CONTENTS INTRODUCTION WATER AND POWER DEMAND CHALLENGES WHY PRIVATIZE? PRIVATIZATION IMPLEMENTATION SALIENT FEATURES OF RESOLUTION 5/23 PRIVATIZATION DETAILS OF WEC IWPPs PROJECT CONTRACTUAL RELATIONSHIPS PRE-QUALIFIED COMPANIES/CONSORTIUMS FOR SHOAIBA (PHASE 3) IWPP OPPORTUNITIES CONCLUSION

Domestic Water Resources INTRODUCTION Domestic Water Resources 50% Desalinated Water 50% Ground Water

INTRODUCTION There is a long history of emphasis on water production by the Government culminating in the establishment of Saline Water Conversion Corporation (SWCC) in 1974. Today, SWCC produces around 20% of total world production of desalinated water.

INTRODUCTION Water Production Increase In SWCC In Last 30 Years: No. of present Plants Kingdom : 30 plants at 15 locations West Coast : 24 plants at 12 locations East Coast : 6 plants at 3 locations Water Production Capacity Growth Year 1973 : 21,000 m3/d Year 2003 : 3,353,068 m3/d SWCC also has major water transmission systems (some 3000 km pipelines in length including large pumping stations) and water storage tanks (capacity almost 9 million m3).

Desalinated Water Production Since 1968 INTRODUCTION Desalinated Water Production Since 1968 Millions 3,353,068 Water Capacity (m3/day)

WATER AND POWER DEMAND The phenomenal growth in water and electricity demands is shown below for the year 2003 and year 2024. Year 2003 Population : 23.4 millions (increase of 3% on year 2002) Water : 6 millions m3/day (demand increasing by 3% annually, 50% being met by desalinated water) Power : 29,000 MW (demand increasing by 4% annually)

WATER AND POWER DEMAND Year 2024 Population : 40 millions Water Demand : 10 millions m3/day (66% to be met by desalinated water) Power Demand : 59,000 MW

WATER AND POWER DEMAND POPULATION Millions 40 Millions

WATER AND POWER DEMAND POWER Thousand MWs

WATER AND POWER DEMAND WATER DEMAND (250 L/P/DAY)

WATER AND POWER DEMAND DESAL WATER (250 L/DAY/Person) Desal Water demand & de-commissioning of existing plants

CHALLENGES Increasing Water demand (By year 2024, total water demand would be 10 million m3/day with a desalination water share of 6.6 million m3/day) De-commissioning of existing plants in near future Huge investment requirement (Saudi Riyal 23,000 million at the initial stage)

WHY PRIVATIZE? Phenomenal water and power demands entail massive investment – a burden on Governmental resources. Low water and electricity tariff Stimulate private sector investment and its effective participation in national economy Expanding the citizens scope of participation in productive assets

WHY PRIVATIZE? Encourage national and foreign capital investment in the Kingdom Increase job opportunities To make available the Governmental re-sources to other services (health, education, …..)

PRIVATIZATION IMPLEMENTATION The Kingdom has initiated several steps to make investment attractive and a reasonable return for private sector. There is tremendous opportunity for private sector to participate in the IWPP Projects . Private investor is assured of Total commitment by the Government and a fair, credible environment. Enabling rules and regulations have been formulated.

PRIVATIZATION IMPLEMENTATION A separate Ministry of Water created in July 2001 (electricity sector incorporated later for it to become MWE) MWE Responsibilities include To establish guidelines for the private sector to invest in water & electricity infrastructure To develop a general sector master plan Formulation of enabling rules and regulations

PRIVATIZATION IMPLEMENTATION All Saudi regional electricity companies integrated into a single entity – Saudi Electricity Company (SEC) in the year 2000 The supreme economic council identified 20 sectors for privatization, those include Desalination, Water Distribution, Railways, Airlines…… Establishment of Electricity & Co-generation Regulatory Authority (ECRA).

PRIVATIZATION IMPLEMENTATION The Supreme Economic Council passed Resolution 5/23 to establish a frame work for participation of the private sector in water desalination and power projects.

Salient Features of Resolution 5/23 Four projects were initially selected and it contemplates additional projects. Ownership in the project companies: Government (PIF) - 32% Saudi Electricity Company (SEC) - 8% Developers - 60%

Salient Features of Resolution 5/23 Actual distribution for the unit prices of water and electricity without any cross-subsidy The projects to be implemented on a build, own and operate (BOO) basis Utilize the Energy Conversion Agreement (ECA) model to provide fuel to the projects companies

Salient Features of Resolution 5/23 The Government will provide the offtaker company with the necessary credit support. The state shall allocate the land sites for these projects.

WATER & ELECTRICITY CO. (WEC) PRIVATIZATION BRIEF DESCRIPTION OF WATER & ELECTRICITY CO. (WEC) WEC is a limited liability company owned on a 50:50 basis by SWCC and SEC. Single Off taker of power and water capacity and output from the IWPPs. Supply the Projects with the fuel requirements. WEC will monitor power, quality of water and efficiency of fuel conversion. WEC will sell the water to SWCC and power to SEC.

