Private Sector participation in the water industry

Opportunity in Water

Independent water projects are on the rise in the UAE, generating new opportunities for developers and lenders as the growing country races to keep up with demand.

Currently, in the Gulf region, the UAE records the highest projected increase in demand, which is expected to continue growing at a minimum rate of 10 per cent per annum, according to the UAE’s Ministry of Economy.

Since 1998, the UAE has been pushing for increased privatisation in the water industry. Last year, the UAE underlined the growing importance of water security when it issued a ministerial decision that assigned specific water-sector development competencies to the Ministry of Energy (MOE).

This move paved the way for increased private-sector participation in the development of the water industry.

The UAE saw in 2016 a number of large scale public-private deals to finance water projects, including a $150 million loan facility, arranged by private venture capital fund United Ventures & Investments Limited, to finance the development of 22 million imperial gallons per day (MIGD) desalination plant in Ras Al Khaimah.

Later in the year, the Federal Electricity and Water Authority (FEWA) requested an expression of interest from developers for the design, build, finance and operation of a 45 MIGD reverse osmosis (RO), seawater desalination independent water project (IWP) located in Umm Al Quwain.

The project received more than 40 expressions of interest from potential developers and subsequently FEWA pre-qualified 13 consortiums.

Additionally, FEWA has since announced further plans to increase the capacity of its Ghalilah plant from 15 million to 45 million gallons per day, with the intention to construct a desalination plant in Al Zawra, Ajman, with a total capacity of 30 million gallons per day.

These projects are the first IWPs in the UAE, with Abu Dhabi’s public-private partnership (PPP) utility projects to date all being cogeneration power and water production facilities.

Furthermore, they are also likely to be the first IWPs in the UAE to be entirely privately financed, whilst FEWA’s project will also be the first federally procured IWP in the UAE.

With these, FEWA will aim to replicate the success of the IWPP programs that the Abu Dhabi Water and Electricity Authority (ADWEA) and Dubai Electricity and Water Authority (DEWA) have implemented in Abu Dhabi, Dubai and Fujairah.

These recent developments signal that water-sector opportunities for the private industry in the UAE are on the increase.

With a well established infrastructure, a competitive business environment, investment initiatives by the government, and strategic plans such as Vision 2021, the country continues to open up opportunities for private sector participation.

The UAE has built up momentum in the pursuit of sustainable growth and these openings in the water industry consolidate its position as a global hub in an expanding market.

Since as far back as the late 1990s, the UAE has undertaken strategic privatisation moves within the water industry.

In October 1998, the Abu Dhabi Water and Electricity Authority (ADWEA) signed a landmark agreement with CMS Energy Corp to develop the UAE’s first independent water and power project (IWPP), the Taweelah A-2.

This was the first privatisation move by any Gulf state, experts say.

In doing this, the UAE emphasised that privatisation was a strategic option for sustainable development in the country, simultaneously expanding private sector investment opportunities and raising efficiency.

Fast forward to 2017, and the demand for water in the country continues to increase year-on-year, and along with the steady growth in population and industry, existing water supplies are being strained.

While the UAE Government is working to manage demand, according to all estimates, consumption will continue to rise in the near future.

With the UAE likely to continue to exhibit significant economic and population growth in the coming years, water remains a priority for the country.

There is also a government-led focus on technology and innovation that can make drinking water production more efficient, as well as solutions for storage and wastewater treatment and reuse.

The result is a continual increase in water and electricity production to meet the rising demand, matched by an increase in the opportunities for private-sector participation in the UAE’s water industry and the subsidiary industries that service the sector.

PULL OUT QUOTES IF NEEDED

1. These projects are the first IWPs in the UAE, with Abu Dhabi’s public-private partnership (PPP) utility projects to date all being cogeneration power and water production facilities.
2. The UAE has built up momentum in the pursuit of sustainable growth and these openings in the water industry consolidate its position as a global hub in an expanding market.