BMI View: Under pressure to advance a coherent agenda for reform in both the political and economic arenas, the government has understandably struggled to maintain the momentum behind water sector projects such as the landmark Tubli and Muharraq wastewater treatment projects. Both were originally conceived as public private partnerships (PPPs), although the Tubli project is now likely to revert to a traditional government-backed engineering, procurement and construction (EPC) contract following deadly clashes between government troops and demonstrators which have shaken investor confidence in the Kingdom. While BMI is broadly confident that the government is capable of overseeing EPC schemes, and has the liquidity to support them financially, the rethink on Tubli is troubling with regard to prospects for Bahrain’s water sector. If developers are pricing their bids too high, as has been intimated, this may reflect the pricing in of higher political risks. If Bahrain is to keep to deadlines, it will still need its PPP projects to play a key role.
Key themes to highlight for Bahrain’s water sector:
?? The disruption to Bahrain’s political and business decision making processes in H111 has come at considerable cost to the water sector, with the revision of key wastewater schemes such as Tubli. Reconfiguring Tubli as an EPC project may lead to delays at a time when the kingdom urgently needs new wastewater capacity to relieve the burden on its desalination and groundwater capacities.
?? International banks are maintaining their support for Bahraini water projects. In Q211, France’s Natixis and Credit Agricole, and Japan’s Sumitomo all committed to the financing of the Muharraq sewage treatment plant and extended funding commitments by three months to end- July 2011.
By 2015, Bahrain is on course to see a significant increase in both reverse osmosis (RO) and multi-stage flash (MSF) desalinated water capacity, with the former growing from 24,562mn gallons to 27,132mn gallons by the end of the forecast period. Investment in MSF expansion will see output grow from 31,423mn gallons – 50% of the total – to 33,957mn gallons. The key factor behind these increases is the fact the Al-Dur desalination plant is expected to come onstream later this year. We also anticipate an increase in groundwater availability, as Bahrain makes use of other source of water, notably treated sewage effluent. The planned Tubli plant and the Muharraq STP will substantially increase access to wastewater in the system, freeing up more groundwater for use. However, there are undoubtedly downside risks which are heightened by the fraught political climate in Bahrain. Foreign investors are maintaining a wait and see approach to Bahrain, and this may impinge on progress on centrepiece water projects that involve the private sector.

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Executive Summary . 5
SWOT Analysis 6
Bahrain Water Industry SWOT .. 6
Market Overview . 7
Domestic Competitive Landscape . 7
Pricing Mechanisms And Regulatory Framework .. 10
Sectors .. 11
IWPPs . 11
Desalination . 12
Wastewater Treatment 13
Water Systems And Pipelines .. 14
Key Projects .. 15
Table: Major Projects – Water 15
Industry Forecast Scenario 16
Table: Key Data, Water Industry 16
Table: Water Production by Station, mn gallons 16
Regional Overview 17
Middle East Infrastructure Business Environment Ratings 17
Table: Middle East Infrastructure Business Environment Ratings .. 22
Company Profiles 23
Energy Central 23
Veolia Water . 25
BMI Methodology 28
How We Generate Our Industry Forecasts .. 28
Construction Industry .. 29
Sources 29
Business Environment Ratings 30
Ratings Overview 30
Table: Infrastructure Business Environment Indicators . 31
Project Finance Ratings Methodology 32
Table: Design And Construction Phase .. 33
Table: Commissioning And Operating Phase – Commercial Construction 34
Table: Commissioning And Operating Phase – Energy And Utilities 36
Table: Commissioning And Operating Phase – Transport . 37
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