Cyprus an island with a semi-arid climate, and with its water resources already intensely utilized is suffering from structural and temporary water shortages. With a high level of utilization of its natural water resources, water demand increasing rapidly and water availability decreasing due to repeated droughts, the Government of Cyprus has decided to construct a number of desalination plants. The target capacity of these plants is 120,000 m(3)/d or 40.0 MCM per year and the objective is to increase water availability and the level of reliability for domestic water supply systems. During the last ten years the available of water from the Government projects and from other sources was very limited which led to supply cuts up to 30% of normal demand in the domestic sector and up to 70% of the normal demand in the agricultural sector. These have serious adverse effects on the social and economic activities and a negative impact on the environment. Tbe first desalination plant is under operation since April 1997, with a nominal daily output of 40,000 m(3), where the second desalination plant with a nominal daily output of 51,667m(3), is expected to be put into operation in March 2001. Further one plant proposed by the Electricity Authority of Cyprus is under consideration by the Government where two other plants are at the stage of Siting and Environmental studies. The first and second plants use the reverse osmosis process with a recovery of 50% and electric energy from the electric power grid. They both use an open sea intake and the water is undergoing a pretreatment for reducing the Silt Density Index and the pH for the protection of the membranes. The desalinated water is post-treated for achieving an acceptable quality complying with the Cyprus and European drinking water quality standards. The Build, Own, Operate and Transfer principle (BOOT) was chosen as the method of project financing on a ten-year basis. For the new plants, now under considerations, options will be given to the tenderers for any process or a combination of the known processes and economic incentives will be given to the tenderers offering low energy consumption processes and for those using renewable energy sources. Brine is discharged to the sea at a depth of at least 15m and at a distance of at least one kin from the shore. The sea environment around the brine disposal point is monitored, on a continuous basis and the results so far are at acceptable levels. In all cases environmental impact assessment studies were carried out before construction and mitigation measures were imposed on the contractors for minimizing adverse environmental effects. This paper will outline the approach, the tender document contents, the tender evaluation procedure, the project construction, the project operation and contract management, the environmental effects and the costs of water. It will also outline the benefits and adverse effects of the desalination plant in operation.