JEDDAH, 16 November 2005 — Saudi Arabia yesterday launched privatization of its desalination projects by awarding a SR9.1 billion contract to a consortium of Saudi and Malaysian companies to set up Shuaiba-3 desal plant, the first independent water and power project (IWPP) in the country.
Water and Electricity Minister Abdullah Al-Hussayen, who supervised the signing of IWPP agreements in Riyadh, said Shuaiba-3 would supply 194 million gallons of water daily as well as 900 megawatts of electricity. Work on the project will start Jan. 21 and its first unit will begin production Oct. 13, 2008.
He said the Supreme Economic Council, chaired by Custodian of the Two Holy Mosques King Abdullah, has approved four IWPPs (Shuaiba-3, Shuqaiq-2, Ras Al-Zour, and Jubail-3), adding that they would be carried out by the private sector on a build operate and transfer (BOT) basis.
The minister estimated the total cost of the four projects at SR30 billion. The private sector will contribute 60 percent of their cost while the state-owned Public Investment Fund (PIF) will have 32 percent stake and Saudi Electricity Company (SEC) 8 percent of the four projects.
The combined production capacity of the four projects will reach 492 million gallons daily and 4,500 megawatt of power. “These projects will boost the total desalination capacity of the Kingdom by 80 percent,” Al-Hussayen pointed out.
The implementation of the projects will start with Shuaiba-3 while commercial operation will begin in early 2009. The Shuaiba-3, which is to supply water to Makkah, Jeddah, Taif and Baha, is one of the world’s biggest co-generation projects for the production of water and electricity.
The four IWPPs will meet the increasing demand for water and power in the Kingdom and compensate old desal plants which will be decommissioned in the near future.
Water & Electricity Company (WEC) will sell 100 percent water produced by these plants to Saline Water Conversion Corp. (SWCC) and 100 percent of their power supply to Saudi Electricity Company. A group of local and international banks are financing Shuaiba-3.
Speaking at the signing ceremony, Minister Al-Hussayen said the Kingdom would require nearly SR350 billion in investment for water and sewage projects and SR340 billion for electricity projects during the next 20 years. He said the water and electricity sectors in the Kingdom were growing at the rate of seven percent.
Tariq Al-Betairi, chairman of Water & Electricity Company of Saudi Arabia, and Azman Mukhtar, managing director of Khazanah Nasional Berhard, the Malaysian government’s strategic investment arm, signed the following agreements: Power and water purchase agreement; shareholders agreement; share sales and purchase agreement; and land lease agreement.
Malaysia’s Minister of Energy, Water and Communications Lim Keng Yaik said his government was attaching great importance to the Shuaiba project and said it would strengthen economic ties between the two countries. “This is reflected by the presence of several Malaysian Cabinet ministers to witness this signing ceremony,” he said.
He urged Malaysian companies participating in the project to give the best of what the Malaysian corporate sector can offer. Apart from Khazanah, Tenaga Nasional Berhad, which is the Malaysian national utility company, and Malakoff Berhad, the largest independent power producer of the Southeast Asian country, are taking part in the project.
The Shuaiba-3, located 110 km south of Jeddah on the Red Sea coast, is the Kingdom’s first privatized IWPP. Saudi-Malaysia Water & Electricity Company holds 60 percent of the project, PIF 32 percent and SEC eight percent.
