Public-private partnerships (PPPs) are likely to fulfil a much greater role in funding green projects for governments whose budgets are stretched, but schemes face failure if they are deemed to be unfair, according to a panel of experts at the World Green Economy Summit this week.

Nayef Al Haddad, a manager at the Kuwait Authority for Partnership Projects (KAPP), the agency that regulates and supervises PPP projects, said: "When we interact with the private sector, what the private developers and the lenders want to see is a clear and very transparent policy."

Kuwait is considered to be one of the more advanced nations for PPP projects in the Gulf, having passed an initial PPP law back in 2008, which was revised in 2014. However, one of the reasons for the change in laws was due to the fact that initial attempts to roll out such partnerships failed due to both parliamentary and political opposition.

"This is what we faced with the first project we tendered," Al Haddad said. "We took almost two years through parliamentary interrogations. There are three current lawsuits still pending in the courts. We've been accused by a lot of false claims from the parliament members, from the public."

Despite this, constrained government budgets, due to the low oil price, has meant that PPP is increasingly being seen by the Kuwaiti government as a method for delivering projects.

"They tell every public utility when they come, or public entity... 'There is no budget for this, go to KAPP'. But then the problem is not all kinds projects are feasible to be tendered through a PPP.

"It has to be bankable, it has to be feasible, there has to be a market interest," said Al Haddad.

He said that it was important to properly communicate the benefits of PPP to all stakeholders, including the public. Otherwise, they possess greater risks and become less appealing to project sponsors and lenders.

Political support

"There has to be political support for these projects. The public needs to accept these projects," he said, adding that there were measures in place to make sure the public are given the chance to invest in such schemes.

"By the Kuwaiti PPP law, all projects which are exceeding 60 million Kuwaiti dinar ($198.4 million), an SPV (special purpose vehicle) company will be established and it will be a joint stock listed company with 50 percent of the shares for the public. So there is an engagement for the public to have shares in these PPP companies and also have a return on investment for it, aside from the creation of jobs. So there are incentives for the public's acceptance."

Sebastien Bernard, general counsel for French water and waste management firm Veolia Middle East, said that it is part of a consortium that runs a major desalination plant in the Sharqiyah region in Oman under a long-term concession that has trained and employed lots of local fishermen to work in the facility.

He said that when describing PPP to trainees he draws a triangle to explain there were three main interests that need to balance - the government or public sector agency, the private sector developer/operator, and the lenders.
"Lenders usually are keen to find very steady, very predictable environments. The more an environment is safe, the more there is a visibility, the more competition a government or dedicated company will get with prices coming down," he said.

Wissam Rabadi, chief of programme for the United States Agency for International Development-funded Jordan Competitiveness Programme, said that his country began using PPP to build its renewables resources after facing disruption to its energy supplies in 2011 as the oil price rocketed and a gas pipeline supply from Egypt was disrupted during the Arab Spring.

It gained funding from both the European Infrastructure Bank and the World Bank's International Finance Corporation to help support three phases of renewable energy products.

However, he said the programme hit a stumbling block almost straight away. In phase one, the Jordanian government agreed 15-year deals with 12 producers to buy power at $0.18 per kilowatt hour, but as the cost of solar projects began falling rapidly it decided unilaterally to change the price to $0.15

"The investors had already made their calculations based on 15 years and $0.18 per kilowatt hour. Now this changed the whole investment. Most important, it really jeopardised the government's credibility with the private sector," he said.

The government eventually agreed to honour the original price, but Rabadi said that such changes in technology are part of the risk when commissioning long term projects.

"The lesson learned is you need a stable, predictable, regulatory framework," he said. © ZAWYA 2017