Saudi Arabia has launched privatisation of its desalination projects by awarding a SR9.1bn contract to a consortium of Saudi and Malaysian companies to set up Shuaiba-3 desalination plant, the first independent water and power project (IWPP) in the country.

Water and electricity minister Abdullah Al-Hussayen, who supervised the signing of IWPP agreements in Riyadh, says Shuaiba-3 would supply 194mn gallons of water daily as well as 900MW of electricity.

Work on the project will start January 21 and its first unit will begin production October 13, 2008.

The Supreme Economic Council has approved four IWPPs (Shuaiba-3, Shuqaiq-2, Ras Al-Zour, and Jubail-3) and they will be carried out by the private sector on a build operate and transfer (BOT) basis.

The total cost of the four projects is estimated at SR30bn. The private sector will contribute 60% of their cost while the state-owned Public Investment Fund (PIF) will have 32% stake and Saudi Electricity Company (SEC) 8% of the four projects.

The combined production capacity of the four projects will reach 492mn gallons daily and 4,500MW of power.

These projects will boost the total desalination capacity of the kingdom by 80%.

The implementation of the projects will start with Shuaiba-3 while commercial operation will begin in early 2009. The Shuaiba-3, which is to supply water to Makkah, Jeddah, Taif and Baha, is one of the world’s biggest cogeneration projects for the production of water and electricity.

The four IWPPs will meet the increasing demand for water and power in the kingdom and compensate old desalination plants which will be decommissioned in the near future.

Water & Electricity Company (WEC) will sell 100% water produced by these plants to Saline Water Conversion Corp (SWCC) and 100% of their power supply to Saudi Electricity Company. A group of local and international banks are financing Shuaiba-3.

Saudi Arabia requires nearly SR350bn in investment for water and sewerage projects and SR340bn for electricity projects during the next 20 years. The water and electricity sectors in the kingdom are growing at the rate of 7%.

Malaysia’s minister of energy, water and communications says his government was attaching great importance to the Shuaiba project and says it will strengthen economic ties between the two countries.

He has urged Malaysian companies participating in the project to give the best of what the Malaysian corporate sector can offer. Apart from Khazanah, Tenaga Nasional, which is the Malaysian national utility company, and Malakoff, the largest independent power producer of the Southeast Asian country, are taking part in the project.

The Shuaiba-3, located 110km south of Jeddah on the Red Sea coast, is the kingdom’s first privatised IWPP.