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Transcript of The Case of Water PPP in Saudi Arabia - UNECE Homepage · The Case of Water PPP in Saudi Arabia ......
The Case of Water PPP in Saudi Arabia
UNECE PPP Team of Specialist 3rd Session
Palais des Nations, Geneva, Switzerland, 18th-19 April 2011
Agenda
NWC, the Road Traveled
Future Opportunity Assessment
Partnering with UNECE
The Road Ahead
Introduction, Global PPP Trends
Water Sector, Privatization Journey in KSA
3
PPPs in the water & waste-water sectorsGlobal Trendso PPPs provide a means of ‘filling the infrastructure gap’ and financing the
delivery of these critical water infrastructure programs, both in developed and developing countries.
o PPPs also provide a means of using the innovation of the private sector, to help integrate both natural and infrastructure-based solutions to water management.
o Waste-water is a rapidly and globally expanding area of infrastructuredevelopment, that enables the sustainable re-use of scarce water resources for non-potable purposes in industry, agriculture, and greening.
o Demand for water and waste-water infrastructure projects has remained unaffected by the global financial crisis, and it continue to grow exponentially.
4
Water Infrastructure Market Forecast by Region (USD 1.4 Trillion in 7 Years)
Source: Global Water Intelligence, Water Technology Markets 2010
2010-2016
5
Water & Sewage Infrastructure Market Forecast – MENA Region (2010 – 2016)
Source: Global Water Intelligence, Water Technology Markets 2010
Water Infrastructure Spend by Country (in US$ Mio)*
Country Water Wastewater Total
Algeria 8,945 2,587 11,532
Bahrain 1,871 739 2,611
Egypt, Arab Rep. 4,129 5,540 9,669
Iran, Islamic Rep. 8,747 3,194 11,941
Iraq 1,767 85 1,852
Palestine 3,445 590 4,036
Jordan 7,710 335 8,045
Kuwait 4,676 757 5,434
Lebanon 254 479 733
Morocco 1,879 2,232 4,111
Oman 2,589 4,595 7,184
Qatar 2,571 1,744 4,315
Saudi Arabia 17,782 12,711 30,493
Syrian Arab Republic 659 539 1,198
Tunisia 872 938 1,810
United Arab Emirates 11,835 9,564 21,399
TOTAL 79,732 46,631 126,362
* Inclusive of infrastructure for Water Desalination
Agenda
NWC, the Road Traveled
Future Opportunity Assessment
Partnering with UNECE
The Road Ahead
Introduction, Global PPP Trends
Water Sector, Privatization Journey in KSA
7
Historically, the Saudi water and wastewater sector faced many critical challenges
Poor Infrastructure
Depletion of Non-Renewable Water Resources
Shortages in Water Supply
High Increase in Water Demand
High population growthHigh economic growthHigh consumption per capita
Old assets with unplanned interruptions High levels of leakagesMore focus on capital expenditure than operational expenditure (maintenance)Groundwater deterioration Limited control over abstraction levels Excessive non-renewable groundwater consumption by the agriculture sectorWater rationing due to demand/supply gapLow pressures in networkIncomplete network coverage Suboptimal reliability of distribution
Low collection network coverageNeed to cater for increasing water supply and consumption
Inefficient Organization and Processes
Limited Sewerage Collection
Nonexistent Price-Signaling Mechanism
Low tariff levels for water and wastewaterHigh subsidies to cover the growing gap between expenditures and revenues
High Non Revenue Water and Low Collection Rates
High unaccounted for water levelsLow tariff collection levels especially from Government and Royal customers
Lengthy government processes, especially planning, contracting and procurementInadequate asset managementLimited automation
Suboptimal Customer Service
Complex complaint managementService is not customer orientedDelays in connecting customers to networks
Environmental Issues
High water spillagesNo control over industrial effluentSub-standard TSE qualityInadequate sludge disposal practices
HR Issues
High CAPEX requirements to meet water demand, expand the sewerage network and develop treatment plants
High Expenditures
Overstaffing Limited staff development and motivationInadequate HR processes
Source: Riyadh Full audit 2006; Jeddah Full Audit 2006
Key Challenges of Saudi Water Sector
8
Saudi Arabia has embarked on a privatization strategy which covers twenty sectors.Water and Sewage services privatization initiative
Source: Governmental Resolution Number 60 of 1/4/1418 H (5/8/1997) and Number 219 of 6/9/1423 H (6/11/2002)
Privatization Program Key Objectives
1. Improving the capacity of the national economy and enhancing its competitive ability
2. Encouraging private sector investment and effective participation in the national economy,
3. Increasing employment opportunities, 4. Providing services to citizens and investors in a timely and cost-
efficient manner5. Rationalizing public expenditure and reducing the burden of the
government budget6. Increasing government revenues from returns on participation in
activities to be transferred to the private sector
Government Assets Covered by Privatization Program (1424H)
1. Water and Sewage Services2. Desalination3. Telecommunications4. Air Transportation and related services5. Railways6. Highways7. Airport Services8. Postal Services9. Wheat Mills and storage facilities10. Port Services11. Industrial Cities Services12. Government’s shares in Public
companies13. Government’s shares in the Arabic and
Islamic common investment companies14. Government Hotels15. Sports Clubs16. Municipal Services17. Education Services18. Social Services19. Agricultural Services20. Health Services
9
The Kingdom’s privatization program has targeted the water sector by introducing key changes from 2005 to 2010, onwards
Key Milestones in the Privatization of the Water and Wastewater Sector (2002-2010)
2005 2007 20152008 2010
NWC launches the PPP agreement for
Makkah / Taif partnering with Saur Group & Al Zamil.
