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...and their contribution to the country’s vision 2030 plans

Despite the impact of COVID-19 which resulted in the Kingdom’s borders being closed for many months, the drive for progressing the programmes set out in the Kingdom’s Vision 2030 continues, and not least in encouraging private sector investment in public sector assets.

KSA PPPs are active.

Author: Mark Rocca, Partner, CMS (UAE LLP)

RENEWABLE ENERGY
The Kingdom, as with other Gulf Cooperation Council states, has set itself ambitious targets for green energy usage. The targets set out in Vision 2030, which were re-affirmed earlier this year, are that 50% of the Kingdom’s electricity usage will come from green energy sources by 2030. Naturally, considering the solar insolation ratings in the Kingdom, there is a particular focus on solar as a means to generate green energy. The Kingdom is clearly serious about these targets, as demonstrated by the Ministry of Energy’s renewable energy programme which is into its third round of procurement and has involved procurement of large and small solar independent power projects (IPPs) across the Kingdom, focusing on locations where the electricity can be generated and distributed over short distances to where it is needed.

Round one saw the procurement of two solar IPPs with a combined capacity of 700MW, and in 2019 round two was launched consisting of six solar IPPs ranging from 20MW to 600MW with a combined 1.4GW. Whilst round two was underway, round three was also launched consisting of four solar IPPs with a combined capacity of 1.2GW. So, since 2017, the Kingdom has actively been progressing twelve solar IPPs at a total of 3.3GW and it is expected that round four will be launched later this year. The success of the programme and the speed of its roll-out is due to the establishment of a transparent and trusted procurement process, an experienced team in the Kingdom’s Renewable Energy Project Development Office (REPDO) and the creation of a bankable suite of precedent project agreements, whilst the Ministry and REPDO continue to strive to improve round on round to achieve the best results for the Kingdom, both in terms of price as well as confidence in the developers to deliver each of the projects.

HEALTHCARE
The Kingdom’s healthcare sector’s key priorities as set out in the National Transformation Plan and the privatisation plan revolve around privatising government healthcare services, increasing PPP healthcare delivery models, scaling up medical education, training its local workforce, and boosting the adoption of digital information systems. The Ministry of Health (MOH) has 20 clusters providing healthcare services across the Kingdom and intends transferring responsibility for healthcare provision to a network of new entities. Under this structure, hospitals and health centres will be separated from the MOH and be standalone entities or groups - “clusters”, competing with each other and private sector operators. Most of the service provision is public sector but with the stated aim of enhancing the role of the private sector from currently 25% to 30%. The sector has been slower than others in progressing a PPP programme. The Al Ansar Hospital project (a 244-bed new hospital in the Al-Masjid Al Nabawi area) recently came to market and attracted 87 expressions of interest from both locally based and international service providers/consortia. The project is in progress with an initial list of 9 bidders.

As well as new hospital projects, there are also opportunities for private sector involvement in providing specialist services dealing with, for example diabetes and obesity. Models here have included upgrading primary care facilities in various locations under a PPP arrangement and training MOH clinical staff in the services (adopting the private sector methodology of service provision) based on an expected throughput of patients and working to KPIs.

EDUCATION
The Kingdom has over 38,000 schools with around 80% being funded publicly. The development of the schools programme is under the auspices of the Tatweer Building Company (a PIF owned entity) and the first schools PPP for 60 schools in Jeddah and Makkah achieved financial close in November 2020. Wave two is under way with the procurement of 60 schools in Medina. The Kingdom plans to procure up to 4,000 schools as part of Vision 2030. The PPP design, build, maintenance, and transfer structure and project documents adopt an internationally recognised approach which will no doubt be further developed through waves two and three of the programme.

TRANSPORT
In the last 10 years the Kingdom has invested over US$100bn in transport, a trend which is set to continue and even accelerate, very much with the assistance of the private sector. All the traditional transport modes – rail, road, ports, aviation – will see a piece of the action and some of the schemes are eye catching in terms of their scale and ambition. For example, the Land Bridge project is a US$7bn railway linking the Red Sea with the Arabian Gulf via Riyadh, and if we head East to Bahrain the procurement of the US$3.5 billion causeway project is also underway. The Saudi Ports Authority has plans to develop eight new ports, new toll roads are planned, and there are also plans to privatise airports. In addition, some of the Giga-projects (Neom and the Red Sea Project) are promoting cutting edge transport as a service approach, developing new ways travellers and communities will benefit from transport provision.

PPPs in KSA are taking root with more project opportunities expected to come to market in a range of sectors.
Market interest also appears buoyant with one project recently attracting over 80 expressions of interest.

As the Kingdom marches on with progressing Vision 2030, PPPs will have a significant role to play in achieving those goals.

This article was originally written for issue 22 of the Driver Trett Digest. To view the publication, please visit: www.driver-group.com/digest-issue-22