Transcript National Water Company

National Water Company
Jeddah Water & Power Forum
December 7th, 2011
Agenda
• NWC Challenges and Strategic Roadmap
• NWC Business Development Initiatives
• NWC Expansion Plan
Strategic Planning
2
Saudi Water and Wastewater Sector is facing numerous challenges
Poor Infrastructure
 Ageing assets with unplanned interruptions
 High levels of leakage
 More focus on capital than operational
expenditure (maintenance)
Shortages in Water
Supply




Limited Sewerage
Collection
Environmental
Issues
Unsatisfactory
Customer Service
Water rationing due to demand/supply gap
Low water pressure in network
Incomplete network coverage
Suboptimal reliability of distribution
 Low collection network coverage
 Need to cater for increasing water supply
and consumption




High water spillages
No control over industrial effluent
Sub-standard TSE quality
Inadequate sludge disposal practices
 Complex complaint management
 Service not customer oriented
 Delays in connecting customers to
networks
Suboptimal
Operational Costs
 Inefficiencies in supply management and
raw material consumption
 Suboptimal staffing levels and
compensation
High Capital
Expenditures
 High capex requirements to meet water
demand, expand sewerage networks and
increase treatment capacity
 Suboptimal project management
High Non Revenue
Water and Low
Collection Rates
Inefficient
Organization,
Processes and Staff
Development
Incomplete Data
 High unaccounted for water levels
 Low tariff collection
 Lengthy processes, especially planning,
contracting and procurement
 Inadequate asset management
 Limited automation
 Limited staff development and motivation
 Inaccurate data on the state of the
infrastructure, particularly leakages
 Limited tracking of key performance
indicators
Strategic Planning
3
Rising per capita consumption, together with population growth is leading
to rapidly increasing the existing water demand and supply gap
Per Capita Water Supply 1)
Projected Water Supply By City2)
In liters/capita/day
2010-2015, in thousand m3/day
5,420
4,265
4,546
5,422
Greater
Dammam
Madinah
4,549
3,859
Makkah/Taif
Jeddah
Riyadh
1)
2)
Total water supply divided by the population of the city
Total required daily supply to meet average daily demand (assuming improving supply continuity coupled with reduction in water losses)
Strategic Planning
4
A clear strategic roadmap has been developed with five transformation
themes to drive performance and health of NWC
“A world-class water
utility company”
Vision
A
World-class
operator
Performance
pillars
Health
foundations
(enablers for
the future)
B
C
Financially
sustainable
water
business
Shaper of
water sector in
KSA
D Streamlined organization structure with strong performance culture
E
Developing distinctive capabilities that will provide a competitive edge
Strategic Planning
5
Agenda
• NWC Challenges and Strategic Roadmap
• NWC Business Development Initiatives
• NWC Expansion Plan
Strategic Planning
6
NWC is working on various initiatives aiming at establishing new profitable
businesses to become financially sustainable
Main Business Development Initiatives
Initiatives
Key Objectives
 Position NWC as a leading O&M player, allowing opportunities to
compete regionally
O&M
(Operations &
Maintenance)
 Reduce O&M costs/ promote Saudization
 Expected to improve customer service and may harmonize processes
and systems across cities within a cluster
TSE
 Effectively utilize waste water resources
(Treated Sewage
effluent)
 Create a profitable TSE business
Strategic Planning
7
Agenda
• NWC Challenges and Strategic Roadmap
• NWC Business Development Initiatives
• NWC Expansion Plan
Strategic Planning
8
City selection requirements were formulated based on the selected PPP
models and NWC’s objectives
City Selection Requirements
Selection Criteria
Description
Implications
Economic
Efficiency
 Cities with higher revenue potential
and lower operating expenditure are
preferred to ensure financial
sustainability
 Select cities with the
highest economic
efficiency under NWC
for the period 20122020
Infrastructure
Development
 NWC should decrease its
dependency on capex-related
government subsidies and minimize
the complexity of managing capital
projects in order to reduce project
delays and attract the private sector
 Select cities with the
relatively better
infrastructure conditions,
requiring the least
intensive capital
investment
1) Conservative, non-comprehensive estimates designed for city ranking purpose only
Strategic Planning
9
The evaluation of cities based on infrastructure development and economic
efficiency, results in the following city prioritization
City Selection Matrix
Selection of
Metropolitan Cities
Infrastructure Development
Cities Mapping
Metropolitan City
Tabuk
Yanbu
Hofuf & Mubaraz
Al Kharj
Contribution Cumulative
To National National
Pop
Pop
Coverage Coverage1)
1. Greater Dammam
5.1%
51.1%
2. Yanbu
0.9%
52.0%
3. Tabuk
