Saudi Arabia moves on utilities reform

Progress is being made with long-awaited plans to privatise power and water assets in the kingdom

The request for proposals from consultants for the privatisation of the world’s largest desalination plant at Ras al-Khair is the latest sign that Riyadh is making progress with overhauling its utilities sector.

The 1,025,000 cubic metre a day (cm/d) Ras al-Khair power and water plant is the first brownfield asset that state utility Saline Water Conversion Corporation (SWCC) is planning to sell off to the private sector, and is hoped to provide the pathfinder scheme for privatising all of its existing assets by the end of 2019.

While Riyadh first issued a decree to privatise SWCC in 2008, little work was undertaken to meeting this goal until the launch of the Vision 2030 and National Transformation Plan (NTP) in 2016. The fall in oil price has expedited all of the kingdom’s plans to privatise areas which have almost been exclusively provided by the state.

Under pressure from directives issued by the Crown Prince Mohammed bin-Salman, SWCC is now making significant progress with efforts to devise a privatisation strategy for new and existing assets. A timely appointment of consultants for the proposed privatisation of the Ras al-Khair cogeneration plant will reassure local and international investors that the kingdom is serious on delivering on its pledges to privatise its desalination production facilities.

Saudi Electricity Company (SEC) is also moving towards unbundling and selling its existing generation assets to the private sector. Having started earlier, SEC has already some progress towards this goal with the creation of a National Grid Company to oversee the operation of the country’s transmission infrastructure. The establishment of a principal buyer earlier this year is the latest milestone to be reached in the privatisation process. According to sources close to the programme, SEC is committed to unbundling the first 15-20GW of brownfield assets in 2017.

While regional and international investors will have been encouraged by the progress made over the past 12 months in the preparation for privatising power and water assets in the kingdom, Riyadh needs to bring the first assets to the market to ensure that potential investors are assured that plans are finally ready to be turned into action.

11 July, 2017 | .By ANDREW ROSCOE