What have been some of the operational changes for NESMA Water & Energy over the past year?
2017 was not an easy year for the water sector. Most of the projects were put on hold. While there was an announcement of several new PPPs under the build-operate-transfer (BOT) model, few actual tenders came to the market. In that sense, 2017 was a preparatory year for many companies; businesses streamlined and prepared their operations in expectation of release of privatization projects. NESMA held a series of meetings with a number of local and international companies, including potential consultants, in order to be ready with the new National Transformation Program (NTP) 2020 requirements going forward. As the result of these efforts, NESMA has been able to secure a partnership with one of the largest water companies in the world. This partnership was already qualified to participate in the bidding for a number of new privatization projects for seawater desalination and sewage water treatment, such as Dammam ISTP, Rabigh 3 IWP, and several others. This is an encouraging indicator for us, and we are focusing our efforts on securing a competitive position for these opportunities. As far as the local market is concerned, we have been working on several projects with the Ministry of Environment Water and Agriculture (MEWA), the National Water Company, the Saudi Industrial Property Authority and others within the government and private sector. In addition, we have also delivered a number of projects related to operational maintenance and building greenfield infrastructure, which includes full comprehensive infrastructure solutions for water, power, lighting, civil works and asphalting, all resulting in a rapid increase in workload.
What is your opinion of the newly implemented VAT?
It is a great step forward for the country. VAT brings additional revenue to the government, which will enable the government to plan and provide improved services to the public. One could expect the current VAT rate of 5% to be gradually increased as the country continues to make public investments for the future. It aligns well with Vision 2030 since the country aims to be a pioneering and global model of excellence on all fronts. Those companies who adopt to the new challenging business environment will thrive and growth whilst those who cannot will perish.
How has privatization transformed the sector in the last several years?
We have started to see many strategies and plans come into action as NTP is being implemented. In the past, investments were from large plants with engineering, procurement, and construction (EPC)-type projects whose procurement was financed by the government. Today, this is not the case. There are announcements of desalination plants and sewage treatment operations with international water companies, and efforts are underway to develop request for proposals (RFP) for the network operations and maintenance. These are management contracts that may be long term. The assets of the network are expected to remain 100% owned by the government within the privatization scheme. Under the NTP 2020, seven executive programs have been launched involving 24 governmental ministries and entities that will have a significant impact on implementing these changes. The entire environment, water, & wastewater sector is reforming, and we have seen new tasks and responsibilities assigned to the MEWA, the Saline Water Conversion Corporation (SWCC), the Water & Electricity L.L.C (WEC), and the National Water Company (NWC). The sector is heading in the right direction, and more privatization efforts are underway. This will facilitate the NTP 2020 objectives to be met in the future.
How is localization or Saudization affecting the water sector and broader economy?
As envisioned in NTP 2020, the Saudization and localisation policy will help achieve our key objectives of contributing to job creation, strengthen partnerships with the private sector, and boost overall growth.