Here’s what you need to know about amended regulations of privatization law

Logo of National Center for Privatization & PPP (NCP)

Saudi Arabia’s official gazette Umm Al-Qura published on Feb. 2 the executive regulations of the privatization law, as amended by the board of the National Center for Privatization & PPP (NCP) on Dec. 31, 2023.

Article 3 of the regulations specifies the minimum value of the privatization project. It sets the minimum value for the transfer of asset ownership project at SAR 50 million, based on the estimated value determined by the executive entity for the target assets.

It also stipulates that the minimum limit for a public-private partnership project stands at SAR 200 million. The limit is set based on the total nominal value expected throughout the project period, as estimated by the competent executive entity after considering each of the following elements, and ensuring that the minimum is met in any of them:

(A) The capital and operational expenditures, including government-owned assets for which the private sector is granted any rights (including ownership transfer), if applicable;

(B) The potential financial obligations arising for the state treasury;

(C) The expected financial revenues that the government will receive.

According to Article 3, the executive entity may combine multiple projects of similar nature in their scope and contractual structure to meet the specified minimum required under this article. If the minimum is not met, and the relevant authority sees the need to continue with the project related to infrastructure or public service, the regulations and rules related to that project will apply.

The provisions and regulations of the law shall apply to privatization projects offered or contracted by companies established or owned by the government, with a direct or indirect ownership of more than 50% of their capital. The purpose of establishing or owning such companies is to offer privatization projects.

A company is deemed established or owned by the government for the purpose of privatization if it meets any of the following criteria:

1) The company is established with the approval of the relevant authority based on the privatization project document for the purpose of implementing the asset ownership transfer process.

2) The establishment or ownership of the company by the government is for the purpose of offering a project related to infrastructure or public services through privatization.

3) Companies wholly owned by the government whose establishment included the transfer of asset ownership related to public infrastructure by the government.

On the other hand, Article 5 of the regulations states that the privatization plan determines the list of assets and services proposed for privatization in the sector. It specifies the entity responsible for each privatization project. The competent entity shall identify public facilities and assets it manages or supervises, the public services it provides, the activities it engages in, and the capital and operational expenditures and their items in its budget.

This also includes its current and future capital projects. The entity evaluates each activity individually to determine the feasibility of assigning it to the private sector through privatization. The evaluation is based on various criteria, including the nature of the activity, sector targets, capital expenditures, quality and efficiency, cost, management efficiency, operations, funding feasibility, and previous experience.