1.9%
53.9%
4. Hofuf & Mubaraz
3.0%
56.9%
5. Buraidah & Onaizah
2.3%
59.2%
6. Al Kharj
1.2%
60.4%
7. Hafr El Baten
1.2%
61.6%
8. Najran
1.2%
62.8%
9. Khamis Mushait &
Abha
2.5%
65.3%
10. Hail
1.2%
66.5%
Madinah
Greater Dammam
Buraidah & Onaizah
Khamis Mushait & Abha
Hail
Najran
Hafr El Baten
Cost Recovery
1) Including Riyadh, Jeddah, Makkah/Taif and Madinah contributing 18.7 %, 13.1 %, 9.8% and 4.4% respectively to national coverage
Strategic Planning
10
Clustering cities promotes scale efficiencies, balanced competition, service
consistency and control
City Clustering Advantages
Advantages
Economies of Scale
and Scope
Balanced Competition
Customer Service
Consistency
Better Control
Description
 Aggregation creates efficiencies such as shared overhead
 Staff exchange, expertise and knowledge sharing between cities of the same cluster
would fill gaps in skills and capabilities and reduce ramp-up period upon privatization
 Allocation of clusters of equivalent operational scale to the operating companies would
facilitate comparison and benchmarking of performance between private operators
 Having the same operator across different directorates will reduce customer service
discrepancies between covered cities
 Granting fewer contracts minimizes the effort required for monitoring the performance
of contractors
Strategic Planning
11
Operating contracts could be granted by regional cluster to improve the
offer to private players and decrease complexity for NWC
Distribution of Cities Across KSA
Suggested Regional Clusters
(Cities in Grey not needed for 60% National Coverage)
Including City Ranking Based on Overall Ranking in
Attractiveness Matrix
Hail Province
Tabuk Province
Hafr El Baten
Tabuk
Hail
Buraidah
& Onaizah
Madinah Province
Yanbu
Makkah Province
Jeddah
Riyadh
Madinah
Al-Kharj
Greater
Dammam
Hofuf &
Mubarraz
Clustering
Methodology
Eastern
Province
Makkah
& Taif
Khamis Mushait
& Abha
Asir Province
Qassim Province
Najran
Najran
Province
Fourteen metropolitan cities were first assigned
to their different provinces (9) across the
Kingdom
= Part of the 60% target national coverage
= Not part of the 60% target national coverage
Hafr El Baten
Buraidah
& Onaizah Greater
Dammam
Riyadh
Hofuf &
Madinah
Mubarraz
Yanbu
Al-Kharj
Makkah
Jeddah
& Taif
Tabuk
Khamis
Mushait
& Abha
Hail
Najran
Then, grouping of neighboring administrative regions into clusters
of equivalent operational scale and evaluation of clustering
options resulted in the selection of the 4-cluster configuration
Strategic Planning
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This privatization growth strategy is fully in line with NWC vision
Proposed Privatization Growth Objectives
Customer Service
Financial Sustainability
National Coverage
Economic Development
Saudization
 Improve operations (e.g. rationing)
 Increase service levels and customer satisfaction
 Introduce new technologies that improve efficiency and performance
 Minimize dependence on government subsidies through rationalizing capital and operational
expenditures and increasing revenues and collection
 Become the dominant player in the water and wastewater sector in Saudi Arabia
 Cover more than 60% of the population within the next 10 years by taking over select
metropolitan cities
 Encourage competition in the sector
 Ensure high transparency and accountability
 Promote advanced privatization models
 Contribute to the employment and development of Saudi nationals
 Optimize the use of the national workforce
Operating Model
 Support the evolvement of NWC into a holding company
 Provide support or transactional services, subject to economies of scale, through shared services
Knowledge Transfer and
Development of Capabilities
 Bring knowledge of international best practices
 Develop and build on existing operational and management capabilities (e.g. asset management)
Strategic Planning
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NWC has defined the key success factors for the privatization growth
strategy along three dimensions
Privatization Growth Strategy Key Success Factors
A
Contract Definition
and Management
 Appropriate allocation of risks
and comprehensive contract
terms
 Accurate baseline and
achievable performance
indicators
B
C
Government Support
 Timely availability of funding
 Enforcement of TSE
regulations and groundwater
abstraction policies to promote
wider TSE usage
Organization and Capabilities
 Restructuring of NWC to better
manage its growth (review of
operating model, organization
structure, governance and
processes)
 Development of competencies
 Proper control post contract
signature
 Improved project management
capabilities
 Management of public
expectations from contracts
 Systematic knowledge transfer
across the organization
Strategic Planning
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Thank You
Strategic Planning
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