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Flurry of tenders in KSA water sector expected

Less critical projects have been delayed due to valuation mismatch.

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There could be an increase in KSA tender activity for wastewater plants in Q1, 2011.
There could be an increase in KSA tender activity for wastewater plants in Q1, 2011.

Contractors can expect a raft of tenders in the Saudi Arabian water treatment sector in Q1 2011, as a mismatch in valuations prevented some projects to be covered by this year’s budget, says an industry source.

Clients had budgeted for 2010 on the back of valuations made in 2008 and 2009, when prices for projects had declined, says Anthony Raftopoulos, business development manager at SETE, an EPC contractor for water projects.

EPC contractors in the Kingdom had then been subject to competitive pressures from big international players, who crowded into the market during the economic downturn, which led to a decline in water treatment projects across the region.

“A lot of international big hitters, those with 10,000-20,000 employees, were pushing into Saudi Arabia, which was little affected by the crisis due to the relative stability of the oil price. They were much more aggressive with their pricing,” says Raftopoulos.

“There was a decline in the market value of projects as clients weren’t paying EPC contractors fair value,” he adds.

With activity in the region picking up, competitive pressures on project pricing in the KSA are abating, and contractors are now able to demand higher prices for their services, says Raftopoulos:

“In 2010 there were a couple of instances of clients being surprised with the valuations that contractors were coming back with. We are talking collectively here, not just a few of them.”

As clients had not budgeted for the prices demanded by EPC contractors, several tenders have not been awarded, says Raftopoulos, who speaks of “a touch of underbudgeting.”

The GCC wastewater treatment sector will undergo an unprecedented expansion in the coming years, and Saudi Arabia is set to lead the way.

“The GCC market for water reuse is on the verge of major expansion. Capital expenditure on advanced water reuse is expected to increase the capacity by more than 13 percent per year in the coming five years,” says Walid Fayad, partner at Booz & Co.

Saudi Arabia alone is expected to become the third largest water reuse market in the world after the United States and China, estimates the Sustainable Water Alliance. Currently, the Kingdom reuses only about 22 percent of its wastewater, if the reuse of low quality treated sewage effluent is excluded.
 

These tenders were typically for smaller, less critical projects, as clients were able to secure additional funds for projects of critical importance.

With new budgets being drawn up for 2011, the tenders for non-critical projects will be retendered in Q1 of next year, believes Raftopoulos.

“Less critical projects have been factored into 2011 budgets,” he says.
 

The GCC wastewater treatment sector will undergo an unprecedented expansion in the coming years, and Saudi Arabia is set to lead the way.

“The GCC market for water reuse is on the verge of major expansion. Capital expenditure on advanced water reuse is expected to increase the capacity by more than 13 percent per year in the coming five years,” says Walid Fayad, partner at Booz & Co.

Saudi Arabia alone is expected to become the third largest water reuse market in the world after the United States and China, estimates the Sustainable Water Alliance. Currently, the Kingdom reuses only about 22 percent of its wastewater, if the reuse of low quality treated sewage effluent is excluded.
 

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