Riyadh is appointing a second developer to work on Prince Adbulaziz bin Mosaed Economic City in Hail, as concern mounts over progress on the project.
The Saudi Arabian General Investment Authority (Sagia), which oversees the kingdom’s six economic cities, tells MEED it is introducing a second developer to stimulate the city’s development.
The decision follows the presentation of a detailed masterplan to the authority by the current developer, the local Rakisa Holdings.
Abdullah Hameedadin, deputy general governor and head of economic cities at Sagia, says an additional developer will be brought in within the next month. “We received the detailed masterplan from Rakisa in April,” says Hameedadin. “When we looked at the plan, we realised it would merit bringing in more expertise into the project, and it required further partnership.
“We have not ended our relationship with Rakisa. We are trying to say we need more co-operation and partnership to move this project forward.”
Hameedadin declined to name the new developer, but says an announcement will be made in early September. He adds that it could be an international developer with experience in large projects. “We are bringing in a big partner for Rakisa,” he says. “It is going to be someone who has the capability to add to the technical part [of the project]. That is where the local partner needs some addition to its business.”
Rakisa could not be reached for comment on the appointment.
According to Hameedadin, the 17 plots that make up the 156 million square metres of land for Prince Adbulaziz bin Mosaed Economic City were signed over to the project for development by the Justice Department in July. The city will be the second largest of the kingdom’s economic cities and is planned to become the largest transport and logistics hub in the Middle East.
The move to bring in an additional developer follows concerns by those close to the economic cities that the emphasis on developing the flagship King Abdullah Economic City (KAEC) has been undermining the development of the others (MEED 20:6:08).
Sources in the kingdom have express concerns over the development of Prince Adbulaziz bin Mosaed Economic City, which is due to be listed on the stock market through an initial public offering (IPO). “The IPO has been in the pipeline for more than two years,” says one source involved in the economic cities. “We are supposed to be working with them, but we have not heard anything from them for more than a year.”
Separately, plans for KAEC are moving ahead, with a financial adviser expected to be appointed soon for the core infrastructure work. The mandate will involve more than $10bn in financing. It will include financing for the city’s water and power plants, and the electricity network, as well as a port. Several international and Saudi banks have been in talks with the city’s developers and an award is expected by September.
The exact scope of the work is not yet clear, but $10bn is considered a conservative estimate by bankers as they expect it to cover the six gas turbine power plants being developed by the local Arabian Bemco Contracting Company.
It could also include the $5bn smelter to be developed by the UAE’s Mubadala and Dubai Aluminium Company (Dubal). Discussions between banks and Emaar, the Economic City, which is developing the city, have been taking place over the past month. Sources close to the talks say an award will be made in the next month. Emaar has appointed Riyadh-based Swicorp as its overall financial adviser on the project. Swicorp is also acting as financial adviser on Knowledge Economic City in Medina.
Construction work on Knowledge Economic City is set to start in early 2009. According to Hameedadin, an IPO is expected to take place by the end of the year.
Hameedadin says Sagia is adapting its approach to the cities as the developments progress. “KAEC was launched in 2005, and Hail was launched last year,” he says. “But yes, definitely we are learning as we move forward. Today, we are smarter and [more] efficient.”
He says the lessons learned while dealing with the first four cities, which also include Jizan Economic City, will be taken into account when developing the remaining two cities at Tabuk and Ras al-Zour. “For the [final] two cities, our approach will be staggered,” he says. “But it is critical for projects of this size that the private sector has the right plans from day one, the funding is in place and the secured land in play.”
To further boost the development of the cities, Sagia is working with developers to ensure they have access to enough labour.
“We are working with developers to facilitate their access to labour from overseas to help in the construction work,” says Hameedadin. “Anyone who wants to go and invest, Sagia will assist in the infrastructure.”