Saudi Arabia continues to be a global hotbed for PPP market activity as new projects are launched, tenders announced and bidders are chosen.
In April this year, a pipeline of 200 projects spanning 17 sectors, involving more than $50bn in investment, was approved by the kingdom’s National Center for Privatisation and PPP (NCP).
Projects include four airports, seven desalination plants, six wastewater treatment plants, 10 strategic water reservoirs, four highways and a transit-oriented development project in Makkah.
In a major sign of the kingdom’s whirlwind progression into the PPP sector, the NCP in May signed a deal with China’s largest bank as it eyes Chinese investment into infrastructure. Under the deal, the state-owned Industrial and Commercial Bank of China (ICBC) will help the kingdom to “increase its access to Chinese companies”.
David Johnston, partner at law firm Norton Rose Fulbright based in Riyadh, says the ICBC-NCP partnership is highly significant, as it could lead to investment from a new part of the world for Saudi Arabia.
“[The deal] will open more doors for Chinese investment into Saudi Arabia's infrastructure market. We are already seeing some of the significant local developers building their relationships with Chinese funders and investors on a bilateral basis,” he explains.
“This trend, coupled with NCP tapping into ICBC's access to Chinese investors on a macro level, will significantly enhance the kingdom’s efforts to attract foreign investment and accelerate its existing privatisation and PPP initiatives.”
Johnston expects to see the current progress in the Saudi PPP market continue to make strides across the full gamut of industry sectors over the next 18 months.
“We expect to see continued interest in PPP projects in the utilities sector, with a strong pipeline in established power, renewables, desalination, wastewater and water transmission and storage procurement programmes,” he says.
Johnston also expects to see an uptick in interest in social and transport infrastructure projects, which have traditionally lagged behind the more established utilities sector.
He adds: “More projects will be coming to market in the airport, rail, seaports and road sectors, as well as the continued development of the social infrastructure model which has already had success in the education and healthcare sectors.”
Nico De Koning, head of PPP bids and assets management at developer Besix, agrees that Saudi’s social infrastructure sectors, including education, housing, and hospitals, are likely to attract “substantial PPP interest in the coming years”.
He explains that this will be driven by a mixture of rising demand, government commitment, and the potential for innovative partnerships that can bridge gaps and deliver essential services efficiently.
A solid footing
Meanwhile, experts in the region have pointed to the important role that the NCP itself has played in laying the foundations for the impressive growth seen in the country - in particular its ability to attract foreign investment from around the world.
Bilal Rana, partner at Saudi-based Faisal Adnan Baassiri law firm, commends the agency for “ensuring that there is a level of consistency in terms of structuring and risk allocation across its projects… this is likely to be welcomed by investors and their lenders.”
He adds: “On the journey towards Vision 2030, the Saudi PPP market is evolving rapidly under the stewardship of NCP. The market has seen a number of successfully closed PPP and privatisation deals in utilities and non-utilities sectors.”
Rana says the NCP has been successful in establishing a PPP template across various industry sectors, such as utilities, transport, healthcare and education. Furthermore, he anticipates that the speed of delivery could be about to ramp up.
“Investors in those sectors can expect deals to progress more rapidly going forward, now that the documentation and risk allocation is more settled,” he suggests.
In the last few weeks alone, Cobra Instalaciones y Servicios was selected as the preferred bidder to deliver Saudi Arabia’s 150km Rayis-Rabigh water transmission pipeline project, while Altakassusi Alliance Medical (AAM) was chosen as the preferred bidder for the Radiology & Medical Imaging Services PPP Project – one of the kingdom’s first healthcare PPPs.
However, the opportunities are even greater than those on offer by the NCP.
In addition to its NCP-mandated projects, Saudi Arabia is seeing a significant ramp up of PPP activity within its various ‘mega’ and ‘giga’ projects under the management of its Public Investment Fund (PIF). These include flagship projects such as the smart city Neom, plus tourism developments including Qiddiya and The Red Sea Project.
“Other [non-NCP] sectors are rapidly catching up and we can expect to see a number of PPP projects across various sectors landing in the market in the coming months,” concludes Rana.
Nevertheless, there remain some hurdles for oversea investors looking to jump aboard the Saudi gold rush.
Johnston cautions that potential investors in the Saudi PPP market should be mindful of the kingdom’s evolving regulatory framework and legal landscape, as well as the specific risks and challenges associated with investing in the country’s infrastructure projects.
Rana also warns that investors should be aware of the need to engage in local partnerships and factor this into their investment strategies.
“It’s vital to collaborate with onshore entities that can assist them in achieving Saudisation targets and also to navigate the regulatory landscape using their local insights,” he explains.