Water and Desalination Projects in Saudi Arabia: Mistakes Bidders and Investors Make

Errors that cost foreign developers, contractors and suppliers in Saudi desalination and water treatment PPPs, with how to avoid each one.

Saudi Arabia relies heavily on desalination and is procuring new plants, wastewater treatment and water transmission through public-private partnerships, largely with the Saudi Water Partnership Company as the procuring entity and offtaker. The model resembles power projects: long-term purchase agreements, competitive tenders and lender scrutiny. Foreign bidders and suppliers make predictable mistakes, and the margin for error is thin because tariffs are bid competitively.

Why these keep happening

Most errors in Saudi water projects come from underpricing risks that seem technical but are commercial: energy cost, seawater quality, brine discharge, localisation and operations staffing. Each one erodes the thin return on a competitively bid tariff over a contract that can run for decades, and lenders rarely allow the sponsor to recover a mispriced risk later.

1. Underestimating energy cost and supply

Energy is the largest operating cost of reverse osmosis, and supply arrangements and pass-through mechanisms vary between projects.

• Avoid it by: Model energy supply and pass-through terms carefully and test the tariff against downside energy scenarios.
• Proof it is closed: Lender-reviewed energy assumptions in the financial model and a clear reading of the pass-through clause.

What it costs you: Operating losses over the contract term if energy consumption or price runs above the bid assumption.

2. Relying on generic seawater data

Red Sea and Gulf water differ in salinity, temperature and biological activity, and local conditions near intakes and outfalls matter.

• Avoid it by: Use site-specific water quality data over seasons and design pretreatment accordingly.
• Proof it is closed: Pilot results or historical data referenced in the design basis and accepted by the independent engineer.

What it costs you: Membrane fouling, higher pretreatment and chemical costs, and output below contracted capacity.

3. Treating brine discharge as a detail

Environmental rules on outfall design and discharge quality are enforced, with oversight from the National Center for Environmental Compliance.

• Avoid it by: Engage environmental consultants early and design the outfall with dispersion modelling.
• Proof it is closed: Environmental approval obtained before financial close, not promised after it.

What it costs you: Permit delays, redesign of the outfall and possible penalties during operation.

4. Missing local content and Saudisation commitments

Tenders often include local content requirements and workforce expectations that are monitored after award.

• Avoid it by: Plan local procurement and Saudi staff training as part of the bid, priced rather than assumed.
• Proof it is closed: A local content plan included in the bid and tracked quarterly after award.

What it costs you: Penalties, weaker scoring in future tenders or disqualification.

5. Weak consortium alignment

Developers, construction contractors and operators have different incentives, and gaps appear during construction and handover to operations.

• Avoid it by: Align construction and operations contracts so that risks accepted under the water purchase agreement are passed down clearly.
• Proof it is closed: Interface agreements signed before bid submission, with liability caps checked against the project agreement.

What it costs you: Disputes and delays that reduce availability payments and strain lender relationships.

6. Ignoring operations and maintenance staffing

Skilled plant operators are in demand across the many new plants being commissioned in the region.

• Avoid it by: Recruit and train operations staff, including Saudi graduates, well before commercial operation.
• Proof it is closed: A trained operations team on site during commissioning, not hired afterwards.

What it costs you: Availability failures, penalties and expensive temporary contractors.

A short check before you sign

• Are energy costs and pass-through terms stress-tested against a downside case?
• Is the design based on seasonal, site-specific seawater data?
• Has brine discharge been modelled and discussed with the environmental authority?
• Is the local content plan realistic, priced and owned by a named person?
• Are consortium interfaces clear, signed and consistent with the project agreement?
• Is the operations team recruited early enough to take part in commissioning?

If it has already happened

If a project is already underperforming, identify whether the cause is design, operations or commercial terms before spending money. Membrane and pretreatment upgrades can address water quality issues, while operational problems may need a stronger operator or retraining. Where contract terms are the root cause, engage the offtaker early with evidence, since long-term relationships matter in a market with repeat tenders.

If a Vision 2030 programme or market trend is shaping your investment case, Domira can test it against real land, construction costs and local demand in the city you are considering before you commit capital.