Overview of the SWCC Privatization and

Restructuring Program

Presented By
ABDULRAZZAG A. HIJAN
Saline Water Conversion Corporation
Director, Privatization and Restructuring Program

Presented in the 2010 Singapore Water Week

July 1, 2010
 ‫بسم الله‬
‫الرحمن الرحيم‬
In the name of God, Most
Gracious, Most Merciful

2
Content:

 Introduction to SWCC

 Privatization of the Desalination Sector

 SWCC Restructuring: Implementation and Roadmap

3
SWCC was established in 1974 with a main purpose
to support natural water resources by means of
seawater desalination

1928 - First Distillation Plants (Kindasa) imported to Kingdom

SWCC in Brief The Start of Saudi Arabia by His Majesty King Abdul Aziz Abdurrahman
Al-Saud

SWCC Vision and

Mission
Establish- 1974 - Establishment of Saline Water Conversion Corporation
ment (SWCC) by Royal Decree

SWCC General
Objectives

Support natural water resources by means of seawater

Main Purpose desalination in addition to electric power generation depending
SWCC Activities on technical and economic conditions(*)

Source: SWCC
(*) SWCC bylaws approved by Royal Decree 4
SWCC aims at meeting Saudi Arabia’s growing water
needs while pioneering the desalination production
and transmission sectors

SWCC in Brief Pioneer the seawater desalination production

Vision
and transmission

SWCC Vision
and Mission

SWCC General
Objectives
Meet the kingdom’s desalination water demand
and contribute to economic and social growth
Mission
through effective investment in human and
SWCC Activities physical asset resources

5
SWCC’s objectives are local and international

 Cutting edge R&D: Follow-up on all innovations and changes in

SWCC in Brief Worldwide research and desalination technologies to maintain leadership

SWCC Vision and

Mission  Maintain high quality water availability and reliable distribution
Kingdom to all Saudi consumers on a consistent basis
Level  Comply with environmental safety regulations and standards
 Promote private sector investments in seawater desalination
SWCC General
Objectives
 Increase efficiency and reduce costs without affecting quality
and continuity
SWCC Level  Develop human resources and build and invest in national
SWCC Activities resources
 Ensure safety of personnel and assets

6
SWCC is engaged in power and water generation
activities as well as research activities in the
desalination sector
 Main activity: Planning, construction, operation and
Water
maintenance of seawater desalination plants
SWCC in Brief Desalination  Process: Production of water either through dual or single
Production purpose plants (MSF, MED, RO)

SWCC Vision and

Water  Main activity: Planning, construction, operation and
Mission Transmission maintenance of water transmission pipelines

 Main activity: Planning, construction, operation and

Power maintenance of electrical power plants
SWCC General
Objectives
Generation  Process: Generation of electricity through dual purpose plants

 R&D: largest Middle East R&D center pioneering in seawater

desalination technologies (nanotechnology, etc.)
Other Activities  Training: Ensuring continuous transfer of knowledge to the
SWCC Activities
sector

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SWCC: current and planned operations

Production and Transmission Assets

N Current Water Production / Power Generation

W E
 30 plants in 17 locations
S
 3.3M m3/day installed capacity
I  More than 5,000MW power generation capacity
LF AL-KHAFIJI
HAQL ZU A
A L MU AL-JUBAIL Current Water Transmission
AJ AIR
DUBA BURAIDAH M U
SI
D AL-KHOBAR
SU
H

 More than 4,200 km of pipelines

AL

AL WAJH
ALQAT
UMLUJ  29 pumping stations
SHUQRA RIYADH HAFUF
 158 storage tanks (capacity: 9M m3)
MADINA MUNAWARA
YANBU  17 blending stations
ِAl-AZIZIA
Large Plants RABIGH MAKKAH
MUKARAMA
New Projects
JEEDAH TAIF
Satellite Plants
Al-SHOAIBA
Al-LEETH
 Jeddah RO 3 (200,000m3/day)
Regional Reservoirs Al-QUNFIDHAH  Ras Azzour (2,400MW and 1,025,000m3/day)
Al-BIRK KHAMIS
Water Transmission ABHA MUSHAYAT  Yanbu 3 (1,700MW and 550,000m3/day)
Systems AL-SHUQAIQ
FARASAN  Other small projects such as Umluj, Wajh,
Rabigh are under construction (6 plants with a
total of 63,000m3/day)
 Various pipelines under construction from
Shuqaiq, Shoaiba, and Jubail

Source: SWCC 8
Kingdom of Saudi Arabia is the largest producer of
desalinated water in the world, accounting for 18% of
total world production
KSA Desalination Share KSA Desalination Share
in the World in the GCC

