Saudi sets up firm to oversee water privatisation

Saudi Arabia has set up a water company to oversee privatisation of expensive sewerage services and efforts to save dwindling water resources.

Minister of water and electricity Abdullah bin Abdul-Rahman Al-Husayen said the National Water Company would be wholly owned by the Public Investment Fund.

It will assume control of all the kingdom's groundwater wells and sewage and desalination plants, which were previously in the hands of various government bodies in a convoluted system.

The new firm also will take charge of privatising urban water and sewerage services. The winner of a tender for Jeddah will be announced in three months, Al-Husayen said, and tenders will be held for Saudi Arabia's other big cities within three years.

No reason has been given for the delay in deciding on bids which first came in two years ago and include France's Veolia and Suez, Britain's Thames Water and Singapore Utilities International.

Al-Husayen said National Water has chosen a foreign firm, which he did not name, to manage the national water network in a five-year contract that includes incentives to devise ways of preventing water wastage.

National Water has a paid-up capital of 6 billion riyals ($1.6 billion) and the remainder of its 22 billion capital will be paid in three years, he said.

An initial public offering (IPO) is not seen in the foreseeable future, he told newswire Reuters.

"In the early period it is not viable. Water is very heavily subsidised. But the incentive for the managing partner is in the saving," he said.

"We are still losing around 20% of our resources in pipeline leakage. It's one million cubic metres per day," he said. "We are targeting reducing per capita consumption to 150 litres per person per day. It is now 250-260 per day."

Al-Husayen confirmed government plans to abandon a 30-year wheat growing programme that has so far guaranteed self-sufficiency for the country of 24 million people.

An official told Reuters last month the government would start reducing purchases of wheat from local farmers yearly and move to 100% reliance on foreign imports by 2015 in order to save underground water resources.

Cereal and dairy farms across the parched desert country account for 85% of water consumption.

"Ground water accounts for around 45-50% of the domestic water and it is near the consumption centres, so a saving in this resource means more water available to the surrounding cities," Al-Husayen said, declining to say how long underground water resources could last.

"If we conserve well it will last for a long time. It is difficult [to say how long] because of how deep you're going to go, how many pumps. It's not an exact science." (Reuters)

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