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KAPP to move forward with several PPP projects
January 14, 2017, 5:02 pm

Kuwait Authority for Partnership Projects (KAPP), the entity responsible for implementing Public-Private Partnership (PPP) projects in the  country, recently announced plans to invite proposals for several large-scale PPP projects in 2017.

Last October, Kuwait had invited two bidders for talks on the KD820 million Phase Two of Az Zour North Independent Water and Power Project (IWPP). Part two of the five-phase project will see private sector involvement on a build-finance-operate-transfer basis. Like the first phase, the second will run on natural gas and will add 1.8GW (Gigawatt) of power generation capacity and 102 Million Imperial Gallons Day (MIGD) of desalination capacity.

Speaking to the media on the sidelines of the Kuwait Projects conference, which was held last year in late November, General Manager of KAPP Mutlaq Al Sanei announced that during the first half of 2017, the authority would invite advisory proposals for the third phase of the Az Zour North IWPP. The third phase, with a projected power generation capacity of 1.8GW and water desalination capacity of 75MIGD, is Kuwait's fourth IWPP project.

During the conference KAPP also announced plans to issue a request for proposals for the Al Khiran IWPP before the end of the year. The Khiran facility is expected to have a power generation capacity of 1.5GW of generation capacity and 125 MIGD of desalination capacity.

In addition to several mega PPP projects announced in power generation and water desalination projects, Kuwait recently announced a major PPP collaboration in the education sector. Last month, the Kuwait Schools Development Program (KSDP) took a significant step forward with the announcement by KAPP that it Kuwait and that the project had moved into the financial evaluation stage.

The KSDP project is to be built, financed and maintained by private investors, while the MoE will be responsible for recruiting staff. If completed as projected, the PPP in the education sector will be the first of its kind in the Middle East.

The government's PPP program and associated regulations, which were launched in 2006, gained more credence with the promulgation in 2014 of the new PPP Law No. 116.

The new law along with its executive regulations strengthened the institutional framework for PPP programs in the country and offered new benefits such projects, including tax and fee exemptions. It also established the KAPP – previously known as the Partnerships Technical Bureau – as the main body responsible for implementing the state’s PPP programs.

However, since the reforms, progress in PPP projects have been rather lethargic and the country's first PPP project awarded in 2013,  for the initial phase of Az Zour North IWPP, has been the only project to have been awarded so far.

Phase One of Az Zour North IWPP is 40 percent owned by a private consortium that includes the French multinational utilities company Engie, the Japanese trading company Sumitomo Corporation, and Kuwait’s Abdulla Al Hamad Al Sagar & Brothers. The government has the remaining 60 percent stake in the project.

Successfully launching new PPPs will be a top priority for the government moving into 2017, as it seeks to maintain momentum on its infrastructure plans, despite the general decline in oil prices since mid-2014 that will lead to the record deficit of KD8.7 billion projected for FY 2016/17.

According to Al Sanei, the PPP model offers mutual benefits for private and public sector with private investors helping to offset the costs of mega-projects. It is the government's fervent hope that Public Private collaborations would help it balance its books and generate new investment opportunities for private developers and contractors.

In a November report published by the National Bank of Kuwait, the state’s projects market was maintaining healthy momentum during the third quarter, when KD1 billion worth of contracts were awarded – a 14.8 percent quarter-on-quarter increase.

This brought the total value of contracts awarded in the first nine months of 2016 to KD3.6 billion, of which KD1.5 billion were for oil and gas projects.
MEED forecasts an additional KD2.3 billion in contracts will be awarded by the end of the year, while the total value of awarded projects is set to rise to KD11.5 billion in 2017, surpassing last year’s record of KD10 billion.

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