NWC Stategy Presentation Water and Power Forum V4 public by 3SKfe0tk

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									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



                       Ageing assets with unplanned interruptions                          Inefficiencies in supply management and
                       High levels of leakage                         Suboptimal            raw material consumption
Poor Infrastructure
                       More focus on capital than operational       Operational Costs      Suboptimal staffing levels and
                        expenditure (maintenance)                                            compensation

                         Water rationing due to demand/supply gap                          High capex requirements to meet water
Shortages in Water       Low water pressure in network                 High Capital         demand, expand sewerage networks and
      Supply             Incomplete network coverage                   Expenditures         increase treatment capacity
                         Suboptimal reliability of distribution                            Suboptimal project management


                       Low collection network coverage              High Non Revenue
Limited Sewerage                                                                            High unaccounted for water levels
                       Need to cater for increasing water supply      Water and Low
   Collection                                                                               Low tariff collection
                        and consumption                               Collection Rates

                                                                         Inefficient        Lengthy processes, especially planning,
                         High water spillages
                                                                                             contracting and procurement
  Environmental          No control over industrial effluent           Organization,
                                                                                            Inadequate asset management
     Issues              Sub-standard TSE quality                   Processes and Staff    Limited automation
                         Inadequate sludge disposal practices          Development         Limited staff development and motivation

                       Complex complaint management                                        Inaccurate data on the state of the
 Unsatisfactory        Service not customer oriented                                        infrastructure, particularly leakages
                                                                      Incomplete Data
Customer Service       Delays in connecting customers to                                   Limited tracking of key performance
                        networks                                                             indicators




                                                                                                                  Strategic Planning
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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    5,422
                                                                                                                                                                     Greater
                                                                                                                                                                     Dammam
                                                                                                                                     4,549
                                                                                                                         4,546                                       Madinah
                                                                                                             4,265
                                                                                                3,859                                                           Makkah/Taif


                                                                                                                                                                     Jeddah



                                                                                                                                                                     Riyadh




1)   Total water supply divided by the population of the city
2)   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




Vision                                         “A world-class water
                                                 utility company”




                               A                       B                         C
                           World-class            Financially              Shaper of
Performance                 operator              sustainable            water sector in
pillars                                              water                    KSA
                                                   business




Health
                    D Streamlined organization structure with strong performance culture
foundations
(enablers for
the future)     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 &    Reduce O&M costs/ promote Saudization
           Maintenance)
                            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
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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

                                                                                                   Select cities with the
                                                         Cities with higher revenue potential
                                                                                                    highest economic
                           Economic                       and lower operating expenditure are
                                                                                                    efficiency under NWC
                           Efficiency                     preferred to ensure financial
                                                                                                    for the period 2012-
                                                          sustainability
                                                                                                    2020


                                                         NWC should decrease its                  Select cities with the
                                                          dependency on capex-related               relatively better
                         Infrastructure                   government subsidies and minimize         infrastructure conditions,
                         Development                      the complexity of managing capital        requiring the least
                                                          projects in order to reduce project       intensive capital
                                                          delays and attract the private sector     investment




1) Conservative, non-comprehensive estimates designed for city ranking purpose only

                                                                                                                                 Strategic Planning
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The evaluation of cities based on infrastructure development and economic
efficiency, results in the following city prioritization

                                                    City Selection Matrix                                        Selection of
                                                      Cities Mapping                                           Metropolitan Cities
                                                                                                                          Contribution Cumulative
                                                                                                                          To National National
                                                                                                  Metropolitan City
  Infrastructure Development




                                                   Tabuk                                                                     Pop         Pop
                                                                                                                           Coverage Coverage1)
                                                            Yanbu
                                                                                               1. Greater Dammam               5.1%                 51.1%
                                            Hofuf & Mubaraz         Madinah
                                                                                               2. Yanbu                        0.9%                 52.0%
                                        Al Kharj
                                                                        Greater Dammam
                                                                                               3. Tabuk                        1.9%                 53.9%
                                                    Buraidah & Onaizah
                                                                                               4. Hofuf & Mubaraz              3.0%                 56.9%
                               Khamis Mushait & Abha
                                                                                               5. Buraidah & Onaizah           2.3%                 59.2%
                                 Hail                                                          6. Al Kharj                     1.2%                 60.4%
                                                   Najran
                                                             Hafr El Baten                     7. Hafr El Baten                1.2%                 61.6%