MOWE develops the Strategic
Transformation Plan (STP) to introduce
private sector participation in the
water sector
CoM Resolution 2/27 sets the guidelines for the privatization of the water and wastewater
sector
NWC is created by Royal Decree M-1 (13/1/1429H)NWC launches 1st PPP
agreements for the water sector in Riyadh and
Jeddah, partnering with Veolia France & Suez
Group respectively
Timeline
PPP Model expected to evolve to complex
and more collaborative arrangements with O&M joint venture. Moreover, NWC to cover the rest of the 15 cities in KSA for
65% population coverage
Privatization Timeline
10
Implementing the Strategic Transformation Plan (STP)
Achievement Accelerated in 3 years
Achievement Accelerated in 2 years
Identify Opportunities for
Improvement (2 years)Management contracts (PPP)In 2 cities
NWC Incorporation( 5 years transition)
Expand in other cities, more complex PPP contracts (lease, concessions.) Private sector will assume greater operating,
commercial and investment risk
Achievement Accelerated By 50%
Achievement Accelerated in 1 year
11
KEY ACHIEVEMENTS (2008 – 2010)
Service continuityOperational Transformation1.2
JaddahRiyadh
0
20
40
60
80
100
BENCHMARK
100%
32%22%
2011
55%55%
2010
43%
2009
34%
N/A
31%
%
Water supply
1,035942827753
0
500
1,000
1,500
2009 2010
Million m3
10%12%
20112008
Operational Transformation1.2
Volume of water saved due to leak reduction Operational Transformation1.2
65,00053,915
23,0187,251
0
20,000
40,000
60,000
80,000‘000 m3
21%
20092008
134%
2010 2011 TARGET
Standard method of measurement to be developed
0
10
20
30%
30%30%
BENCHMARK
23%
2011 TARGET
30%25%
2010
JaddahRiyadh
Non revenue water (NRW)1.2 Operational transformation
12
KEY ACHIEVEMENTS (2008 – 2010)
*
Number of new wastewater connections per yearDelivery of capital projects2.3
30,000
20,700
40,000
27,600
20,000
30,000
40,000
#
10,000
45%
2011 TARGET201020092008
Average time to install connectionCustomer Focus1.1
30304760
180
20283030
70
0
50
100
150
200
2010
Days
2011 TARGET
5%
- 35%
35%
- 49%
BENCHMARCK20092008
JADDAHRIYADH
Customer satisfaction index
020406080
100%
1%37%
2011 TARGER
85%
2010
84%
2009
85%
2008
45%
Customer focus1.1
Complaint resolution
2424
48
96
0
20
40
60
80
100
20092008
Hours
2011 TARGET2010
0%
-50%
1.1 Customer focus
13
KEY ACHIEVEMENTS (2008 – 2010)
*
Volume of TSE agreements and MOUs signedCash inflow from Non-Core Activities3.2
475,000
395,000
287,200
M3 / day
500,000
400,000
300,000
200,000
100,000
2011 TARGET2008 2010
20%
38%
Collection ratio in current periodCash inflow from Core Activities3.1
%
100
80
60
40
20
23%33%
BENCHMARCK
97%
2011 TARGET
75%
2010
61%
2009
46%
Agenda
NWC, the Road Traveled
Partnering with UNECE
The Road Ahead
Introduction, Global PPP Trends
Water Sector, Privatization Journey in KSA
15
Clear strategic roadmap developed – Five transformation themes to driveperformance and health of NWC
16
6 priority initiatives and 5 enabling initiatives, which will drive strategy implementation
1 Customer Experience & Operations Excellence
1.1 Customer Focus
1.2 Operational Transformation
1.3 Opex Optimization
2 Projects Acceleration
2.1 Initiation, Planning and Design
2.2 Awarding
2.3 Delivery
3 Increased Cash Inflow
3.1 Revenues from Core Activities
3.2 Revenues from non-Core Activities
4 Performance Management
4.1 Framework & System
5 IT Integration Project
5.1 Compass
6 Privatization Growth Strategy
6.1 Planning
Enabling Initiatives
7.1 Mid-management Transformation
7.2 Highly Competent Employees 7.4 Strategic Marketing Capabilities
7.5 Change Management
2011 Priority initiatives
Priority Initiatives and Programs
7.3 Organization Structure with Clear R&R
Agenda
NWC, the Road Traveled
Future Opportunity Assessment
Partnering with UNECE
The Road Ahead
Introduction, Global PPP Trends
Water Sector, Privatization Journey in KSA
18
Currently, NWC is looking at collaborative joint efforts with the UNECE Program on PPP
Host the PPP PPP Specialist Centre for water
Integrated in NWCGovernance through UNECE MOUOperates under KSA lawActivities defined in UN MOU
Development of UN PPP Best Practice
Formula for Success – high level guide for governmentsSolutions for Practitioners –detailed research based guide for PPP Units and PPP Managers
Area of Support Description Support From
UN PPP SecretariatPrivate sectorResearch institutions
UNECE Editor-in-ChiefTOS membersOther CountriesPrivate sectorUniversitiesInstitutions