Cairo looks to boost water supplies

12 April 2015

The decreasing availability of water is starting to impose limits on Egypt’s economic growth, forcing the government to explore alternative sources

While much of the focus at the Egypt Economic Development Conference (EEDC) in Sharm el-Sheikh was on solving the country’s power shortage, a growing water crisis formed an interesting undercurrent of discussion at the event in mid-March.

According to the Ministry of Water Resources & Irrigation (MWRI), the declining availability of water is now starting to impose limits on Egypt’s economic growth, forcing Cairo to look at new methods of developing and financing water supplies for its rapidly growing population.

The country’s PPP Central Unit, the public-private partnership (PPP) office under the Ministry of Finance, is set to play a key role in procuring large-scale desalination projects to support ongoing schemes to upgrade water transmission networks.

Growing demand

With Egypt’s population expanding at a rate of 2 per cent a year, rising demand for water is having a significant impact on availability. A recent study found that annual per capita water availability fell from 1,893 cubic metres in 1959 to 900-950 cubic metres in 2000, and is expected to decrease to 670 cubic metres in 2017 and further to 536 cubic metres by 2025.

Egypt currently relies on the Nile River for about 95 per cent of its water consumption, with the remainder coming from limited groundwater resources and water reuse schemes. In addition to having to deal with growing demand, the North African country’s water supplies from the Nile may be affected by projects being undertaken by upstream riparian states, particularly Ethiopia.

The biggest threat to its Nile supplies comes from the Ethiopian Renaissance Dam Project, with some reports forecasting that the dam, which will generate more than 5,250MW of power, could reduce Egypt’s water resources by up to 18 billion cubic metres a year when completed in 2017.

Alternative sources

With no prospect of increased supplies from the Nile River, Cairo will need to develop alternative sources of water and improve the efficiency of existing networks to prevent availability falling to dangerous levels in the coming years.

The MWRI estimates $25.9bn will need to be invested in water schemes until 2050 if supplies are to be kept at adequate levels.

As part of efforts to boost supplies of fresh potable water, the Ministry of Housing, Utilities & Urban Development, and its four main water agencies, are pushing ahead with several major water treatment and transmission network schemes.

The largest water treatment plant currently out for tender is the 500,000 cubic-metre-a-day (cm/d) Abu Oweiqal facility, which will be developed under a design-and-build contract.

Both local and Saudi Arabian contractors have been invited to submit bids this month for the deal to build the plant, and provide and install water transmission pipelines for the scheme.

Egypt will also be required to invest significantly in expanding its water transmission network as new urban areas and large real estate schemes are built.

In addition to tendering construction contracts, Cairo is seeking to improve the operation of existing water networks. In 2014, Spain’s Acciona, in partnership with the local International Consultants for Agency & Trade, was awarded a deal for the operation and maintenance of the water supply network in New Cairo, which is located about 30 kilometres east of the capital.

Large-scale desalination

Egypt has traditionally given desalinating seawater low priority due to the high costs involved compared with other resources, and as a result, only a few small-scale desalination plants have been implemented to date, on the Red Sea coast.

However, with demand for water continuing to rise, Cairo is planning its first large-scale desalination projects to help ease pressure on Nile and groundwater supplies. The majority of the planned desalination capacity will be developed with private financing.

At the development conference in March, the US’ RWL and the local Orascom Construction Industries signed a memorandum of understanding (MoU) to develop an 80,000-cm/d desalination plant, which can be expanded at a later date. The government intends to enter into a water supply agreement with the joint venture after studies are completed, with the proposed project to be developed under a build-own-transfer (BOT) model.

Plans for other large-scale desalination projects under consideration fall under the auspices of the PPP Central Unit.

Key fact

Egypt currently relies on the Nile River for about 95 per cent of its water consumption

Source: MEED

Following the approval of the PPP law in April 2010, the unit began conducting feasibility studies into developing desalination plants as a way to boost water supplies. The body is currently working on feasibility studies for facilities at Sharm el-Sheikh and Hurghada on the Red Sea coast. Both projects are planned to have a total capacity of 40,000 cm/d, developed over two phases of 20,000 cm/d. The UK’s Atkins has been working as a consultant on the pre-feasibility studies for the two schemes, with the EU providing pre-feasibility study financing.

The National Organisation For Potable Water & Sanitary Drainage, the agency in charge of executing water and wastewater projects outside the Cairo and Alexandria area, will oversee both projects.

The PPP Central Unit had set a target of finalising pre-feasibility studies in March, with tendering to begin in August. However, the projects are already facing delays, with the Hurghada project in particular causing some problems.

According to sources close to the project, the site selected in Hurghada may not be suitable for the proposed desalination plant and, depending on the outcome of the feasibility studies, an alternative site may be chosen.

Several challenges

In addition to the technical challenges in adopting a large-scale desalination programme, Cairo faces several other challenges in succeeding with the planned projects.

While the decision to use PPP for water and wastewater projects is rightly regarded as a positive development, the PPP Central Unit and supporting organisations will need to ensure they can quicken the pace at which transactions are designed and procured, and projects are executed.

The PPP Central Unit’s first utility scheme, the Abu Rawash wastewater treatment plant, faced numerous delays even before the 2011 revolution, with changes to scope and, following the invitation of bids in early 2011, prices were not submitted until January 2015. The contract was due to be signed at the EEDC, but has since been pushed back due to a delay with the technical evaluation of bids.

Power crisis

Another hurdle to the development of desalination capacity is the current power crisis afflicting the country. “Egypt will need to sort out the power problem first,” says a local contractor involved in major utility projects. “Once progress is made with the power projects, then we will see progress with the water projects. Desalination plants require a lot of power.”

While providing water for its population will remain Cairo’s primary concern, the demand for industrial water is also set to rise as the government seeks to move forward with major projects to expand the industrial sector.

Much of the new demand for industrial water will emanate from the ambitious Suez Canal development corridor scheme. To meet the forecast demand for water related to the development of land alongside the canal, nine new projects have been identified.

These include the establishment of four new water treatment plants with capacities ranging between 50,000 cm/d to 120,000 cm/d. In total, it is estimated an additional 50,000 cm/d of water capacity will be required by 2017 and 230,000 cm/d by 2020. By 2030, if the redevelopment of the area goes to plan, a total additional capacity of 865,000 cm/d will be required to service the Suez Canal area.

While the financing model for the projects has yet to be identified, the private sector is expected to play a central role in providing the capital investment.

Wastewater reuse

In addition to desalination projects, Cairo is seeking to expand the reuse of wastewater for irrigation and industrial purposes.

The first goal will be to increase the volume of wastewater that is treated. In 2012, out of the 6.5 billion cubic metres of wastewater collected, 2.9 billion cubic metres, 44 per cent, was not treated.

The PPP Central Unit is contributing to efforts to boost wastewater treatment capacity. It is planning to award the contract to expand the capacity of the existing Abu Rawash sewage treatment plant by 400,000 cm/d and install a secondary treatment stage by the end of April. In addition, the body is currently undertaking a pre-feasibility study for the planned 250,000-cm/d Helwan facility.

Although the Abu Rawash project has suffered from delays due to political upheaval and slow decision-making, the wastewater sector was the first in Egypt to successfully procure a PPP project. The contract for the New Cairo sewage treatment plant was signed in June 2009 and the scheme reached financial close in February 2010.

While this preceded the formation of the PPP Central Unit, there is optimism that a swift contract award and financial close on the Abu Rawash project could lay the foundations for success with the pipeline of other PPPs planned.

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