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Presented at the Saudi Arabia: M ajor I nvestment O pportunities in the 21 st C entury

Power & Water Utility Company For Jubail and Yanbu (MARAFIQ). Dr. Akili Daifallah Khawaji Director for Marafiq Company Program Royal Commission for Jubail & Yanbu Kingdom of Saudi Arabia. Presented at the Saudi Arabia: M ajor I nvestment O pportunities in the 21 st C entury

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Presented at the Saudi Arabia: M ajor I nvestment O pportunities in the 21 st C entury

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  1. Power & Water Utility Company For Jubail and Yanbu (MARAFIQ) Dr. Akili Daifallah Khawaji Director for Marafiq Company Program Royal Commission for Jubail & Yanbu Kingdom of Saudi Arabia Presented at the Saudi Arabia: MajorInvestmentOpportunitiesin the21st Century 13-15 November, 2000 Madinat Jubail Al-Sinaiyah

  2. CONTENTS • Royal Commission for Jubail & Yanbu at a Glance • MARAFIQ Company Program • Conclusions

  3. Royal Commission for Jubail & Yanbu at a Glance • Background • Existing Utilities • Utility Demand Growth

  4. Background The Strategic Decision was Made by the Government of Saudi Arabia in the Early 70’s: • Stop Burning Associated Gas, Build Gas Collection System, and Transport Gas to Jubail and Yanbu (Done by Saudi Aramco). • Establish the Royal Commission to Plan, Construct and Operate Two Industrial Cities at Jubail and Yanbu. • Establish Saudi Basic Industry Company (SABIC) which will Invest in Building Petrochemical Industries in Both Cities.

  5. East & West Pipeline Jubail Arabian Yanbu Gulf Riyadh Red Sea Jeddah

  6. Jubail Industrial City (1016 Km2) (Master Plan) Airport Area 250 Km2 Residential Area 170 Km2 Industrial Area 130 Km2 Park Area 200 Km2 Arabian Gulf

  7. Jubail Industrial City

  8. Light Industrial Park Community Heavy Industry Heavy Industrial Park Light Industry Infrastructure Community Support Port Facility Conservation Area Yanbu Industrial City (185 KM2) (Master Plan) Support Areas Resedintial Community

  9. MADINAT YANBU AL-SINAIYAH (MYAS)

  10. INDUSTRIES (MYAS)

  11. Scope of Services and Gas/Utility/Petrochemical Relations Scope of Services GAS SUPPLY ENERGY INTENSIVE HEAVY INDUSTRIES • Electrical Power Supply (Yanbu) • Desalinated Water (Potable, Process) • Seawater Cooling • Sanitary & Industrial Waste Water Treatment FUEL FUEL UTILITIES PETRO- CHEMICAL INDUSTRIES FEED STOCK UTILITY UTILITY

  12. Existing Utilities Production Facilities at Jubail and Yanbu Industrial Cities

  13. Utilities Demand Growth Power Demand Forecast Peak Power (MW)

  14. Desalinated Water Demand Forecast Potable/Process Water (M3/Day) YEAR

  15. Seawater Demand Forecast Seawater Cooling (M3/Day) YEAR

  16. Sanitary Wastewater Demand Forecast Sanitary Wastewater (M3/Day) YEAR

  17. Industrial Wastewater Demand Forecast Industrial Wastewater (M3/Day) YEAR

  18. MARAFIQ Company Program • Objectives • Legal & Commercial Structure • Key Elements in the Program

  19. Objectives • Supply two Industrial Cities of Jubail & Yanbu with Reliable, Reasonably Priced Utility Services that Satisfy the Growing Needs in These Two Cities. • Arrange for a Private Commercial Basis without Imposing Additional Requirements on the Budget of the Royal Commission or Relying on Sovereign Guaranties. • Provide Investment Opportunities for the Saudi Business and Financial Institutions. • Provide Employment and Training Opportunities for Qualified Saudi Manpower.

