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| 13 September, 2017

Kuwait KAPP taps NBK Capital for Shamal Azzour Al-Oula IPO

Investor watches computer screen on trading floor of Kuwait Stock Exchange

Investor watches computer screen on trading floor of Kuwait Stock Exchange

REUTERS/Stephanie McGeHee

First PPP project to debut on Boursa Kuwait in Q1 2018


KUWAIT CITY: The Kuwait Authority for Partnership Projects (KAPP) today announced the appointment of an NBK Capital-led consortium as the advisor and offering manager for the distribution and transfer of shares in Shamal Azzour Al-Oula K.S.C, which are currently held by KAPP, to Kuwaiti citizens. Shamal Azzour Al-Oula is the owner and operator of Kuwait’s first and only independent power and water plant. The transaction is mandated by Kuwait’s Public-Private Partnership Law (PPP Law), which requires the State to offer 50% of the total ownership of PPP projects to Kuwaiti citizens through an Initial Public Offering (IPO). Kuwaiti citizens interested in receiving the distributed shares will be invited to settle the par value of the shares through a streamlined process. Shamal Azzour Al-Oula is the first company to be established pursuant to the PPP Law framework in Kuwait, and the first to reach the IPO stage. The company is planning to list on Boursa Kuwait stock exchange once the shares have been distributed. The offering is expected to take place in first quarter of 2018.

The PPP Law is part of an overarching government policy to include citizens in the ownership of mega projects offered to investors in the private sector and enabling Kuwaiti citizens to benefit from these projects; and to empower the private sector to take the lead in growing the national non-oil economy.

In addition to the 50% stake in the company held by the KAPP for the benefit of eligible Kuwaiti citizens, the Government of Kuwait currently owns 10% of the company through two other entities, and they are the Kuwait Investment Authority (KIA: 5%), and the Public Institution for Social Security (PIFSS: 5%). The remaining 40% is held by the operators of the plant, a private consortium comprising ENGIE (formerly GDF SUEZ), Sumitomo Corporation, and A.H. Al Sagar & Brothers.

The company’s power and water plant commenced full commercial operation in November 2016 and today represents 10% of Kuwait’s installed power generation capacity and about 20% of its installed water desalination capacity. Both power and water produced by the plant is entirely supplied to the country’s national power and water grid operated by the Kuwait Ministry of Electricity and Water (MEW) under a 40-year long-term Energy Conversion and Water Purchase Agreement (ECWPA). Shamal Azzour Al-Oula is the first phase of Kuwait’s Independent Water and Power Project (IWPP).

KAPP Director General Mutlaq Al-Sane’a said, “By appointing NBK Capital and consortium today, we have officially kicked-off the countdown for the first PPP IPO in Kuwait’s history and the first bourse-listing of a utility company in the country. The Azzour North Power and Water Plant is a fully-operational world-class facility that was built on schedule and on budget, it is undoubtedly a model PPP project that has set a high benchmark for our future PPP partners. This is also an achievement for Kuwait’s lawmakers and a testament to the government’s will to create real investment opportunities for Kuwaiti citizens, in addition to empowering private sector to lead the growth of the economy and creating a supportive environment for it to flourish.”

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NBK Capital, the investment arm of the National Bank of Kuwait, has a track-record of successfully executing landmark transactions in the equities market in Kuwait. Some of the most recent transactions executed by NBK Capital include the sale of secondary shares in Humansoft, the IPO of Mezzan Holding, the listing of Kuwait Telecommunications Company (VIVA), and Saudi Telecom Company (STC)’s tender offer for VIVA.

For Shamal Azzour Al-Oula’s IPO, NBK Capital is joined by a consortium of seasoned advisors with market-leading experience in their fields. The consortium includes the International Counsel Bureau Lawyers and Legal Consultants, the Transaction’s legal advisors, Kuwait Clearing Company, who will provide the online IPO management system to facilitate the settlement process, and Bensirri Public Relations, the Transaction’s media and communication advisors.

NBK Capital’s CEO Faisal Al Hamad said, “We are honored to be selected along with our consortium partners to lead the offering of the first company established under Kuwait’s PPP law. Shamal Azzour Al-Oula is a PPP success story with a 40-year commercial agreement serving the Ministry of Electricity and Water, making it not only a unique addition to any investor’s portfolio, but also an opportunity to participate in and benefit from the country’s energy infrastructure. Kuwait’s approach to mega infrastructure projects is currently undergoing a major transformation as the state moves away from being the owner and operator of mega projects and services, and looks to the private sector to take the lead, while making sure that the ultimate benefactor is always the consumer of these services. NBK Capital is proud to be awarded a role in this landmark transaction.”

Shamal Azzour Al Oula CEO Andy Biffen said, “Myself, the founding shareholders, and everyone working at the company have always been proud to have had a role in the growth and development of this new stage in the evolution of Kuwait’s energy sector. In less than a year of commercial operations, Shamal Azzour has already started delivering on the benefits envisioned by the PPP legislators. We have added substantial capacity to the grid, created job opportunities for Kuwaitis, and became an active participant in the local economy by procuring many of the products and services we require through local providers. We look forward to maintaining a strong role in the development of country’s energy sector and to share this success with our new shareholders, the Kuwaiti citizens, through this IPO.”

Azzour North One Power and Water Plant Highlights:

* Power plant produces 1,539.2 MW in net contracted power capacity

* Power plant is operated by a combined cycle gas turbine, natural gas as main fuel and gas oil as backup fuel

* Power plant comprises five (5) General Electric GTG 9F-3 turbines generating 225.8 MW each and two (2) General Electric STG D1 turbines generating 251 MW each

* Has the capacity to generate 10% of Kuwait’s power requirements at peak capacity (1,539.2MW) and 20% of water generation (107 million gallons per day)

* Fueled by a blend of local gas and imported LNG

* Part of a larger effort to meet an anticipated peak demand of 25 gigawatts (GW) by 2025

* Water desalination plant comprises a multiple-effect distillation (MED) unit capable of producing 107 million imperial gallons per day (MIGD), represents 20% of Kuwait’s installed water treatment capacity

* Water plant uses MED technology through 10 SIDEM MED units, each generating 10.84 MIGD

Azzour North One Power and Water Plant Timeline:

* December 12, 2013: Signing ceremony with MEW, successfully concluding Kuwait’s first PPP RFP process and construction starts

* January 10, 2014:  Shamal Azzour Al-Oula reaches financial close

* March 13, 2015:  Key interface connections with MEW and KOC:

* Electricity transmission facilities (MEW)

* Main fuel connection – gas (KOC)

* Backup fuel connection – fuel oil (KOC)

* May 3, 2015:  First megawatt of power was generated into the national grid of Kuwait

* June 28, 2015:  ECOD 1 :1 GTG in SC – 214.3 MW

* August 11, 2015:  ECOD 2 :2 GTGs in SC – 440.5 MW (achieved two days early)

* September 18, 2015:  ECOD 3 :3 GTGs in SC – 664.2 MW (achieved ten days early)

* November 26, 2016:  Construction completed, starts full commercial operation (on schedule and on budget)

© Arab Times 2017