governor's presentation - swcc privatization and restructuring 20100622 1400
TRANSCRIPT
Overview of the SWCC Privatization and Restructuring Program
Presented ByABDULRAZZAG A. HIJAN
Saline Water Conversion CorporationDirector, Privatization and Restructuring Program
Presented in the 2010 Singapore Water Week
July 1, 2010
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بسم الله الرحمن ,In the name of Godالرحيم
Most Gracious, Most Merciful
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Content:
Introduction to SWCC
Privatization of the Desalination Sector
SWCC Restructuring: Implementation and Roadmap
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SWCC was established in 1974 with a main purpose to support natural water resources by means of seawater desalination
SWCC in Brief
SWCC Vision and Mission
SWCC Activities
Source: SWCC(*) SWCC bylaws approved by Royal Decree
Main Purpose
Support natural water resources by means of seawater desalination in addition to electric power generation depending on technical and economic conditions(*)
1974 - Establishment of Saline Water Conversion Corporation (SWCC) by Royal Decree
1928 - First Distillation Plants (Kindasa) imported to Kingdom of Saudi Arabia by His Majesty King Abdul Aziz Abdurrahman Al-Saud
Establish-ment
The Start
SWCC General Objectives
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SWCC aims at meeting Saudi Arabia’s growing water needs while pioneering the desalination production and transmission sectors
VisionPioneer the seawater desalination production and transmission
Mission
Meet the kingdom’s desalination water demand and contribute to economic and social growth through effective investment in human and physical asset resources
SWCC in Brief
SWCC Vision and Mission
SWCC Activities
SWCC General Objectives
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SWCC’s objectives are local and international
Worldwide Cutting edge R&D: Follow-up on all innovations and changes
in research and desalination technologies to maintain leadership
Kingdom Level
Maintain high quality water availability and reliable distribution to all Saudi consumers on a consistent basis
Comply with environmental safety regulations and standards Promote private sector investments in seawater desalination
SWCC Level
Increase efficiency and reduce costs without affecting quality and continuity
Develop human resources and build and invest in national resources
Ensure safety of personnel and assets
SWCC in Brief
SWCC Vision and Mission
SWCC Activities
SWCC General Objectives
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SWCC is engaged in power and water generation activities as well as research activities in the desalination sector
Water Desalination Production
Other Activities
Water Transmission
Power Generation
SWCC in Brief
SWCC Vision and Mission
SWCC Activities
SWCC General Objectives
Main activity: Planning, construction, operation and maintenance of seawater desalination plants
Process: Production of water either through dual or single purpose plants (MSF, MED, RO)
Main activity: Planning, construction, operation and maintenance of water transmission pipelines
Main activity: Planning, construction, operation and maintenance of electrical power plants
Process: Generation of electricity through dual purpose plants
R&D: largest Middle East R&D center pioneering in seawater desalination technologies (nanotechnology, etc.)
Training: Ensuring continuous transfer of knowledge to the sector
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SWCC: current and planned operations
Production and Transmission Assets
N
EW
S
AL-KHAFIJI
AL-KHOBARDUBA
AL WAJH
UMLUJ
RABIGH
JEEDAH
Al-SHOAIBA
Al-BIRK
AL-SHUQAIQ
FARASAN
3Al-AZIZIA
BURAIDAH
AL ZULFI
ALQAT
SHUQRA
MAJM
UA
SUDAIR
AL HUSI
RIYADH
MADINA MUNAWARA
MAKKAH MUKARAMA
TAIF
ABHAKHAMIS MUSHAYAT
AL-JUBAIL
HAQL
YANBU
HAFUF
Large Plants
Satellite Plants
Water Transmission Systems
Regional ReservoirsAl-LEETH
Al-QUNFIDHAH
Source: SWCC
Current Water Production / Power Generation
30 plants in 17 locations 3.3M m3/day installed capacity More than 5,000MW power generation capacity
Current Water Transmission
More than 4,200 km of pipelines 29 pumping stations 158 storage tanks (capacity: 9M m3) 17 blending stations
New Projects
Jeddah RO 3 (200,000m3/day) Ras Azzour (2,400MW and 1,025,000m3/day) Yanbu 3 (1,700MW and 550,000m3/day) Other small projects such as Umluj, Wajh,
Rabigh are under construction (6 plants with a total of 63,000m3/day)
Various pipelines under construction from Shuqaiq, Shoaiba, and Jubail
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Kingdom of Saudi Arabia is the largest producer of desalinated water in the world, accounting for 18% of total world production