                                                                                               8. Najran                       1.2%                 62.8%

                                                                                               9. Khamis Mushait &
                                                                                                                               2.5%                 65.3%
                                                    Cost Recovery                              Abha

                                                                                               10. Hail                        1.2%                 66.5%


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                                                Description

                         Aggregation creates efficiencies such as shared overhead
  Economies of Scale
                         Staff exchange, expertise and knowledge sharing between cities of the same cluster
      and Scope
                          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
 Balanced Competition
                          facilitate comparison and benchmarking of performance between private operators



  Customer Service       Having the same operator across different directorates will reduce customer service
    Consistency           discrepancies between covered cities



                         Granting fewer contracts minimizes the effort required for monitoring the performance
    Better Control
                          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                                                                 Hafr El Baten
                 Tabuk     Hail                        Qassim Province                                       Hail
                                     Buraidah                                                  Tabuk           Buraidah
                                     & Onaizah    Greater
                                                                                                               & Onaizah Greater
Madinah Province                                  Dammam                                                                  Dammam
                                 Riyadh           Hofuf &
                                                                 Eastern
                         Madinah                                 Province                                   Riyadh        Hofuf &
             Yanbu                   Al-Kharj     Mubarraz
                                                                                             Yanbu  Madinah Al-Kharj      Mubarraz
                            Makkah
Makkah Province
            Jeddah          & Taif                                                            Jeddah   Makkah
                                                                                                       & Taif

              Khamis Mushait                                                                       Khamis
              & Abha                                         Najran                                Mushait          Najran
                                  Najran                     Province                              & Abha
  Asir Province



 Clustering          Fourteen metropolitan cities were first assigned       Then, grouping of neighboring administrative regions into clusters
Methodology          to their different provinces (9) across the            of equivalent operational scale and evaluation of clustering
                     Kingdom                                                options resulted in the selection of the 4-cluster configuration


   = Part of the 60% target national coverage
   = Not part of the 60% target national coverage                                                                       Strategic Planning
                                                                                                                                              12
This privatization growth strategy is fully in line with NWC vision


                                           Proposed Privatization Growth Objectives

                                 Improve operations (e.g. rationing)
      Customer Service           Increase service levels and customer satisfaction
                                 Introduce new technologies that improve efficiency and performance

                                 Minimize dependence on government subsidies through rationalizing capital and operational
    Financial Sustainability
                                  expenditures and increasing revenues and collection

                                 Become the dominant player in the water and wastewater sector in Saudi Arabia
      National Coverage          Cover more than 60% of the population within the next 10 years by taking over select
                                  metropolitan cities
                                 Encourage competition in the sector
    Economic Development         Ensure high transparency and accountability
                                 Promote advanced privatization models

                                 Contribute to the employment and development of Saudi nationals
         Saudization
                                 Optimize the use of the national workforce

                                 Support the evolvement of NWC into a holding company
       Operating Model
                                 Provide support or transactional services, subject to economies of scale, through shared services

   Knowledge Transfer and        Bring knowledge of international best practices
  Development of Capabilities    Develop and build on existing operational and management capabilities (e.g. asset management)



                                                                                                              Strategic Planning
                                                                                                                                      13
NWC has defined the key success factors for the privatization growth
strategy along three dimensions


                                 Privatization Growth Strategy Key Success Factors

A                                       B                                       C
      Contract Definition
                                                 Government Support                 Organization and Capabilities
       and Management

 Appropriate allocation of risks            Timely availability of funding         Restructuring of NWC to better
  and comprehensive contract                                                          manage its growth (review of
                                             Enforcement of TSE
  terms                                                                               operating model, organization
                                              regulations and groundwater
                                                                                      structure, governance and
 Accurate baseline and                       abstraction policies to promote
                                                                                      processes)
  achievable performance                      wider TSE usage
  indicators                                                                         Development of competencies
 Proper control post contract                                                       Improved project management
  signature                                                                           capabilities
 Management of public                                                               Systematic knowledge transfer
  expectations from contracts                                                         across the organization




                                                                                                  Strategic Planning
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Thank You




            Strategic Planning
                                 15

								
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