Bahrain’s PM supports locals in sewage dispute

09 August 2012

Prime minister weighs in to support Sunni residents in dispute with international consortium

Bahrain’s Prime Minister Sheikh Khalifa bin Salman al-Khalifa has taken the unusual step of ordering the international consortium developing a sewage plant in the Sunni district of Muharraq to move part of the project after complaints from locals.

The intervention by Sheikh Khalifa is said by Bahraini sources to be indicative of his desire to ensure support for the Sunni ruling family in the midst of around 18 months of unrest and opposition to the government from the island’s majority Shia population.

Sources close to a consortium led by South Korea’s Samsung Engineering, which is developing the Muharraq wastewater project, say a variation request has been made by the Works Ministry stipulating that the pumping station must be moved. The idea currently proposed is to move it away from residential areas in Muharraq and on to a reclaimed island.

“Residents complained that they don’t want a smelly sewage pumping station near their houses and managed to get the prime minister involved,” says one Bahraini source. “And because it’s a Sunni area, he has said it has to be moved.”

Muharraq is one of the traditional bases of support for the government and the prime minister in particular. “Some residents got quite angry about the pumping station and managed to get the issue before the prime minister, who took steps to address it,” says a former member of parliament (MP) for the Muharraq governorate involved in petitioning Sheikh Khalifa.

The issue that has yet to be resolved is who will pay for changing the location of the pumping station, although the original contract does involve leeway for variations. The cost of putting the pumping station on reclaimed land is unclear, but is expected to be significant when compared with the $320m total cost of the project. Both sides are understood to want to avoid having to pay upfront for the project change.

“Ultimately, the government will pay for it. The question is do they pay for it upfront or through the tariff,” says a source involved in the project. If the Samsung Engineering consortium is eventually forced to pay for building the pumping station elsewhere, it could require a renegotiation of the tariff it charges the government for operating the plant for it to recoup the cost. It could also cause difficulties with the banks that provided about $240m of debt for the project.

The Works Ministry had initially refused requests to get the pumping station moved, according to the former MP. “One of the good things about the Al-Khalifa family is that if there is a problem they will get personally involved to solve it,” he adds.

It is the second time the uprising against the Al-Khalifa ruling family, which started on 14 February 2011, has hit the Muharraq project. A deal between the government and the Samsung Engineering consortium was signed in early February 2011, just before the uprising began. At its height, this led to several days where work on the project ground to a halt as protests shut down activity in much of Bahrain. The downgrade of Bahrain’s credit rating by Standard & Poor’s and Moody’s credit agencies as a result of the political instability also delayed attempts to put the finance in place for the scheme. A deal was eventually closed, several months behind schedule, in September 2011.

The government and the Samsung Engineering consortium are now expected to go through a long negotiation to resolve the issue of how the change in location will be paid for. “There is a dispute as to how this will be paid for,” says a Manama-based source close to the project. “The issue is not resolved yet and I would be surprised if it gets resolved soon.”

The Muharraq project was intended to be a pathfinder deal for the use of public-private partnerships (PPPs) in Bahrain when it was launched in 2009. Since then, however, and following the political unrest, the Works Ministry has re-evaluated plans to develop a second wastewater project at Tubli as a PPP.

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