UAE33%
KSA41%
BAHRAIN3%
QATAR7%
OMAN3% KUWAIT
13%
Source: SWCC
KSA Desalination Share in the GCC
KSA18.00%
KUWAIT6.46%
OTHERS27.36%
OMAN1.38%BAHRAIN
1.32%SPAIN7.64%
USA17.80%
UAE16.66%
QATAR3.39%
KSA Desalination Share in the World
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Content:
Introduction to SWCC
Privatization of the Desalination Sector
SWCC Restructuring: Implementation and Roadmap
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3.00
2.210.70
0.95
2025
8.34
3.25
1.93
2008
6.19
2.49
Water Shortage
Supply - SWCC
Supply - IWPP
and Private Producers
Supply - Ground &
Surface Water
Main Challenges in the Saudi Water and Desalination Sector
High per-capita consumption (~220 liters / capita / day)
Rapid increase in water demand driven by population and GDP growth
Increased pressure to mitigate environmental impacts resulting from the conventional exploitation of water resources
Increasing cost burden and the challenge of identifying the optimal solutions to close a widening supply-demand gap
The Saudi Water and Desalination Sector: facing the challenges
Source: SWCC Studies and Projects
Water Demand vs. Planned Supply in KSA(Million m3/day)
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Total Capital and Operational Investments until 2020
Desalination Sector Capex and Opex(2010 – 2020) – USD Million
Total = US$ 24.3 Billion (SR 91 Billion)
Power and water
Transmission
2,422
CAPEX OPEX
2,337
2,051
6,811
17,453
11,651
Transmission
5,802
Power
Water
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KSA has committed to increase private sector participation in key government assets to achieve the following strategic objectives
Source: Governmental Decree Number 60 of 1/4/1418 H and Number 175 of 27/6/1424 H, Supreme Economic Council Resolution 5/23
Government’s Strategic Objectives
Enhance competitiveness of national economy
Encourage/increase private sector participation
Expand the ownership of productive assets by Saudi nationals
Encourage investment of domestic and foreign capital in KSA
Create employment opportunities for nationals
Provide quality services in a cost effective manner
Reduce the burden on the government budget
Increase government revenues
Sectors Covered by Privatization Program
Water and wastewater Desalination Telecommunications Air Transportation and related services Railways Highways Airport Services Postal Services Wheat Mills and storage facilities Port Services Industrial Cities Services Government’s shares in Public companies Government’s shares in the Arabic and Islamic
common investment companies Government Hotels Sports Clubs Municipal Services Education Services Social Services Agricultural Services Health Services
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Formation Supreme Economic Council
Saudi Electricity Company (SEC)
1999 2002 Formation
Saudi Arabian General Investment Authority (SAGIA)
Initial Privatization of 20 Economical sectors
Formation of ECRA
Approved IWPP projects
2000
2004 Formation of the
Ministry of Water and Electricity (MOWE)
Established the single off-taker, the Water and Electricity Company (WEC)
Modified the Electricity Regulatory to Regulate Co-generation
Provide full Credit Support
2006
2003
SWCC’s BoD approval of Privatization Strategy of SWCC
Forward to Supreme Economic Council, (30/12/2006)
Initiates implementation of privatization & restructuring of SWCC
2007
Formation of National Water Company (NWC)
Approval of Privatization Strategy of SWCC (3 July 2008)
2008/09
Government steps for private sector participation
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Status
Commercial Operations started by February 2009
Project Information
Source: SWCC Studies and Projects
Project Name
Shoaiba III(West Coast)
Shuqaiq II (West Coast)
Commissioning started by end of April 2009
Project expected to start operating by November 2010
Estimated total cost: USD 1.87B
Total Capacity: 212,000 m3/day
60% owned by the private sector
20 years BOO scheme
Estimated total cost: USD 2.69B
Total Capacity: 1,030,000 m3/day
60% owned by the private sector
20 years Build, Own, Operate (BOO) scheme
Action to date: 2 Independent Water Power Producers launched
16Source: SWCC Studies and Projects
Strategy for Private Sector Participation in SWCC
Strategy for Private Sector Participation in SWCC
Significant investment opportunities for private
sector
*) Due to the present economic situation and the difficulties in ensuring financing, Yanbu -3 and Ras Azzour will be tendered as an EPC contract by SWCC
