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$2.7 billion To Be Spent on Water and Sewer Projects Over Two Years in Saudi

Saudi Arabia : 30 May 2011

Over the next two-year period Saudi Arabia will spend 10 billion Saudi Riyals (or $2.7 billion) on sewer and water projects in two of the largest cities in the Kingdom. This spending is part of the nation’s program of infrastructure upgrades, according to an official of the government.

These projects cover a capacity expansion in the wastewater treatment arena, as well as expansions in sewerage and key reservoirs within Jeddah and capital city Riyadh, according to the CEO of NWC (or the National Water Company) Loay Al Musallam. NWC is owned by the state and is in charge of water/wastewater networks within urban centers.

Musallam stated that SAR 18 billion in projects were launched in these city centers over the last two years, adding that the Saudi water sector is forecasted to require about $30.5 billion in total investments from 2010 to 2016. This total also takes into account rural water networks and desalination, both of which are not within the mandate of NWC.

Saudi Arabia has the largest economy in the Middle East and is increasing investments in sewerage, water and wastewater projects due to the increasing demand and surging capacity requirements resulting from expansions in both industry and the population.

When interviewed Musallam stated that these projects were included in a portfolio focusing on expanding the capacity of wastewater treatment.

The construction of infrastructure within the wastewater industry is included, as well as the development of large tunnels and mainlines. Other projects relating to key reservoirs are also included, in order to provide sufficient amounts of water should an emergency arise.

NWC is likely to be privatized at some point, although Musallam stated that it is unlikely the company will issue shares in an IPO for at least two, or even four years.

The company is doing well financially according to the CEO who added that after two to four years have passed his firm can issue an IPO that includes a small portion of the company – likely between 30 and 35 percent of the assets.

Musallam noted that in order to make the company financially secure and independent the water tariffs needed to be increased. Tariffs for private customers are currently SAR 0.15 per cubic meter. About 80 percent of revenue generated by the company come from a small portion of commercial customers, according to the CEO.

Musallam stated that the increases should be done gradually, as the public has perceived water services to be free for the last four decades. After the tariff has been changed NWC will see higher profits and will be set to cover all of the capital investments and operational costs of the company.

A collection of government bodies are currently responsible for setting the tariffs, however Saudi Arabia has plans for a water regulator to be set up. Musallam said that the responsibilities regarding the water sector would likely fall on the electricity regulator.

He noted that the firm had considerations regarding a future debt issue, but that this will not happen for at least 12 months.

NWC is also extending into fresh areas of business, such as treated sewage effluence sales, which are useful in garden irrigation and as industrial coolants.

Musallam stated that his firm has been awarded contracts for SAR 4 billion to 5 billion in sales over the last two years. They are aiming for an expansion into the market for treated sewage effluence worth SAR 15 billion. The CEO is targeting that this expansion will bring in 50 percent of NWC’s revenues within a five-year period.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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