The first PPP deal to be struck since the Arab uprisings was for a wastewater treatment plant in Bahrain
Even though billions of dollars of projects in the Middle East are facing delays or cancellations as a result of a lack of funds or disruptions due to the Arab uprisings, wastewater projects are rarely axed.
Fearing further social unrest, governments are keen to press ahead with projects that ensure their people have access to water. Similarly, affordable housing projects remain on track because people need homes to live in.
A lack of appropriate wastewater treatment infrastructure has many costs. The environmental impact of dumping untreated effluent does not sit well with citizens.
In recent years, Dubai and Bahrain have both struggled with treatment plants operating at overcapacity due to population increases. They have resorted to desperate and damaging measures including dumping untreated sewage in waterways and the desert. The state of Saudi Arabia’s woefully inadequate sewerage system was exposed when floods ravaged Jeddah in 2009, causing a serious overflow problem.
Essential investment into wastewater sector
Governments have learnt that investment in the wastewater sector is neglected at their peril. The authorities realise that no matter how projects are delivered, either as public-private partnerships (PPPs) or through direct procurement, they must be built. The first PPP deal to be struck since the uprisings began was for a wastewater treatment plant in Bahrain – itself the scene of violent protests in February.
Egypt tendered its first PPP wastewater project – the New Cairo wastewater treatment plant – in 2009
With a population of about 26 million people, Saudi Arabia has the greatest demand for wastewater treatment in the region. As the kingdom’s major cities continue to grow, the development of its wastewater treatment and sewerage networks has fallen behind.
Only half of the country has access to proper sanitation facilities. Its population is expected to increase by 22 per cent by 2020, straining the wastewater system further. To address the problem, the Saudi government set aside $40bn in 2009 to ensure water and wastewater services for the entire kingdom by 2030. An additional $17bn was allocated for operations.
The government decided to tender management contracts for water and wastewater in some cities. The largest cities were targeted first and contracts have been issued to the private sector for Riyadh, Jeddah, Mecca and Taif.
The National Water Company (NWC) intended to extend the contracts to several other cities including Medina and Damman, but has since decided to revise its strategy. It is not yet clear whether further water and wastewater management contracts will be signed with the private sector. Until a decision is taken, all eyes will be on the effectiveness of the already awarded water management contracts.
Another country with a history of wastewater treatment problems is Kuwait. For a long time, the country’s treatment plants were run at a level that exceeded their intended capacity. Kuwait identified the need to rehabilitate its sewerage system several years ago and, since 2007, has been carrying out an extensive programmes of projects.
The plan includes four new main deep sewer tunnel systems and pumping stations to replace the existing trunk sewer and pumping station network. Two of the stations have been completed and are in operation at Mishref and Egaila. Two additional projects are being completed at Riggae and Jahra.
In terms of wastewater treatment, Kuwait has been bold developing plants on a PPP basis. Its latest PPP scheme will expand the existing Umm al-Hayman plant from its current treatment capacity of 27,000 cubic metres a day (cm/d) to about 600,000 cm/d.
The project will be carried out in two phases. The first phase will see about 400-450,000 cm/d of capacity brought online by 2015. The enlarged plant will serve a new city near to the site. The extension of the facility will also treat raw sewage diverted from the Riqqa plant, which is to be decommissioned.
The Umm al-Hayman project was originally planned as a government-procured scheme. The move to a PPP caused significant delays and Kuwait cannot afford further set backs.
Private finance benefits for Bahrain project
In Bahrain, the government has succeeded in obtaining financing for its first wastewater PPP at Muharraq despite the global economic downturn and civil disturbances. The project has almost reached financial close with Export-Import Bank of Korea providing a large portion of the debt.
The deal is significant, as the country has long struggled to meet demand for wastewater processing. The Finance Ministry originally intended to launch a tender for another PPP wastewater treatment plant at Tubli, but has since reconsidered its plans. It will now go ahead with the project on an engineering, procurement and construction basis, despite observers questioning whether the kingdom has sufficient allocated funds to pay for the scheme.
The advantage of paying for the assets over an extended period – alongside efficiency gains and other benefits – was what attracted Egypt to the idea of using PPPs to finance its wastewater treatment infrastructure. It tendered its first project, the New Cairo wastewater treatment plant, in 2009. Financing was closed in February 2010 with the local Orascom Construction Industries and Spain’s Aqualia as joint sponsors. The project will be completed next year and will have a capacity of 250,000 cm/d.
Tenders for two wastewater treatment facilities at 6 October City and Abu Rawash were to follow, but both have faced delays. The scope of the Abu Rawash project has been changed several times. The original contract included the operation and maintenance of a 1.2 million cm/d primary treatment plant.
In October 2010, the ministry decided to add sludge management and cogeneration capabilities to the project. The facility was to have a secondary treatment capacity of 800,000 cm/d and a power generation capacity of 9MW. However, this was subsequently reduced.
Prequalification was reopened for the third time in December 2010 following alterations to the scope of the project. The adjustment revised down the planned capacity of the project’s sludge management and cogeneration capacities.
The popular uprising that overthrew President Hosni Mubarak caused the project to be put on hold initially, but this now appears to be progressing. According to a source close to the project, “[The PPP Central Unit is] preparing the latest set of bid documents which will need to be approved by the supreme committee … Once the committee is convened and approval is granted, the request for proposals will be issued.”
The winning bidder will sign a 20-year PPP agreement for the design, financing and construction of a secondary treatment stage, a cogeneration unit and sludge management facilities.
The story is much the same with the 6 October wastewater treatment project. “The PPP Central Unit is trying to arrange one-to-one meetings with the bidders,” says a source. “Final bid documents will be issued after the [national] elections.”
Oman wastewater operations
Less urgently, Oman is assessing its future needs. It currently has 11 sewage treatment projects in operation, handling about 50,000 cm/d.
The sultanate’s expanding industrial sector and a growing population, which is expected to increase by 18 per cent by 2020, means Oman Wastewater Services Company (Haya Water) has ambitious plans to expand the network.
By 2020, Haya Water expects to be treating 160,000 cm/d. The expansion scheme is scheduled for completion by 2025. At this point, the company will be operating seven more large sewage treatment projects and 23 package sewage treatment plants to serve small villages.
Meanwhile in Qatar, the Public Works Authority (Ashghal) has revived plans for a $100m wastewater treatment plant at Al-Dhakhira, 40 kilometres north of Al-Khor. Other significant projects – driven to a certain extent by hosting the Fifa World Cup in 2022 – are in the planning stage.
The World Cup aspect was one of the important factors that prompted Dubai-based Belhasa Projects, a company that specialises in infrastructure such as wastewater projects, to open a new office in the country’s capital.
“We are looking at contracts in Qatar, the UAE and beyond,” says Greg Garner, chief executive officer of Belhasa Projects.
Saudi Arabia, Bahrain, Kuwait and Egypt are the largest wastewater markets in the region as a result of growing populations and an absence of sufficient development in recent years. The need to invest in new capacity is significant for other countries too. With $7.3bn-worth of schemes under study or execution, the sector offers plenty of opportunities for wastewater specialists.