Old Production Plants: Jeddah-3, 4, RO1 and RO2, Jubail-1, 2 A and 2 B, Birk-1, Haql-2, Khobar-2, Rabigh-1+TR1, Wajh-2+TR1-3, Farasan-1+TR1, Umlujj-2, Duba-3, Azizia-1
Public Ownership
Public/Private Ownership Full Ownership
Partial Ownership
SWCC Holding
Trans-mission
Shoaiba-1,2
Shoaiba-4
Shuqaiq-1Shuqaiq-3
Yanbu-1,2,RO
Yanbu-3*
OtherR&DT, …
Khafji-2 Khafji-3
OldProductio
n Plants
Incorporate as government-owned holding company and then possibly float on stock
exchange
Duba-4 / Haql-3 Wajh-3 Wajh-4
Umlujj-3
Jubail RO Jubail-4
Khobar-3 Khobar-4
Leith-1 Farasan-2
Qunfutha-1 Rabigh-2Azizia-2
Introduce PSP in value creating priority assets, following “IWPP model”
Yanbu ProdCo
RaZProdCo
KhafjiProdCo
ShoaibaProdCo
Shuqaiq ProdCo
KhobarProdCo
Jubail ProdCo
Trans-mission
OldProduction
Plants
abc Existing / Built by SWCC abc To be Implemented by PPP
Ras Azzour*
SatelliteProdCo
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Content:
Introduction to SWCC
Privatization of the Desalination Sector
SWCC Restructuring: Implementation and Roadmap
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8 Months 18 Months3 Months 4 Months 5 Months 17 Months ~5 YearsToday
Selection of implementation teams and committees
Development of information center
Completion of bidding process
Selection of consultants and finalization of contracts
Preparation of a report on requirements to develop SWCC’s privatization strategy and organization restructuring
Strategy and organization
Technical requirements
Financial requirements
Legal requirements
Change management
Reports submittal
Stakeholder presentations
Strategy approval from SWCC Board and Supreme Economic Council
Rollout to the new org. and processes
Creation of the Holding Company
Creation of Production Company
PSP in Production Companies
Organization detailing and HR readiness studies
Commercial agreements
Documentation required for Royal Decree
Tender preparation
Prepare Report on
Requirements to Develop
Privatization Strategy
Complete Internal
Preparations
Finalize Consultant Contracts
Develop Privatization Strategy and Restructuring
Plan
Obtain Approval from Board of
Directors & Supreme Economic
Council
Complete Detailed
Restructuring, Commercializat-
ion and Transaction
Studies
Rollout Restructuring,
Create ProdCos and Introduce
PSP
Phase 1: Preparation Steps and DetailingStudies
Phase 2: Approvals
Phase 3: Execution of Privatization & Restructuring
Management contracts
IPO (long term) Potential PSP in
Transmission
Introduce PSP at the Level of the
Holding Company
Phase 4: Holding Co. Privatization
SWCC Privatization and Restructuring Program Steps
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For the past 17 months SWCC has been conducting a 3 stream restructuring exercise encompassing 9 modules
Source: SWCC Privatization Program
Lead Advisor
Execution Advisor
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17months
Pro
gra
m a
nd
C
ha
ng
e
Ma
na
ge
me
nt
Change Management & CommunicationsChange Management Program, Awareness and Communication, Change Training, Change Monitoring
Program Management and LeadershipStrategic Alignment, Leadership and Implementation Master Planning, PMO
Module 8
Str
ea
m I
II
Module 9
Strategy Advisor
Strategy Advisor
Change Management
Advisor
Commercialization Prep. and Implem.Financial, Legal and Technical Restructuring
Transaction PreparationPreparatory Technical Studies, Incorporation of BU’s, Tendering Process
Co
mm
erc
iali
-za
tio
n a
nd
P
riv
ati
zati
on
Str
ea
m I
I
Module 6
Module 7Investment
Banking Advisor
Accounting
Legal
Technical
Advisors
Strategy Advisor
BPR and System ReadinessIT and ERP Implementation, Business Process Baseline,
Business Process Reengineering
Strategy Implications on Regulatory RequirementsRoyal Decree Detailing, Coordination with
External Entities, Executive Government Regulations
HR ReadinessDetailed Job Descriptions & Job Families, Grading & Compensation, HR Policies
Str
ate
gy
Ba
se
dT
ran
sfo
rma
tio
n
Management and Organization RestructuringOrganization Structure, Manpower Plan and Redeployment, Management Processes, Authorities, Governance, Grievance
Str
ea
m I
Module 1
Module 3
Module 4
Module 5
IT StrategyIT Architecture,
Implementation PlanMod. 2
Strategy Advisor
Strategy Advisor
HR Advisor
Strategy Advisor
IT Advisor
Strategy Advisor
Legal Advisor
IT Advisor
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Main achievements and immediate priorities
SWCC Privatization and Restructuring Program - Main Achievements and Next Steps
Main Achievements Key Next Steps for 2010 Module
Source: SWCC Privatization Program
Draft Royal Decree for the creation of SWCC Successor and send for approval
