Domestic demand for water and power in Saudi Arabia is growing about 8 per

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cent annually, requiring at least 1 trillion Saudi riyals of investments in capacity through 2025, a new report has said.

According to Banque Saudi Fransi's sector analysis report, the country's peak power demand jumped 85 per cent between 1999-2008 and an expected onslaught of new demand in the next decade will call for massive investments in power generation.

While water and power generation projects are a top priority for the Saudi government, the utilities sector has suffered from insufficient investments by the public and private sectors in the past decade.

"Available water per capita dwindled by almost a quarter in the past decade, reform of agriculture policies essential to conserve water," it said, adding that the state has taken on power and water project financing burden amid tight credit conditions and private sector de-leveraging.

"Estimates about the amount of investment needed to enable Saudi Arabia's power and water sectors to grow fast enough for the next decade quite easily stretch into the hundreds of billions of riyals," the report added.

Keeping investments in utilities infrastructure high is far from a luxury for a country where power demand outpaces supply in many areas during peak summer months, and natural renewable water resources are among the sparsest in the world

"We estimate that Saudi Arabia's power and water sector will require at least 1 trillion riyals of investments through to 2025 to build capacity at a pace that caters to a population that has grown around 2.5 per cent per year in recent years and is likely to continue expanding about 2 per cent annually over the next decade," the report said.

Power demand is rising due to the kingdom’s burgeoning industrial base, which has grown in size by more than a fifth since 2005.

By the end of 2008, 4,167 factories were operating in the kingdom employing 466,661 people, up 7 per cent from the year earlier," it said.

In the 2010 fiscal budget, Saudi Arabia boosted the allocation for the water, agriculture and infrastructure sector by 30 per cent to 46 billion riyals, accounting for 8. 5 per cent of the total budget.