After months of negotiations, the Ras al-Zour power and water project is finally back on track. The resurrected scheme is almost unrecognisable from the independent water and power plant (IWPP) that was originally to be developed by the Water & Electricity Company.
With a water capacity of 226 million gallons a day, Ras al-Zour can still lay claim to the title of the largest desalination plant in the world, but its financial model is completely different.
Riyadh has also severely delayed the date when the first power from Ras al-Zour will flow into the kingdom’s electricity grid.
The state’s decision to scrap the IWPP in May has pushed back the first supply of electricity by a year to December 2012. The state will now tender the giant plant on an engineering, procurement and construction basis.
At the time, the decision to abandon the IWPP model sent waves of panic through developers, who feared it was a sign of a wholesale shift in policy in Riyadh.
The change on Ras al-Zour did not need to happen. The preferred bidding group managed to secure long-term debt finance before one of its members, Malaysia’s Malakoff International, failed to put forward its share of the equity. However, the second-ranked bidder still wanted to develop the project.
With the state’s acquiescence, the private sector could have successfully developed the project. Instead, it chose to go down a longer and altogether more difficult route.