The opportunities for investment in Saudi Arabia water PPP projects

Below, we take a look at the state of play in the current market, and highlight the relevant laws, bodies and processes that businesses seeking to participate in the market need to familiarise themselves with.

A large pipeline of projects

In Saudi Arabia’s Vision 2030, sustainable water management has been set as a cornerstone of the Kingdom’s broader economic and social development goals. Objectives for the water sector include ensuring continuous access to safe and adequate water, enhancing water demand management, delivering high-quality and cost-effective water services, safeguarding water resources, and promoting private sector participation.

The main way for the private sector to get involved in water-related initiatives in Saudi Arabia is through public-private partnership (PPP) projects. The pipeline of PPP projects continues to grow. Over 40 PPP projects have been announced by the government, including desalination plants, wastewater treatment plants, and strategic water reservoirs. The Madinah 3, Buraydah 2 and Tabuk 2 Independent Sewage Treatment Plant projects are among the high-profile examples of the water PPP projects involving foreign investment. The combined value of these projects is in excess of $700 million. They are being developed by a consortium consisting of Spanish company Acciona Agua and Saudi companies Tamasuk Holding Company and International Water Distribution Company (Tawzea). Pinsent Masons advised the consortium on the projects, which achieved financial close in 2022.

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In October 2024, it was announced that eight new projects valued at $8 billion are to be awarded over the next 12 months, signalling the intention of the Saudi Water Partnership Company (SWPC) to deliver a pipeline of projects to encourage private sector interest, competition in the market and, ultimately, investment. The SWPC subsequently issued ‘request for proposal’ (RFP) documents in respect of the development of two independent sewage treatment plants (ISTPs), the Hadda ITSP and the Arana ITSP, in January this year. Both projects will be located in Makkah. The RFPs were issued to developers that passed through pre-qualification in November 2024. The SWPC said the two projects will be delivered in partnership with the private sector via the ‘build, own, operate, and transfer’ model. They are expected to be operational by 2028.

Regulatory framework and key stakeholders

The National Water Strategy 2030 supports the goals for Saudi Arabia’s water sector by integrating policies, regulations and practices to address water scarcity and improve sector governance. To ensure the continuous development of the water sector, Saudi Arabia has implemented several regulations. The Water Law, enacted in July 2020, regulates all aspects of water usage, ensuring sustainability, protection, and efficient use. It empowers the Ministry of Environment, Water, and Agriculture to develop comprehensive water management plans. The Private Sector Participation (PSP) Law provides a transparent framework for private sector participation in various sectors and infrastructure projects, including water. The PSP Law dictates what happens during the procurement process – see below for more on this.

A number of different authorities have a role to play in relation to water projects in Saudi Arabia. The SWPC, the Water Transmission and Technologies Company (WTTCO) and National Water Company (NWC) all have different functions.

The SWPC plays a pivotal role in procuring water-related PPP projects. It is responsible for developing and managing desalination, strategic water reservoirs and wastewater treatment projects, ensuring high-quality and low-cost water services through private sector collaboration. The NCP, meanwhile, oversees the implementation of projects under the PSP Law, facilitating private investment and ensuring regulatory compliance.

The WTTCO is responsible for procuring future water transmission projects in Saudi Arabia. There are 485 different projects in its pipeline up to 2030. The WTTCO is also responsible for managing the seven different water transmission systems operating across the country. The pipes in those systems span more than 10,000 kilometres.

The NWC is a state-owned company that itself provides water and sanitation services to customers. The NWC is also involved in the new wastewater projects procured by SWPC under the PSP Law and offers long term operation and maintenance contracts to the private sector for its existing wastewater treatment plants.

Other important government entities for the water sector include the Ministry of Environment, Water, and Agriculture, which sets policies and regulations, and the Water and Electricity Regulatory Authority, which oversees service provision and compliance.

The procurement process

The SWPC is responsible for procuring private sector participants in the water PPP projects it has announced. It has introduced a pre-qualified bidder program to streamline the tendering process and ensure bidders have time to form consortia, as well as enhance competitiveness in projects.

The key steps in the procurement process are set out under the PSP Law, and the SWPC is responsible for implementing the PSP framework within the water sector. Foreign businesses and investors seeking to participate in the PPP projects should be aware of these steps:

• Project identification and approval – projects are identified based on sector-specific plans and approved by the relevant authorities, including the Council of Economic and Development Affairs and the Ministry of Finance (MOF).
• Prequalification – businesses must meet specified criteria to be eligible to submit bids; the contracting authority assesses their qualifications and capabilities against those criteria.
• RFPs – prequalified bidders are invited to submit detailed proposals. The RFP includes project specifications, performance standards, and evaluation criteria.
• Bid evaluation and selection – proposals are evaluated based on predefined criteria, including technical and financial aspects. The best proposal is selected, and negotiations are conducted to finalise the contract.
• Contract award and implementation – the contract is awarded to the selected bidder, and the project moves into the implementation phase. The contracting authority monitors the project to ensure compliance with contractual obligations and performance standards.

Private sector involvement

The private sector can get involved in Saudi water PPP projects through various avenues, including bidding for project tenders, forming joint ventures with local companies, and investing in infrastructure development. Participating in Saudi water PPP projects offers several benefits for private stakeholders, including:

• attractive investment opportunities with potential for significant financial returns due to the high demand for water infrastructure;
• access to a growing market with substantial government support and a clear regulatory framework;
• ·opportunities to implement advanced technologies and best practices, enhancing operational efficiency and sustainability;
• secure, long-term contracts that provide stability and predictable revenue streams; and
• strategic partnerships with government entities and other private sector players, fostering knowledge exchange and capacity building.

The Saudi government's regulatory reforms and commitment to development the pipeline of water PPP projects has attracted international and local bidders, fostering a competitive market environment. As a result, this has significantly bolstered the success of the SWPC program, leading to the development and financial closure of numerous high-value projects.

Private sector involvement in Saudi water PPP projects is nevertheless not without challenges, as there are with any major project of any kind. We will explore these challenges and how these can be managed in upcoming articles on Saudi water PPPs.

Co-written by Tiantian Fang of Pinsent Masons.