Draft Holding Company and ProdCo by-laws Legal arrangements for assets and staff transfer Opening balance for Holding Company Establishment of commercial agreements
Follow up on and facilitate the issuance of the Royal Decree
Finalize legal and commercial agreements Finalize financial requirements of the Holding
Commercialization and Privatization
Strategy BasedTransformation
Detailed design of organization & manpower plan for the Holding Company
Main business processes, policies & procedures Employees redeployment approach Governance structure for the Holding Company New compensation plan and review of HR enablers IT strategy
Complete redeployment of all employees Rollout the new organization structure Develop employee performance management
system Finalize BPR for the whole company Implement new processes in ERP system
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SWCC organization restructuring involves setting up of a corporate core and business units
Transmission Business Units
Sh
uq
aiq
-Ass
ir-
Jiza
n
Sh
oai
ba-
Jed
dah
-M
akka
h-T
aif
Yan
bu
-Mad
inah
Jub
ail-
Riy
adh
-Qas
sim
Eas
tern
P
rovi
nce
Production Business Units
Headquarters
East Coast
West Coast
SWCC (As Is)
Corporate Core
R&
DT
Bu
sin
ess
Un
it
SWCC (To Be)
Yan
bu
Sh
oai
ba
Sh
uq
aiq
Jub
ail
Jed
dah
Kh
afji
Kh
ob
ar
Sat
ellit
e
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Critical items need to be addressed in the institutional setting and commercial relations for SWCC to operate on a commercial basisFuture Institutional Setting and Commercial Relations
Notes: (*) Includes Marafiq (**) Agreements with Direct Purchasers to be transferred to privatized ProdCos as may be applicable
MaintainedAgreements
RevisedAgreements
New CommercialAgreements
Cash Flow
ECRA Regulation
Ministry of
Finance
Direct Water Purchasers*
Consumers
MOWE/ NWC
Saudi Aramco
Privatized ProdCos
Saudi Electricity Company
WEC
IWPPs
SWCC Successor HoldingPower on-sale
Agreements(IWPPs & ProdCos)
PWPAs / ECAs
FSAs for IWPPs & ProdCos
PWPAs / ECAs
Power Purchase Agreements
Consumer Tariffs
Water on-sale Agreements
Water Sale Agreements
Transmission Service
Agreements
Yearly budget
Financial Support
FSAs for retained plants
Water Purchase Arrangements**
ECA: Energy Conversion AgreementFSA: Fuel Supply AgreementPWPA: Power and Water Purchase Agreement
Credit Support
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A preliminary timeline for the creation of production companies was developed by SWCC
201320122011Production BU’s/ Companies
Shuqaiq
Khobar
Khafji
Jeddah
Satellite Plants
Shoaiba
Jubail
Ras Azzour
Yanbu
2010
Creation of Production Companies2010 - 2013
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The first private sector participation transaction is scheduled for 2012
Private Sector Participation in Production Companies
Source: SWCC Privatization Program, Estimation Report
3,291Total Expected
Capex
New Plant 2010 2011 2012 2013 2014 2015Estimated Cost
(M USD)
Shuqaiq-3
Khobar-4
Jubail-4
Shoaiba-4
722
446
810
1,313
Shuqaiq Transaction
Khobar Transaction
Jubail Transaction
Shoaiba Transaction
Time span for Transaction tendering and award
Legend
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Summary
Source: SWCC Privatization Program
The Saudi Water Sector is attractive and growing, benefiting from the full support of the government to meet the strategic aim of production efficiency and private sector participation
The water sector benefits from the continuous support of SWCC to the private sector in key areas of production, transmission and R&D
The sector presents real opportunities for private sector participation
Potential local and international investors can look for a reasonable return, flexible payment terms, well defined risk allocation, clearly defined responsibilities & obligations of both parties (stakeholders & the private sector), through a fair and a transparent bidding process
Private sector local and international participation in desalination sector benefit the broadest range of players: investors, financing institutions, operators, EPC contractors, equipment and materials providers etc.
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For further information please For further information please contactcontact::
Abdulrazzag A. Hijan Abdulrazzag A. Hijan director ofdirector of
Saline Water Conversion Corporation Privatization and Restructuring program
P.O.Box. 5968P.O.Box. 5968 Riyadh – 11432, Saudi ArabiaRiyadh – 11432, Saudi Arabia
Tel : +966 1 2174721Tel : +966 1 2174721
Tel : +966 505767055Tel : +966 505767055Fax : +966 1 4160177Fax : +966 1 4160177E-mailE-mail : [email protected]: [email protected]
CONTACT DETAILSCONTACT DETAILS
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THANK YOU