Emerging role of BOOT desalination projects

This paper presents the main concepts and deliverables of the BOOT structure. It also summarizes current and foreseen BOOT desalination projects, which indicate their increasing role in the water desalination market. Finally, this paper includes a comparison of the life-cycle costs of three recent similar BOOT projects (Larnaca in Cyprus, Tampa Bay in Florida, and Trinidad) and identifies those parameters which have the most significant impact on the life-cycle water cost.

The financial debt instruments available are inherently site specific, as demonstrated by the financial structure of the three projects mentioned. In Tampa Bay, private activity tax-exempt bonds were presented to finance 90% of the project cost (with only 10% equity required). This resulted in a project finance rate of about 5.5%. For the Larnaca project, bidders were allowed to provide pricing in various foreign currencies where the client assumed sole risk associated with fluctuations in the foreign currency exchange rate. This risk was mitigated by a relatively short term of debt (10 years), and the resulting debt finance rate was also about 5.5%. In Trinidad, however, none of these mechanisms was available, and the project finance rate was reported to be about 9%. As shown above, an additional factor which has a significant impact on the water price is the cost of energy. In Tampa and in Trinidad, the cost of electricity was about $0.04/kWh, whereas in Cyprus the cost was 43% higher, at about $0.057/kWh. If we assume that energy amounts to roughly 30% of the water cost, then a 50% increase in electricity rate would raise the water cost by 15%. Finally, the site-specific conditions such as feedwater quality and temperature, required product quality, distance to intake system and delivery point, and local cost for manpower and chemicals all impact the water cost in almost every cost category: capital cost, O&M costs and energy consumption. The results of recent BOOT tenders indicate that this structure provides the lowest seawater desalination cost. The pressing competition and successful experience with BOOT contracts in the last decade point to the increasing role of this arrangement in the desalination market. As shown before, it is expected that in the forthcoming years, large single and dual-purpose desalination projects, especially for the municipal sector, will be executed under the BOOT structure.