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Kuwait is looking to extend the scope of public-private partnerships (PPPs) to include leisure and tourism schemes, and is still aiming to leverage such schemes to bring forward at least part of the country's proposed metro project , according to an official from the Kuwait Authority for Public Partnerships.
Speaking on the sidelines of last month's World Green Economy Summit in Dubai, Nayef Al Haddad, research and strategic planning manager for the Kuwait Authority for Public Projects (KAPP), told Zawya that the agency is initially focusing on the delivery of a few lower-risk PPP schemes, but will eventually broaden its remit.
"The safest approach is to tender at least one or two projects to test how the law and the executive regulations [are] applied. And then there is usually always hiccups, because what's good on paper is never usually good in reality," Al Haddad told Zawya.
"What the state is looking at right now - what is under demand the whole time - is infrastructure - mainly basic infrastructure," he said.
The potential for PPP projects in Kuwait has been debated for years, with the first PPP law passed in 2008. However, delivery has been patchy, with some major schemes caught up in political disputes that saw projects cancelled and re-tendered, and there were issues around the law that made it less attractive for private sector project sponsors.
The law was eventually repealed when a second one was passed in 2014, and KAPP became the body responsible for overseeing PPPs in the country, replacing the Partnerships Technical Bureau.
Al Haddad said that some of the most feasible schemes currently on the table are in power generation. The authority has five power projects on its books, which are a mix of conventional and renewable schemes, he added. Yet the fate of schemes launched to date remains mixed.
Reports emerged last month that a bidding process for the $3.5 billion second phase of the Al Zour North IWPP (Independent Power and Water Project), which began a year ago, had been scrapped. An analysts' note published by National Bank of Kuwait last month stated that it is likely to be re-tendered alongside phase three of the project. The Al Abduliyah Hybrid Power Plant, for which a feasibility study was completed in 2013, also had a tender cancelled this year, according to Thomson Reuters Projects data.
Energy from waste
KAPP has had some recent wins, though. A consortium led by French contractor CNIM, Gulf Investment Corporation and Al Mulla Group Holding was named as preferred bidder for the Kabd Municipal Solid Waste Project, a scheme aimed at generating up to 100MW of energy from municipal waste. The deal, which was confirmed in late September, is worth 236 million Kuwaiti dinars ($781.1 million).
Last month, KAPP and Kuwait Municipality also awarded deals to five consortia to build the South Jahra Labour City project containing accommodation for up to 20,000 workers. It said the winning consortia was headed by firms including Kuwait-based logistics specialist Agility, developer Al Mazaya Company and contractor China State Construction Enginering Corporation (Middle East).
He said that KAPP has learned lessons both from the previous law and from abandoned bids.
"When these lessons happen, we learn how to go back into our terms and conditions, how we deal with the private sector, how we modify the process to make it more flexible and progressive, and even to make it more appealing to the private sector," said Al Haddad.
For example, when asked about Kuwait Metro - a project whose initial feasibility study was handed to the government in 2008 and for which a PPP process took place in 2012, Al Haddad said that both the cost and the risk of placing the entire system in the hands of one operator was "high".
"It's going to be coming back into market, but we have to re-evaluate again the options," Al Haddad said, stating that a part-PPP and part-EPC (engineering, procurement and construction contract) could be one option.
"You have to break it down to see what are the available options and bundles that could be offered into the market. Also, you've got to test the market to see if there is an appeal for that or not."
Museum pieces
Other schemes being considered for PPP include a new museum, where the project's investors would receive capacity payments rather than relying on revenue generation.
"Museums don't make a penny. It will be government sponsorship. The SPV (special purpose vehicle) company will be running this museum," he explained, but added that the project was still under study.
Another project under study for a PPP would be a tourist attraction linked to the new Kuwait Motor City racing circuit, which is currently under construction.
He said that the long term aim for KAPP is to move away from facilitating new PPP projects to becoming the administrative body overseeing them.
Al Haddad said its involvement is currently aimed at ensuring that "public entities who are dealing with the private sector are comfortable [with] conducting this project and ensuring the environment is feasible for the private sector to participate".
Once this has been achieved, he said, "you will see maybe the state is considering to tender most of the projects on a PPP framework".
During an earlier panel debate at WGES, Al Haddad said the Kuwait government was sending more new projects down the PPP route as a result of constrained economic conditions.
“They [the government] tell every public utility when they come, or public entity... 'There is no budget for this, go to KAPP'.”
However, he stressed that projects have “to be bankable” in order to attract interest from the private sector.
