Water Desalination Plants
Water Desalination Plants
Business Model Description
Invest in the construction of water desalination plants to convert sea water into potable water to improve access to fresh water for drinking as well as consumption in the agricultural industry
Expected Impact
Investments in seawater desalination can reduce the deterioriation of surface and ground water quality by using other sources of water.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Tunisia: South East
- Tunisia: Centre-East
- Tunisia: North-West
Sector Classification
Infrastructure
Development needs
Although access rates to infrastructure are high, the quality of Tunisia's infrastructure stock has significantly deteriorated in the past decade, while rural access to infrastructure remains very basic (1). Economic repercussions from the pandemic also generate a need for advanced, sustainable, and resilient infrastructure that supports post-COVID-19 economic recovery. (2).
Policy priority
Tunisia has begun to establish a credible environment for public-private partnerships (PPPs) by revising its PPP legislation and establishing PPP agencies or specialized divisions within existing institutions for infrastructure investments (2). Public authorities have also established procedures to expedite the execution of large-scale public projects, mainly focusing on infrastructure (3).
Investment opportunities introduction
Tunisia will need to spend 4.4% of GDP annually on infrastructure until 2040 (which will approximate USD 75 billion) to meet the investment gap (2). The COVID-19 crisis has emphasized the need for essential infrastructure investment with a high multiplier effect on growth (6). The prevalence of state-owned enterprises causes reliance on high subsidies (1)
Key bottlenecks introduction
Infrastructure and its administration are often handled by non-competitive firms. The state retains a disproportionate stake of the businesses responsible for a large number of infrastructure and network services (7).
Utilities
Development needs
The Near East-North Africa region's freshwater resources are among the world's most depleted; they have declined by 2/3 over the last 40 years and are projected to decrease by more than half by 2050 (8). Tunisia's per capita availability of renewable freshwater resources was 410 m3 in 2014, far below the 500 m3 absolute water security threshold (9).
Policy priority
The public sector leads the water utilities ecosystem in Tunisia. The National Water Supply Authority (SONEDE) and the National Office of Sanitation (ONAS) are responsible for developing the country's main desalination facilities. Desalination of salt water and saline groundwater is a component of the government's attempt to manage and rationalize natural resource usage (10).
Gender inequalities and marginalization issues
Building and operating desalination plants comes at a high cost, which are often subsidized. If such subsidies are not extended to desalination projects for domestic and community use, it would create higher water utility rates, which would negatively affect the residents of impoverished and arid regions (11).
Investment opportunities introduction
The overall investment potential for desalination facilities on a big scale is USD 1.9 billion. Investment potential is expected to vary depending on the terms of the government's PPP agreements with service providers (10).
Key bottlenecks introduction
Desalination consumes a lot of energy. Desalination supplied 3% of the Middle East's water supply but accounted for 5% of overall energy usage in 2016 (12). Desalination, if increased and fueled by fossil fuels, may therefore act as a driver of climate change. Attaining desalination goals should not increase fossil fuel use or Tunisia's deficit (10).
Pipeline Opportunity
Water Desalination Plants
Invest in the construction of water desalination plants to convert sea water into potable water to improve access to fresh water for drinking as well as consumption in the agricultural industry
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
5% - 10%
The global water desalination market is expected to grow at a CAGR of over 9.32% during the period 2020−2026 (15). The value added of the water sector to national GDP stood at 339 million TND (USD 122 million) at the end of 2019.
Indicative Return
5% - 10%
An academic study on the economic evaluation of seawater desalination based on cases from Saudi Arabia points to rates of return between 5-10%, which could surpass 10% if cost of capital is decreased (16).
Investment Timeframe
Long Term (10+ years)
The loans provided for desalination projects are long term given cash-flow generation of these projects with an average maturity around 25 years. (14)
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
As one of the most arid countries in the world, Tunisia suffers the consequences of global warming, particularly with recurrent periods of drought and high variability of precipitation, which can cause a hydraulic stress problem (17).
