PRIVATIZATION PIPELINE

Saudi Arabia 2018 | ECONOMY | VIP INTERVIEW

TBY talks to Eng. Mohammed A. Al-Mowkley, Deputy Minister of Water Services & CEO National Water Company (NWC), on privatization, the tendering process, and ambitions for the years to come.

What is your vision for privatization of the sector?

We definitely intend to take the privatization in two stages. Stage one entails issuing management contracts, followed by a concession of 25-30 years. The management contract means the contractor will take over the region or city for three to five years, depending on the complexity of the area. The contractor will evaluate the asset, manage the whole operation, and oversee all the manpower. During this period, the contractor will decide and vocalize the investment requirements so as to ensure the efficiency of the operation. We will provide all of the CAPEX required during this period of time. Once we move from a management contract to a concession, the contractor will take over everything. It will be responsible for the manpower and investing in CAPEX to manage the master plan, with which we will have agreed. The contractor will, therefore, become the supervisor and operator of the water sector. The benefit of having this model comes from the private sector, which has the expertise to run the water sector. It will level the efficiency of the sector and do a better job than what we are doing today. We could do what the private sector is doing, but it might take 20 years to get there, while we expect the private sector to do the same work in half the amount of time. Finally, we will pay the private contractor based on a unit rate according to each cubic meter of water supplied or the waste water being discharged. The other benefit of the private sector is that all the CAPEX can be deferred. We do not need any more funding from the government. The private contractor has to fund all the expansions and upgrades for brown- and greenfield projects.

How do you envision balancing between inviting international companies to bid on projects and tendering to local entities?

International operators and developers have the know-how and experience. At the same time, it is important that they partner with a local developer because the local developer has the knowledge of the market, connections to necessary organizations, and the understanding of the culture. When they come together, both will form a good bow and arrow to operate, which we see today. Today, international players are in alliances with local developers.

What ambitions have you set for the organization in the next three years?

Our main objective is to monitor the highest standards for when we hand the operations over to the private sector. We have to leverage the entire efficiency factor, either in terms of the billing coverage, collections, costs, the way we operate, or project execution. If we go without spending enough time on efficiency improvement on everything we do, then the private sector will unquestionably charge additional costs because of these efficiency issues. We seek to minimize or reduce the gap.