(Reporting by Michael Fahy; Editing by Shane McGinley)
(michael.fahy@thomsonreuters.com)
© ZAWYA 2017
Speaking on the sidelines of last month's World Green Economy Summit in Dubai, Nayef Al Haddad, research and strategic planning manager for the Kuwait Authority for Public Projects (KAPP), told Zawya that the agency is initially focusing on the delivery of a few lower-risk PPP schemes, but will eventually broaden its remit.
"The safest approach is to tender at least one or two projects to test how the law and the executive regulations [are] applied. And then there is usually always hiccups, because what's good on paper is never usually good in reality," Al Haddad told Zawya.
"What the state is looking at right now - what is under demand the whole time - is infrastructure - mainly basic infrastructure," he said.
The potential for PPP projects in Kuwait has been debated for years, with the first PPP law passed in 2008. However, delivery has been patchy, with some major schemes caught up in political disputes that saw projects cancelled and re-tendered, and there were issues around the law that made it less attractive for private sector project sponsors.
The law was eventually repealed when a second one was passed in 2014, and KAPP became the body responsible for overseeing PPPs in the country, replacing the Partnerships Technical Bureau.
Al Haddad said that some of the most feasible schemes currently on the table are in power generation. The authority has five power projects on its books, which are a mix of conventional and renewable schemes, he added. Yet the fate of schemes launched to date remains mixed.
Reports emerged last month that a bidding process for the $3.5 billion second phase of the Al Zour North IWPP (Independent Power and Water Project), which began a year ago, had been scrapped. An analysts' note published by National Bank of Kuwait last month stated that it is likely to be re-tendered alongside phase three of the project. The Al Abduliyah Hybrid Power Plant, for which a feasibility study was completed in 2013, also had a tender cancelled this year, according to Thomson Reuters Projects data.
Energy from waste
KAPP has had some recent wins, though. A consortium led by French contractor CNIM, Gulf Investment Corporation and Al Mulla Group Holding was named as preferred bidder for the Kabd Municipal Solid Waste Project, a scheme aimed at generating up to 100MW of energy from municipal waste. The deal, which was confirmed in late September, is worth 236 million Kuwaiti dinars ($781.1 million).
Last month, KAPP and Kuwait Municipality also awarded deals to five consortia to build the South Jahra Labour City project containing accommodation for up to 20,000 workers. It said the winning consortia was headed by firms including Kuwait-based logistics specialist Agility, developer Al Mazaya Company and contractor China State Construction Enginering Corporation (Middle East).
He said that KAPP has learned lessons both from the previous law and from abandoned bids.
"When these lessons happen, we learn how to go back into our terms and conditions, how we deal with the private sector, how we modify the process to make it more flexible and progressive, and even to make it more appealing to the private sector," said Al Haddad.
For example, when asked about Kuwait Metro - a project whose initial feasibility study was handed to the government in 2008 and for which a PPP process took place in 2012, Al Haddad said that both the cost and the risk of placing the entire system in the hands of one operator was "high".
"It's going to be coming back into market, but we have to re-evaluate again the options," Al Haddad said, stating that a part-PPP and part-EPC (engineering, procurement and construction contract) could be one option.
"You have to break it down to see what are the available options and bundles that could be offered into the market. Also, you've got to test the market to see if there is an appeal for that or not."
Museum pieces
Other schemes being considered for PPP include a new museum, where the project's investors would receive capacity payments rather than relying on revenue generation.
"Museums don't make a penny. It will be government sponsorship. The SPV (special purpose vehicle) company will be running this museum," he explained, but added that the project was still under study.
Another project under study for a PPP would be a tourist attraction linked to the new Kuwait Motor City racing circuit, which is currently under construction.
He said that the long term aim for KAPP is to move away from facilitating new PPP projects to becoming the administrative body overseeing them.
Al Haddad said its involvement is currently aimed at ensuring that "public entities who are dealing with the private sector are comfortable [with] conducting this project and ensuring the environment is feasible for the private sector to participate".
Once this has been achieved, he said, "you will see maybe the state is considering to tender most of the projects on a PPP framework".
During an earlier panel debate at WGES, Al Haddad said the Kuwait government was sending more new projects down the PPP route as a result of constrained economic conditions.
“They [the government] tell every public utility when they come, or public entity... 'There is no budget for this, go to KAPP'.”
However, he stressed that projects have “to be bankable” in order to attract interest from the private sector.
(Reporting by Michael Fahy; Editing by Shane McGinley)
(michael.fahy@thomsonreuters.com)
© ZAWYA 2017
