sector. The decision to restructure the ground and sewage water sector was made by the SEC, chaired by the Custodian of the Two Holy Mosques, King Abdullah, in September 2006.
The reform aims to separate water and wastewater operations on a city-by-city basis. The private sector will be offered wastewater treatment plants on contract terms, which have yet to be confirmed.
From an investor’s perspective the utility market in Saudi is eye-catching. Researchers at Saudi Arabia’s Samba Financial Group rank the utilities segment as the third most attractive area for investors. This prediction is expected to improve with the utilities market to hit the number one spot for investor attractiveness in the next five years.
Presently, private investment has already been utilised in Saudi Arabia, via independent water and power projects, with the first expected to begin operation in 2009.
 The bid for Shuaiba Phase 3 was given to a consortium of Saudi and Malaysian companies. The estimated cost of the project is $2.5 billion, 60 per cent of which will be private investment. With an expected daily capacity of 900 MW and 880,000 cu m of water, it will ensure that homes in Mecca, Jeddah, Taif and Al-Baha on the western coast have a sufficient supply of water.
The government hopes that by in bringing private sector knowledge and expertise, it can take advantage of more efficient work practices, which should have a positive impact on service.