Riyadh accelerates Yanbu development

07 November 2008
Saline Water Conversion Corporation considers offering Yanbu 3 to developer on standalone basis.

Saudi Arabia’s Saline Water Conversion Corporation (SWCC) is considering offering its Yanbu 3 independent water and power project (IWPP) to a developer on a standalone basis, rather than making it part of a wider deal with existing plants at Yanbu as previously planned.

A final decision has yet to be taken, but Fehied Alshareef, governor of SWCC, says it is considering a change in approach in order to speed up its delayed privatisation programme.

SWCC received the long-awaited approval for its privatisation plans from the Supreme Economic Council in July.

However, as the process is already behind schedule the corporation needs to move quickly to ensure that it can meet rising demand for power and water.

“It has become an urgent issue,” Alshareef told MEED at the Saudi Water & Power Forum in Jeddah in early November. “We are one year late.”

The privatisation strategy involves restructuring SWCC into a holding company with eight subsidiary production companies. Under the plan, existing plants were to be bundled together with agreements to build new plants, which would then be awarded to private investors. The private sector would take a 60 per cent stake in each production company.

The sale of the Yanbu production company was due to be the first transaction completed under the privatisation scheme. The existing Yanbu 1, Yanbu 2 and Yanbu reverse osmosis plants were to be bundled together with the planned Yanbu 3 IWPP and sold to a private investor.

With the delays to the privatisation programme, SWCC is now considering pushing ahead with the construction of the Yanbu 3 plant independently, although the plant will eventually be bundled with SWCC’s other Yanbu assets.

“It will belong to the holding company anyway later on, but for quick action we have to think of alternatives,” said Alshareef.

SWCC plans to issue a request for proposals for the Yanbu 3 plant by the end of 2009, either as part of a bundled production company or as a separate project. The plant will have capacity of 88 million gallons a day (g/d) of desalinated water and 1,600MW of power.

SWCC has appointed eight consultants to help advise it on its restructuring and privatisation programme.

The US’ Booz & Company has already started work as the strategy consultant and change management adviser. SWCC will begin holding meetings with the other consultants in the second week of November.

Germany’s Fichtner is the technical adviser and HSBC is the financial adviser. Freshfields Bruckhaus Deringer is the legal adviser while KPMG of the Netherlands is advising on accounting and Canada’s Hay Group on human resources.

The UK-based Ernst & Young is the information technology adviser (MEED 14:8:08).

The SWCC holding company will continue to own any assets that are not included in the eight subsidiaries, including the transmission network, older plants and its research institute and training centre.

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