Algeria ventures into PPP to address growing water shortages through BOT contracts concerning desalination plant

Slaking the Nation’s Thirst

-------------------------------

Algeria may have ample reserves of natural gas, one of the foundation stones of the country’s economy, but it is short of water. However, a series of public-private ventures have been launched over the past few years to redress Algeria’s growing water shortages.

Many of Algeria’s newest power stations have built a desalination plant nearby as a way to use some of the electricity generated for the water purification process.

According to a report by the World Health Organisation, without the benefit of the massive desalination programme, the amount of drinking water available to Algeria’s citizens would fall to less than 1000 cu metres a year by 2025, well below the 1700 cu metres considered as a health minimum.

The government was forced to improve its management of water resources in 2002, when the country was hit by severe shortages, which saw parts of Algeria receiving running water only one day out of 18.

"The rationing also affected Algiers," said Christopher Gasson, the publisher of Global Water Intelligence to the press on April 16. "At that point, water became a political priority, and the government is now investing heavily in desalination."

In response, the government opened up the water and power industry to the private sector, authorising partnerships between state organisations and private firms to provide the necessary expertise and funds for implementing increasingly essential projects.

The latest of these joint ventures is a large-scale facility at Tlemcen, outside Algiers, with a desalination plant supplying 200,000 cu metres of water a day, roughly a quarter of the capital’s daily needs.

On May 5, a series of eight contracts were signed covering the construction, operation and maintenance, financing and marketing of water from the desalination plant, which has a total budget of $260m and is set to start pumping before the end of 2009.

The main beneficiary of the contracts was a consortium consisting of Singapore’s Hyflux and Malaysia’s Malakoff, which signed a joint venture agreement with the state-owned Algerian Energy Company (AEC) to build and operate the plant in a deal worth $205m.

The contracts for the Tlemcen facility marked a turning point, with Asian firms being given the nod over bidders from North America, which won the lion’s share of tenders for earlier plants. These include a plant at al Hama near Algiers, which is due to come on line in December. Both these and other desalination plants are supplied with electricity by AEC, with the state-owned water company Algerienne des Eaux (ADE) being the main client.

In total, Algeria hopes to have 14 desalination plants in operation by 2010, supplying up to 1m cu metres of water a day. It has already called tenders for a desalination plant at Cap Blanc and a facility is planned in Arziew, with a capacity of 500,000 cu metres a day, a project in which nine international firms have expressed interest.

Away from desalination, Algeria is also weighing up other options to boost its water stocks. Late last year, the government announced its plan to invest around $1bn to tap into aquifers in the Sahara Desert to supply water to the city of Tamanrasset.

Another problem that the government is seeking to overcome is water loss through its distribution network. Some estimates put the figure of water losses during transfer at 30%, an amount a thirsty Algeria can ill afford to lose.

In mid-2005, the government passed legislation allowing foreign companies to bid for contracts to operate water supply networks in urban areas, with the successful bidder receiving a management fee in return for running and upgrading the systems.

Some estimates put Algeria’s planned investments in desalination plants up to 2010 at more than $1bn, with further facilities likely to be considered as demand increases.