  20. Legal & Commercial Structure

  21. Transitional Paths in Infrastructure Privatization • Political Cost of Adjustment/Regulatory Effort HIGH LOW Publicly Owned Regulated Monopoly C B A - Unbundling & Deregulation Private Entry Allowed Unbundling and Privatization Economic Efficiency of Provision No Unbundling Divestiture Only MARAFIQ Divestiture Unbundling/ Demonopolization Divestiture of SOE Competitive/Contestable Private Infrastructure Provision HIGH

  22. Competition Versus Monopoly Partial Liberalization Generation Distribution Transmission & Control Customers Open Access to Transmission System for Producers Partial Liberalization Levy for Transmission Producers Connect to T/D System Total Liberalization Levy for Trans. & Dist.

  23. Steps for Privatization 3 2 1 Changing Ownership to Private Sector Commercialization Corporatization Complete Privatization Partial Privatization

  24. Legal Structure of the MARAFIQ Closed Joint Stock Company Joint Stock Company Limited Liability Company Present Status Present Status

  25. Royal Commission PIF Saudi Aramco SABIC Other Industrial Users Commercial Structure of the MARAFIQ Saudi Aramco SABIC OIU ECAs USERS Saudi Institutions Regional & Int’l Banks Royal Commission Utility Service Agreements Utility Concession & Lease Agmt Loan Agreements Construction Contractor MARAFIQ Equity and Management Agreements Turn-Key EPC Agreement Subcontractors & Suppliers O&M Agreements Supplier Agreements Intertie Agreement OTHERS SEC West IPP SWCC ARAMCO Direct Hire/ Contractors SEC West

  26. Key Elements in the Program • A Saudi Joint Stock Company Called “Power & Water Utility Company for Jubail and Yanbu (MARAFIQ)” will be Established with a Capital of SR 2.5 Billion Invested by the Participant Partners (Royal Commission, Public Investment Fund, Saudi Aramco, SABIC and Other Saudi Private Investors). • MARAFIQ will be Responsible for Operation, Maintenance, Management, and Expansion of the Power, Water, Seawater, and Wastewater Utility Infrastructures in Industrial Cities of Jubail and Yanbu.

  27. MARAFIQ will Lease the Existing Facilities which will be Owned by MARAFIQ at the End of the Lease Term. • MARAFIQ’s Services will be Provided to the Non-Industrial User at the Government Approved Rates, whereas its Services will be Provided to the Industrial Users at the Commercial Rates. • MARAFIQ Board of Directors will Act as an Independent Regulator during the First 3 Years. • The Board of Directors will Prepare the Details of the Independent Regulator and Get Approval from the Council of Ministers. • Since Users are Credit-Worthy, MARAFIQ will Be also Credit-Worthy.

  28. The Kingdom has Favored the Company with the Privileges such as: • Legal Reserve = 4% instead of 10% • Maximum Reserve = 20% instead of 50% • It is Anticipated that the Company will Invest in New Projects and in the Expansion of the Existing Infrastructure Projects. The Cost will Range from SR 5 to 8 Billion during the First 5 Years of its Life. • The Royal Decree Approving the Basic By-Laws of the MARAFIQ Has Been Issued.

  29. The MARAFIQ Program Implementation Plan is as Follows:

  30. Conclusions • Additional Power & Water Production Plants are Needed to Meet the Utility Growth. • The MARAFIQ Program is Essential for Continued Industrial Growth in the Two Cities. • Combined Utility Production (Power, Desalination and Seawater Cooling System) will Result in a Minimum Cost/Unit of Production. • Phased Privatization Approach will Allow Maximum Gain with Minimum Impact on Users.

  31. MARAFIQ will Allow Competition in Production of Electricity and Desalinated Water. • Users and Owners will Develop Hand by Hand the Well-being of MARAFIQ. • Cost of Service Approach Required will Establish Cost Data which will be Available after 3 Years of MARAFIQ Operation.

  32. THANK YOU www.royalcommission.com E-Mail: marafiq@rc-ynb.com

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