PRIVATIZATION Shoaiba Phase 3 Shuqaiq Phase 2 Raz Azzour Under this initiative, the First Group of Four IWPP projects were selected: Shoaiba Phase 3 Shuqaiq Phase 2 Raz Azzour Jubail Phase 3 With an investment potential of about Saudi Riyals 23,000 millions

DETAILS OF WEC IWPPs LOCATIONS Shoaiba Raz Azzour Jubail Shuqaiq ° N W MW 2500 800,000 m³/d MW 1100 340,000 m³/d MW 650-950 880,000 m³/d Shuqaiq MW 700 212,000 m³/d

DETAILS OF WEC IWPPs 1. Shoaiba Phase 3 IWPP Water : 880,000 m³/day Power : 650 – 900 MW Fuel : Liquid Fuel (Crude Oil) Estimated Capital Cost : SR 6,000 Million (total SR 23,000 Millions for 4 initial projects) RFP Issued : 31-Jul-2004 Bid Submission : 08-Jan-2005

DETAILS OF WEC IWPPs Shuqaiq Phase 2 IWPP Water : 212,000 m³/day Power : 700 MW Fuel : Liquid Fuel (Crude Oil) Estimated Capital Cost : SR 3,800 Million (total SR 23,000 Millions for 4 initial projects)

DETAILS OF WEC IWPPs 3. Raz Azzour IWPP Water : 800,000 m³/day Power : 2,500 MW Fuel : Natural Gas Estimated Capital Cost : SR 9,000 Million (total SR 23,000 Millions for 4 initial projects)

DETAILS OF WEC IWPPs 4. Jubail Phase 3 IWPP Water : 340,000 m³/day Power : 1,100 MW Fuel : Natural Gas Estimated Capital Cost : SR 4,200 Million (total SR 23,000 Millions for 4 initial projects)

DETAILS OF WEC IWPPs IMPLEMENTATION PROGRAM No. Plant Location RFP Issue 1st Unit Production 1 Shoaiba (Phase 3) 31-July-2004 1st Quarter 2008 2 Shuqaiq (Phase 2) 1st Quarter 2005 3rd Quarter 2008 3 Raz Azzour 3rd Quarter 2005 4th Quarter 2008 4 Jubail 1st Quarter 2006 3rd Quarter 2009

PROJECT CONTRACTUAL RELATIONSHIPS Government MOF SEC SWCC Aramco Project Company WEC Fuel (ECA) EPC Contractor O&M WPA PPA FSA PWPA Contract LLA Agreement Credit Support Shareholders’ Developers 60% PIF 32% 8%

PRE-QUALIFIED COMPANIES/CONSORTIUMS FOR SHOAIBA (PHASE 3) IWPP

OPPORTUNITIES There are unprecedented and enormous opportunities in water desalination (and power generation) fields for: Developer Financing / investment Consulting Design & Engineering Construction including Civil Works

OPPORTUNITIES Operation and Maintenance Maintenance Services Material & Equipment Supply

OPPORTUNITIES We consider that there is a further unique and very significant incentive for the developers in these IWPPs. The developers are not bound by the precise and detailed Tender Specification of the client. These IWPPs have performance based functional specification and the developer is free to adopt technological innovation / improvement (i.e. improvement in Performance Ratio, amalgamation of different technologies etc.)

OPPORTUNITIES We believe that this approach offered to developers will yield substantial improvement in plant’s capital cost, performance and efficiency to yield very competitive prices.

OPPORTUNITIES SWCC shall build water transmission systems with a total pipelines length of 1,560 km for transmission of the four IWPPs as follows: Shoaiba – Jeddah, Makkah and Taif Shuqaiq – Abha and Jizan Raz Azzour – Riyadh Jubail – Dammam with an approximate total cost of 12.8 Billion Saudi Riyals

OPPORTUNITIES SWCC has already tendered the water transmission system for Shoaiba Phase 3, on 15-Sep-2004. The bid submission date is 31-Jan-2005. This water transmission system consists of: Interconnection between Shoaiba 2 and Shoaiba 3 Water transmission system to Jeddah Water transmission system to Mina 2nd Water transmission system to Jeddah Water transmission to Makkah and Taif

CONCLUSION These 4 IWPPs will bring unprecedented opportunities for Developers, Financing / Investment, Construction / Civil Works and Supply of Equipment & Materials and Services.

CONTACT DETAILS Omar A. M. Al-Ghamdi For further information please contact: Omar A. M. Al-Ghamdi President Water & Electricity Co. P.O. Box. 300091, Kingdom Center Riyadh – 11372 , Saudi Arabia Tel : +966 1 211 3362 / 63 Fax : +966 1 211 3313 Email : omar@wec.com.sa ; wec@wec.com.sa Website : www.wec.com.sa

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