Gender & Marginalisation
Access to water in rural areas can be inefficient, and women are often on the front line of supplying water to the household at collection points, increasing their vulnerability (18).
Expected Development Outcome
Desalination investments could reduce the excessive use of groundwater and surface water.
Gender & Marginalisation
Investments in desalination plants can contribute to the empowerment of women by providing easier access to clean water in higher quantities.
Primary SDGs addressed
6.1.1 Proportion of population using safely managed drinking water services
79% (19) (Rural: 69% Urban: 84%)
n/a
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Indirectly impacted stakeholders
People
Planet
Corporates
Public sector
Outcome Risks
Water desalination may modify the salinity level in the water collection areas and thus negatively impact marine life.
Impact Risks
The heavy involvement of local authorities in the sector might risk the probability that the impact could have been achieved with fewer resources or at a lower cost.
Failure to correctly plan the plant's connection to the public infrastructure and/or a private intake system might risk the activities being delivered as planned, and, thus risk the desired impact.
Impact Classification
What
Improve and secure freshwater supplies while enabling access to water services
Risk
While water desalination model is proven, the heavy involvement of local authorities and the plant's connection to public and/or private delivery systems require consideration.
Impact Thesis
Investments in seawater desalination can reduce the deterioriation of surface and ground water quality by using other sources of water.
Enabling Environment
Policy Environment
(National Strategy for Sustainable Development 2015-2020): The strategic axis consists of preserving water resources and increasing the desalination of brackish and maritime waters.
National Sanitation Office (ONAS)'s Project 2030 aims to extend and rehabilitate the wastewater networks and provide water access to all citizens by 2030 (20).
Decree 2005-3280 19 December 2005 fixes the conditions and procedures for granting the concession of financing, realization, and exploitation of sanitation work to private persons.
Financial Environment
Investment Law (Loi n° 2016-71 du 30 Septembre 2016, portant loi de l’investissement) aims to promote investments in Tunisia by liberalizing the legal framework to invest and investors’ protection. It provides investors with greater flexibility and offers more incentives.
Consumption tax n° 88-62 of 2 June 1988 recasts the regulation of consumer rights by establishing a consumption fee rate for water to 25%.
Other incentives: International cooperation agencies such as JICA and KFW provide concessionary financing for desalination projects in Tunisia.
Regulatory Environment
(Law n75-16 of March 31, 1975): Promulgation of the water code sets the rules for water management in the public domain.
(Law n° 49-2015): relates to public-private partnerships that provide a legal framework for PPPs.
(Decree n2008-2268 June 09, 2008) governs the list of services falling under the missions of the national office of the cleansing, which can be conceded.
Marketplace Participants
Private Sector
Cadagua, Tedagua, Cobra Instalaciones y Servicios, Metito, Orascom Construction.