OM AN
BAHRAIN 1.38%
1.32% KSA KSA
QATAR SPAIN 18.00% 41% UAE
3.39% 7.64% 33%

UAE
OMAN
OTHERS 16.66%
3% KUWAIT
27.36% BAHRAIN QATAR 13%
3% 7%
KUWAIT
USA
6.46%
17.80%

Source: SWCC 9
Content:

 Introduction to SWCC

 Privatization of the Desalination Sector

 SWCC Restructuring: Implementation and Roadmap

10
0

The Saudi Water and Desalination Sector: facing the

challenges

Main Challenges in the Saudi Water and Water Demand vs. Planned Supply in KSA
Desalination Sector (Million m3/day)
8.34
 High per-capita consumption (~220 liters /
capita / day) Water Shortage
0.95
 Rapid increase in water demand driven by
population and GDP growth 6.19 Supply - SWCC
 Increased pressure to mitigate environmental 2.21
impacts resulting from the conventional 0.70
exploitation of water resources Supply - IWPP

 Increasing cost burden and the challenge of •and Private Prod

1.93

identifying the optimal solutions to close a

widening supply-demand gap 3.00
Supply - Ground &

2.49 •Surface Wate

3.25

2008 2025

Source: SWCC Studies and Projects 11

7

Total Capital and Operational Investments until 2020

Desalination Sector Capex and Opex

(2010 – 2020) – USD Million

17,453

Transmission
5,802

Power and 6,811

water 11,651 Water

2,337 Transmission
2,422
2,051 Power

CAPEX OPEX

Total = US$ 24.3 Billion (SR 91 Billion)

12
e

KSA has committed to increase private sector participation

in key government assets to achieve the following strategic
objectives
Government’s Strategic Objectives Sectors Covered by Privatization Program

 Enhance competitiveness of national economy  Water and wastewater

 Encourage/increase private sector participation  Desalination
 Telecommunications
 Expand the ownership of productive assets by  Air Transportation and related services
Saudi nationals  Railways
 Encourage investment of domestic and foreign  Highways
capital in KSA  Airport Services
 Create employment opportunities for nationals  Postal Services
 Wheat Mills and storage facilities
 Provide quality services in a cost effective
 Port Services
manner  Industrial Cities Services
 Reduce the burden on the government budget  Government’s shares in Public companies
 Increase government revenues  Government’s shares in the Arabic and Islamic
common investment companies
 Government Hotels
 Sports Clubs
 Municipal Services
 Education Services
 Social Services
 Agricultural Services
Source: Governmental Decree Number 60 of 1/4/1418 H and Number 175 of 27/6/1424 H, Supreme
 Health Services
Economic Council Resolution 5/23 13
 Government steps for private sector participation

 SWCC’s BoD  Formation of

 Formation  Modified the
approval of National Water
Supreme  Initial Privatization of 20 Electricity
Privatization Company
Economic Economical sectors Regulatory to
Strategy of SWCC (NWC)
Council Regulate Co-
 Formation of ECRA generation
 Forward to Supreme  Approval of
 Saudi Economic Council, Privatization
 Provide full Credit
Electricity  Approved IWPP (30/12/2006) Strategy of
Company Support
projects SWCC (3 July
(SEC) 2008)

2000 2003 2007

1999 2002 2004 2006 2008/09

 Formation  Formation of the  Initiates
Saudi Arabian Ministry of Water implementation of
General and Electricity privatization &
Investment (MOWE) restructuring of
Authority SWCC
(SAGIA)  Established the
single off-taker, the
Water and Electricity
Company (WEC)

14
e

Action to date: 2 Independent Water Power Producers

launched

Project Name Project Information Status

 Estimated total cost: USD 2.69B  Commercial Operations started by

 Total Capacity: 1,030,000 m3/day February 2009
Shoaiba III
(West Coast)  60% owned by the private sector
 20 years Build, Own, Operate
(BOO) scheme

 Estimated total cost: USD 1.87B  Commissioning started by end of April

 Total Capacity: 212,000 m3/day 2009
Shuqaiq II
(West Coast)  60% owned by the private sector  Project expected to start operating by
 20 years BOO scheme November 2010

Source: SWCC Studies and Projects 15

e

Strategy for Private Sector Participation in SWCC

Strategy for Private Sector Participation in SWCC

Significant investment
opportunities for private
sector Incorporate as government-owned holding
company and then possibly float on stock SWCC Holding
exchange

