Abu Dhabi, January 9, 2007: Gulf Capital's recent acquisition of 60% of Metito Group, the largest Arab water engineering and concession company, sheds light on how leading financial institutions are positioning themselves to take advantage of the upcoming trend for privatizing the water sector in the Middle East.

Population and economic growth are stretching the supply of fresh water, and making the scarce commodity into an even more critical resource to humanity. Only a handful of companies, such as Metito, have focused on providing solutions for increasing the supply of fresh water to impoverished areas.  According to a UN report, a third of the world population will be living in areas experiencing water shortage. Surprisingly, such areas will include parts of the USA, south and east Africa, and vast areas of Asia in addition to the desert areas of the Middle East. Symptoms of such shortages are already appearing across the global, and the stress on the water infrastructure has never reached such levels.



Imad Ghandour, the head of strategy and research at Gulf Capital said: "Governments in the region are paying attention to the mounting need for fresh water, and have increased their investments in the water sector. Around $117 billion are expected to be invested in the Middle East between 2005 and 2015, an increase of 59% compared to the previous decade's investment."   

Saudi Arabia is the largest market for water and waste water in the region. Nearly $28 billion, 24% of the region's total, are to be invested in the sector over the next 10 years, of which approximately $6 billion will be allocated for building new desalination water plants. The UAE, Egypt, Iran, Iraq and many other Middle Eastern countries will be required to invest heavily in their water sector just to keep up with demand and avoid social and economical problems.


Privatization Trend

Given the magnitude of the investments needed, governments in the region are rapidly privatizing  the water sector. The recent water shortages in Jeddah that have led to an urgent rush to secure water supplies, for example, have expedited the Saudi government's plans to privatize the sector: Saline Water Conversion Corporation (SWCC), which oversees the water sector production and distribution in Saudi Arabia, announced recently its plans for the privatization of its water production assets worth around $800 billion.  Abu Dhabi Water & Electricity Authority (ADWEA) has started its privatization program since 1997, but has extended it this year to its sewerage treatment facilities. 

As a matter of fact, Metito was one of the few regional companies to tap into this growing trend as early as 1999. In that year, Metito secured its first concession to supply water to a part of the Sharm El-Sheikh region. That concession now supplies 36 hotels with all their water needs.  Metito was also the first company to procure a water concession in Dubai/UAE in 2004, when it signed an agreement with Dubai Investment Park to recycle their wastewater. So far, Metito has accumulated 16 concession contracts, and is currently under negotiations for more.  

Perfecting the Solution

Mr. Ghandour concludes: "As water assets move from public ownership into private hands, it is expected that competition will evolve into more than the basic commodity of water. Perfecting the operational management and maintenance of the water assets, reducing waste and non-revenue water, revenue management, and optimizing the financial structuring are some of the skills that will be needed to remain competitive over the long term. More importantly, local market knowledge and developing solutions and technologies adapted to the local needs will be a necessity to be perfected most likely by a local player with a fully integrated operation."

-Ends-

About Gulf Capital
Gulf Capital is a leading alternative investment company focused primarily on investing locally raised capital in the GCC region. Incorporated in Abu Dhabi in 2006 as a Private Joint Stock Company, Gulf Capital was established with a capital base of AED 1.225 billion (USD 330 million) from 300 of the most prestigious institutional and individual investors in the Gulf.  Gulf Capital is focused on acquiring sizeable and controlling stakes in highly profitable and rapidly growing companies within a select number of emerging industries in the GCC region. Gulf Capital is rapidly emerging as a leader in the field of private equity investing in the Middle East.

Issued on behalf of Gulf Capital PJSC by Hill & Knowlton. For further information, please contact
Ellie Thompson or Stefan Batory
(+ 971) 4 33 44 930
email ellie.thompson@hillandknowlton.com
stefan.Batory@hillandknowlton.com

© Press Release 2007