1. An overview of the Saudi Arabian utilities market Angus Hindley, Research Director, MEED AWCS Breakfast Briefing, 25 May 2010 Abu Dhabi

2. Introduction MEED Insight is the research and analysis arm of the MEED group, providing off-the-shelf reports and bespoke services to customers. It offers tailored research on a broad range of countries and sectors in the Middle East on issues such as market sizing and outlook, project overviews and competitor analysis.

3. Agenda The Saudi Arabian utilities market in the regional context The challenges facing the sector Power Desalination Wastewater Conclusions

4. Saudi Arabia is the region’s biggest utilities market The kingdom’s power sector is more than twice as big as the UAE’s and four times larger than Kuwait’s

5. Its desalination sector is slightly smaller than the UAE’s but twice as big as Kuwait’s

6. Its wastewater treatment capacity accounts for almost half of the GCC total

7. The UAE was the largest spender on utility projects in 2009, although its total was distorted by the $20bn nuclear power contract in Abu Dhabi

8. Each sector faces similar challenges * They are all experiencing high growth in demand, brought about by a population increasing in size by 2-3 per cent a year and robust economic growth * They each have to contend with some of the highest rates of per capita consumption and usage in the world, as a result of heavily subsidised services * They are all struggling to meet the demand growth, in part due to a lack of investment in the late 1990s * They are all entering a period where decommissioning of existing plants will become a major issue on account of age * They all require unprecedented investment, which is set to come from both the private and public sectors

9. The power challenge Riyadh has had to cope with power demand rising by 6-8 per cent in recent years, which has led to a reserve margin of about 9 per cent in 2009

10. The power challenge Based on 6 per cent annual growth, the kingdom will require 40,000 MW of new capacity up to 2019 in a programme that will cost an estimated $48bn

11. The power challenge The new capacity requirement is likely to be much greater than 40,000 MW given the need to replace existing units on account of age

12. The power challenge The dominant power generator, Saudi Electricity Company (SEC), plans to award 10,800 MW of new capacity to private developers and a further 21,000 MW through the conventional EPC market

13. The power challenge Riyadh contracted almost 8,000 MW of power capacity from the developer market since 2004, allowing a number of private companies to build up significant portfolios

14. The desalination challenge * Water demand is growing by about 6 per cent a year, but demand for desalination is rising much faster given that the government wants to increase its share of total water supplies from 60 per cent at present * Based on MEED Insight forecasts, desalination capacity will have to increase to at least 1,600 million g/d from 900 million g/d by 2019 at an estimated cost of $6bn just to meet demand * SWCC, the main desalination provider, is facing an extensive decommissioning programme, having been advised that 12 plants with total capacity of 480 million g/d should be retired in 2012/13 * Investment in new capacity has increased significantly in recent years with 230 million g/d coming on stream in 2009, 280 million g/d planned to be commissioned in 2010/11 and some 250 million g/d in 2013/14 * Like SEC, SWCC is looking to award contracts to both EPC contractors and developers and is also planning its own privatisation

15. The wastewater challenge By GCC standards, wastewater network coverage is low in Saudi Arabia covering just 45 per cent of the population

16. The wastewater challenge The government aims to have 100 per cent network coverage by 2024 in a programme that will require an estimated $40bn of investment in infrastructure and a further $17bn in operations

18. New private companies are to be set up to market sell and distribute treated sewage effluent (TSE) and sludge* The scale of the challenge, particularly in Jeddah, has meant that progress so far on the restructuring has been limited, although NWC insists that private investors and international contractors will play a central role in future

19. Conclusions * High demand growth, the age of existing capacity and a lack of investment in the late 1990s means that there is now a huge need for new utility infrastructure in Saudi Arabia * An estimated $80bn is required over the next 10 years to meet demand * Non-government investors, both at home and abroad, are being targeted to shoulder a major share of the investment costs * Difficulties in the regional project finance market put a brake on private projects in 2009, but the government remains committed to the developer model * The Saudi utilities sector is becoming much more international with foreign developers and consultants increasing in number * Government clients, and in particular NWC, are looking to attract more international contractors into the market

20. Now available:Power & Desalination in the GCC 2010 The 2009 GCC Wastewater Report Benefit from access to detailed insight into:1. Market characteristics, challenges and opportunities 2. Procurement strategies and the project finance market 3. Feedstock availability and the push for alternative energy 4. Data on the private developer and EPC contracting market To order your copy today, please: Telephone: +971 (0) 4 367 1302 Email:insight@meed.com