Yanbu RaZ Satellite Khafji Shoaiba Shuqaiq Khobar Jubail

ProdCo ProdCo ProdCo ProdCo ProdCo ProdCo ProdCo ProdCo
Trans-
Trans- Old
Duba-4 / Leith-1 Production
Production Other
R&DT, …
mission
mission
Yanbu- Haql-3 Farasan-2 Shoaiba- Plants
Plants
Ras Khafji-2 Shuqaiq-1 Khobar-3 Jubail RO
1,2,RO Wajh-3 Qunfutha-1 1,2
Azzour* Rabigh-2 Khafji-3 Shuqaiq-3 Khobar-4 Jubail-4
Yanbu-3* Wajh-4 Shoaiba-4
Umlujj-3 Azizia-2

Old Production Plants: Jeddah-3, 4, RO1 and RO2, Jubail-1, 2 A and 2 B, Birk-1,
Haql-2, Khobar-2, Rabigh-1+TR1, Wajh-2+TR1-3, Farasan-1+TR1, Umlujj-2, Duba-3,
Azizia-1
Introduce PSP in value creating priority
assets, following “IWPP model”
abc Existing / Built by SWCC abc To be Implemented by PPP

Public Public/Private Partial Ownership

Ownership Ownership Full Ownership

*) Due to the present economic situation and the difficulties in ensuring financing, Yanbu -3 and Ras Azzour will be tendered as an EPC contract by SWCC
Source: SWCC Studies and Projects 16
Content:

 Introduction to SWCC

 Privatization of the Desalination Sector

 SWCC Restructuring: Implementation and Roadmap

17
 SWCC Privatization and Restructuring Program Steps
Phase 1: Preparation Steps and Detailing Phase 2: Phase 3: Execution of Phase 4:
Studies Approvals Privatization & Restructuring Holding Co.
Privatization
Obtain Complete
Prepare
Develop Approval Detailed Rollout
Report on Introduce PSP
Complete Finalize Privatization from Board of Restructuring, Restructuring,
Requirements at the Level of
Internal Consultant Strategy and Directors & Commercializa Create
to Develop the Holding
Preparations Contracts Restructuring Supreme t-ion and ProdCos and
Privatization Company
Plan Economic Transaction Introduce PSP
Strategy
Council Studies
 Preparation  Selection of  Completion  Strategy and  Reports  Organization  Rollout to  Management
of a report implementati of bidding organization submittal detailing and the new org. contracts
on on teams process  Technical  Stakeholder HR readiness and  IPO (long
requirement and  Selection of requirement presentatio studies processes term)
s to develop committees consultants s ns  Commercial  Creation of  Potential PSP
SWCC’s  Developmen and  Financial  Strategy agreements the Holding in
privatization t of finalization requirement approval  Documentati Company Transmission
strategy and information of contracts s from SWCC on required  Creation of
organization center  Legal Board and for Royal Production
restructuring requirement Supreme Decree Company
s Economic  Tender  PSP in
 Change Council preparation Production
management Companies
3 Months 4 Months 5 Months 8 Months 18 Months 17 Months Today ~5 Years

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 For the past 17 months SWCC has been conducting a 3
stream restructuring exercise encompassing 9 modules
months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Lead Execution
Advisor Advisor
Management and Organization Restructuring Strategy
Module 1 Organization Structure, Manpower Plan and Redeployment, Advisor
Management Processes, Authorities, Governance, Grievance
IT Strategy
Mod. 2 IT Architecture, IT Advisor
Strategy Based
Transformation

Implementation Plan
Stream I

HR Readiness Strategy HR Advisor

Module 3 Detailed Job Descriptions & Job Families, Grading & Compensation, HR Policies Advisor

BPR and System Readiness Strategy

Module 4 IT and ERP Implementation, Business Process Baseline, Advisor
Business Process Reengineering IT Advisor
Strategy Implications on Regulatory Requirements Strategy
Module 5 Royal Decree Detailing, Coordination with Advisor
External Entities, Executive Government Regulations Legal Advisor
Commerciali-
Privatization

Commercialization Prep. and Implem. Strategy Accounting

zation and

Module 6
Stream II

Financial, Legal and Technical Restructuring Advisor

Legal
Investment Technical
Transaction Preparation Banking
Module 7 Preparatory Technical Studies, Incorporation of BU’s, Tendering Process Advisors
Advisor
Management
Program and

Program Management and Leadership Strategy

Module 8
Stream III

Change

Strategic Alignment, Leadership and Implementation Master Planning, PMO Advisor

Strategy
Advisor Change
Change Management & Communications
Module 9 Management
Change Management Program, Awareness and Communication, Change Training, Change Monitoring Advisor
Source: SWCC Privatization Program 19
Main achievements and immediate priorities

