Several Middle Eastern countries have invested in large-scale wastewater treatment projects to expand their treatment capacity and improve infrastructure.
Saudi ISTPs score on green credentials
JULIO DE LA ROSA, Acciona* ME Director, Water Solutions, elaborates on the environmental benefits of three of major independent sewage treatment plants (ISTPs) in Saudi Arabia which have helped them secure key green loans and Islamic financing.
01 August 2023
Wastewater treatment is of great importance in the Middle East due to the region's limited freshwater resources and increasing population. Several countries in the Middle East have implemented wastewater treatment programmes to ensure the sustainable use of water resources, protect the environment and promote circular economy.
Due to the scarcity of freshwater sources, many countries in the region heavily rely on desalination, which is the process of converting seawater into freshwater. However, to mitigate the strain on freshwater resources, wastewater reuse has gained significant importance. Treated wastewater is increasingly being used for irrigation, landscaping, and industrial purposes.
Several Middle Eastern countries have invested in large-scale wastewater treatment projects to expand their treatment capacity and improve infrastructure, but despite progress, there are still challenges in wastewater treatment in the region. Some of these challenges include the high energy requirements and costs associated with tertiary and polishing treatment, proper maintenance and operation of treatment plants, solid legal framework, ensuring adequate funding and investment, and addressing the perception and stigma associated with using treated wastewater for various purposes. And it is here where green financing takes a main role.
As countries identify measures to fight against climate change, investors all over the world are increasingly incorporating particular investment objectives into green infrastructure projects, with an ever clearer focus on water projects. This trend, observed in recent years, is giving rise to the exponential growth of “green financing”, where investors and lending institutions consider environmental, social and governance (ESG) aspects as an even more important part of their criteria when selecting assets.
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Investors all over the world are increasingly incorporating particular investment objectives into green infrastructure projects, with an ever clearer focus on water projects. |
From theory to practice
To cite an example, Acciona last year closed green loans totalling $480 million for three independent sewage treatment plants (ISTPs) – Madinah 3, Buraydah 2 and Tabuk 2 – that it is building in Saudi Arabia for the Saudi Water Partnership Company (SWPC).
Madinah 3 will serve up to 1.5 million inhabitants of existing and future residential areas near the city of Madinah. It will have an initial treatment capacity of 200,000 cu m per day, which can be expanded to 375,000 cu m per day.
Buraydah 2 will serve up to 600,000 people and support the projected growth of the city and the nearby town Ash Shimasiya. It will have a capacity of 150,000 cu m per day.
Tabuk 2, serving up to 350,000 people, will have a capacity of 90,000 cu m per day. It will serve mostly existing and future residential areas in conjunction with Tabuk 1 ISTP, which is currently operational.
The ISTPs are being financed through a combination of green loans and Islamic financing.
Acciona will be responsible for the design, construction, operation, and maintenance of the ISTPs, which are expected to be operational by 2025.
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Some of the challenges in wastewater treatment include the high energy requirements and costs associated with tertiary and polishing treatment. |
Acciona will be a 35 per cent shareholder in each of the three special-purpose vehicles (SPVs) that will own the ISTPs. The other shareholders in the SPVs are Tawzea and Tamasuk. Acciona will also be the project manager for the ISTPs.
SWPC has signed an agreement with the project company of each of these projects to procure the treated water from the ISTPs for 25 years. These three companies will design, build, own, operate and transfer the ISTPs, which are being built to expand and improve wastewater and sewage treatment services in the kingdom.
Key environmental features and benefits of these projects include:
• Recycling of wastewater for agricultural activities: The use of treated sewage effluent will substitute the use of available fresh water for farming purposes, thereby producing direct water savings. The plants have been designed to comply with stringent technical requirements regarding the quality and quantity of discharged water to satisfy the needs of local farmers who will ultimately use the water.
• Treatment and reuse of sewage sludge (‘zero-sludge-dispatch’ method): All sewage sludge produced in the plants will be suitable for agricultural application and cement manufacturing. The plants will handle, transport, and deliver it to the designated sludge disposal area (specific for each ISTP), so that the amount of non-beneficial sludge that is removed or leaves the ISTPs’ site is equivalent to zero.
• Renewable electricity consumption: Up to 57 per cent of the daily electricity consumption for the different sites will be supplied from renewable energy sources onsite (solar photovoltaic electricity), resulting in a significant reduction in greenhouse gas emissions generated by the ISTPs. This is the maximum renewable energy available from the extension of land available for the installed capacity of PV panels and the production of biogas derived from water treatment processes.
With the incorporation of these solutions into the sewage treatment plants, Acciona and its partners set out to make a contribution to the European Union objectives on the sustainable use of water and offsetting climate change, while working within the framework of the United Nations Sustainable Development Goals on water and clean energy.
Green Financing
Aware of the importance of these projects to optimise the use of water resources in Saudi Arabia and their clear alignment with the kingdom’s Vision for 2030 programme and the plan to reach Net Zero by 2060, these ISTPs have been considered clear objectives for the application of green finance from the outset. They have represented a perfect opportunity for lending institutions to take a position in a financial trend that is rapidly growing globally.
In this sense, the project companies have developed a ‘Green Loan Framework’ that has been appraised by a second party opinion (SPO) provider, concluding that the Green Loan Framework for the ISTPs is aligned with the Green Loan Principles. This enables the project companies to close a green loan for each of the projects totalling $480 million.
Islamic Project Finance
In addition to the priority objective of applying a green loan to these projects, the companies have given priority to a structuring of finance that will incorporate an additional Islamic tranche to the more common conventional approach. In these three projects, Islamic finance has accounted for just over 60 per cent and is structured under the “Ijara Facilities” modality.
Islamic banking, which has its roots in Sharia law, is characterised by its strong ethical commitment. Nowadays, the fundamental role of ethical principles in the development of a sustainable international financial system is unquestionable.
* Acciona is a Spanish multinational company that specialises in renewable energy, water, and infrastructure.