Government
Ministry of Local Affairs and Environment, National Company of Water Exploitation and Distribution (SONEDE), National Environmental Protection Agency (ANPE), Ministry of Public Health
Multilaterals
The Japan International Cooperation Agency(JICA), The French Development Agency (AFD), KfW, Saudi Fund for Development (SFD), European Union (EU), Kowait Fund For Arab Economic Development (FKDEA), KfW
Non-Profit
Association eau et developpement (AED), Watchwater, UN,Friedricht-Ebert(FES), Nomad 08
Public-Private Partnership
SONEDE/ WEG, The Tunisian Chemical Group (GCT)
Target Locations
Tunisia: South East
Tunisia: Centre-East
Tunisia: North-West
References
- (1) World Bank Group, December 2019. Tunisia Infrastructure Diagnostic. https://openknowledge.worldbank.org/bitstream/handle/10986/35116/Tunisia-Infrastructure-Diagnostic.pdf?sequence=1&isAllowed=y
- (2) OECD, 2021. Middle East and North Africa Investment Policy Perspectives. https://www.oecd-ilibrary.org/sites/49d6211b-en/index.html?itemId=/content/component/49d6211b-en
- (3) Republic of Tunisia, 2018. Economic Recovery Plan 2019-2020. http://www.cae.gov.tn/wp-content/uploads/2019/08/Plan-de-relance-V-Finale-12-oct.pdf
- (4) Bertelsmann Stiftung, 2020. Tunisia Country Report. https://www.bti-project.org/en/reports/country-report-TUN-2020.html
- (5) IMF, 2021. Tunisia Country Report. https://www.imf.org/en/Publications/CR/Issues/2021/02/26/Tunisia-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-50128
- (6) OECD, 2018. Reviving Investment in Tunisia. https://www.oecd-ilibrary.org/economics/relancer-l-investissement-en-tunisie_55b4653d-fr
- (7) General Authority for PPP, 2018. Pipeline of PPP Projects in Tunisia. http://www.igppp.tn/sites/default/files/Fiches_descriptives/03-Fiche%20Station%20d%27%C3%A9puration%20%C3%A0%20Tunis%20Nord.pdf
- (8) French Development Agency (AfD), 2021. North Africa Regional Strategy 2021-2025. https://www.afd.fr/sites/afd/files/2021-03-02-49-37/strategie-regionale-afrique-nord-2021-2025.pdf
- (9) World Bank Group, 2020. Tunisia - Economic Monitor: The COVID-19 Global Pandemic Shock. https://openknowledge.worldbank.org/handle/10986/34974
- (10) UNDP, 2020. Engaging private sector in NDC implementation - Assessment of private sector investment potential for the water sector in coastal areas. https://www.undp.org/content/dam/LECB/docs/pubs-reports/undp-ndcsp-tunisia-private-sector-exec-sum.pdf?download
- (11) Stanford, 2020. Water in the West. The Hidden Costs of Desalination. https://waterinthewest.stanford.edu/news-events/news-insights/hidden-costs-desalination
- (12) IEA, 2019. Desalinated water affects the energy equation in the Middle East. https://www.iea.org/commentaries/desalinated-water-affects-the-energy-equation-in-the-middle-east
- (22) Republic of Tunisia, October 2021. Contribution Determinee au niveau National (CDN) actualisee. https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Tunisia%20First/Tunisia%20Update%20NDC-french.pdf
- (13) KFW, 2020. Drinking water from the Mediterranean Sea. https://www.kfw.de/stories/environment/natural-resources/tunisia-desalination-of-sea-water/
- (14) Construction Review Online, 2021. Construction of Sfax desalination plant in Tunisia to commence. https://constructionreviewonline.com/news/construction-of-sfax-desalination-plant-in-tunisia-to-commence/
- (15) CISION, 2021. Water Desalination Market Size to Reach Revenues of USD 28.13 Billion by 2026. https://www.prnewswire.com/news-releases/water-desalination-market-size-to-reach-revenues-of-usd-28-13-billion-by-2026--arizton-301407440.html
- (16) H Bin Marshad, Saud Mohammed, 2014. Economic Evaluation of Seawater Desalination. Heriot Watt University. https://core.ac.uk/download/pdf/77036159.pdf
- (17) Ministry of Agriculture, Water Resources and Fisheries, SONEDE, 2015. Preparatory Study on Construction of Seawater Desalination Plant in Sfax. https://openjicareport.jica.go.jp/pdf/12245619.pdf
- (18) AFD, 2021. Facilitating Access to Water and Women's Empowerment in Tunisia. https://www.afd.fr/fr/actualites/tunisie-acces-eau-emancipation-femmes
- (19) Sustainable Development Solutions Network (SDSN) and the Bertelsmann Stiftung, 2021. Sustainable Development Report 2021. Tunisia Profile. https://dashboards.sdgindex.org/profiles/tunisia
- (20) PS-EAU, 2021. Water and Sanitation Issues. https://www.pseau.org/outils/ouvrages/ps_eau_fiche_pays_tunisie_2021.pdf
- (21)SONEDE, 2019. La securisation de l'approvisionnement en eau potable.