SWCC Privatization and Restructuring Program - Main Achievements and Next Steps

Module Main Achievements Key Next Steps for 2010

 Detailed design of organization & manpower plan for

 Complete redeployment of all employees
the Holding Company
 Rollout the new organization structure
 Main business processes, policies & procedures
Strategy Based  Employees redeployment approach
 Develop employee performance management
Transformation system
 Governance structure for the Holding Company
 Finalize BPR for the whole company
 New compensation plan and review of HR enablers
 Implement new processes in ERP system
 IT strategy

 Draft Royal Decree for the creation of SWCC

Commercialization
and Privatization
Successor and send for approval
 Draft Holding Company and ProdCo by-laws
 Legal arrangements for assets and staff transfer
 Opening balance for Holding Company
 Establishment of commercial agreements
 Follow up on and facilitate the issuance of the
Royal Decree
 Finalize legal and commercial agreements
 Finalize financial requirements of the Holding

Source: SWCC Privatization Program 20

 e

East
Coast
Headquarters
SWCC (As Is)

West
Coast
ubna Y

abi aoh S

qi aquh S

li abuJ

haddeJ
corporate core and business units

ij f ah K
Production Business Units

r aboh K

etill et a S
Corporate Core
SWCC (To Be)

hdayi R-li abuJ

m
i ss a Q-

-ri ss A- qi aquh S
nazi J

- haddeJ- abi aoh S

fi a T- hakk a M

hani da M
- ubna Y

nr et s a E
SWCC organization restructuring involves setting up of a

Transmission Business Units

ec ni v or P

ti n U ss eni s u B T D& R
21
 Critical items need to be addressed in the
institutional setting and commercial relations for
SWCC to operate Futureon a commercial
Institutional Setting and Commercialbasis
Relations
ECRA Regulation

Credit
Support Saudi Ministry of
Aramco Finance

IWPPs FSAs for FSAs for Yearly Consumers

IWPPs & retained budget
ProdCos plants Financial
PWPAs /
ECAs Support

Water on-sale MOWE/ Consumer

WEC Agreements Tariffs
NWC
PWPAs /
ECAs
SWCC
Water Sale Direct Water
Privatized Successor Agreements
Power on-sale Purchasers*
ProdCos Holding
Agreements
(IWPPs & ProdCos)
Transmission Water Purchase
Service Arrangements**
ECA: Energy Conversion Agreements
Agreement Saudi
FSA: Fuel Supply Agreement Power Purchase
PWPA: Power and Water
Electricity Agreements
Purchase Agreement Company
Cash Flow

Notes: (*) Includes Marafiq

Maintained Revised New Commercial
(**) Agreements with Direct Purchasers to be transferred to privatized ProdCos as may be applicable Agreements Agreements Agreements
22
A preliminary timeline for the creation of production
companies was developed by SWCC
Creation of Production Companies
2010 - 2013
Production BU’s/ Companies 2010 2011 2012 2013

Shuqaiq

Khobar

Jubail

Shoaiba

Yanbu

Khafji

Jeddah

Satellite Plants

Ras Azzour

23
The first private sector participation transaction is
scheduled for 2012
Private Sector Participation in Production Companies

Estimated Cost
New Plant 2010 2011 2012 2013 2014 2015
(M USD)

Shuqaiq-3 Shuqaiq Transaction 722

Khobar-4 Khobar Transaction 446

Jubail-4 Jubail Transaction 810

Shoaiba-4 Shoaiba Transaction 1,313

Legend
Time span for Transaction Total Expected
3,291
tendering and award Capex

Source: SWCC Privatization Program, Estimation Report 24

 Summary

 The Saudi Water Sector is attractive and growing, benefiting from the full support of the
government to meet the strategic aim of production efficiency and private sector
participation

 The water sector benefits from the continuous support of SWCC to the private sector in
key areas of production, transmission and R&D

 The sector presents real opportunities for private sector participation

 Potential local and international investors can look for a reasonable return, flexible
payment terms, well defined risk allocation, clearly defined responsibilities & obligations
of both parties (stakeholders & the private sector), through a fair and a transparent
bidding process

 Private sector local and international participation in desalination sector benefit the
broadest range of players: investors, financing institutions, operators, EPC contractors,
equipment and materials providers etc.
Source: SWCC Privatization Program 25
 CONTACT DETAILS
For further information please contact:
Abdulrazzag A. Hijan
director of
Saline Water Conversion Corporation
Privatization and Restructuring program

P.O.Box. 5968
Riyadh – 11432, Saudi Arabia

Tel : +966 1 2174721

Tel : +966 505767055
Fax : +966 1 4160177
E-mail : ahijan@swcc.gov.sa

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THANK YOU

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