Excitement is growing in the Kuwaiti and international banking sectors around the country’s long-awaited $22bn public-private partnership (PPP) programme.

Kuwait Authority for Private Partnerships (KAPP) is expected to tender the first project, the Al-Zour North 2 independent water and power project (IWPP), in the next few months.

Activity is expected to ramp up in the Kuwaiti project finance market when the first tender deadlines approach in late 2015.

Banks are generally positive about the newly released executive regulations.

“The new executive regulations resolve the earlier problems so they can get on with the programme,” says a source in international project finance. “They filled gaps in the legislation and covered critical issues such as IPO [initial public offering] regulations, prequalification requirements and evaluation methodologies.”

Earlier PPP projects faced legal challenges due to a lack of legislation covering the structure of the schemes.

Local banks also have a big appetite for government projects, and are already involved in financing road and hospital schemes.

They are also highly liquid and capable of financing all the planned projects except for the $12bn Clean Fuels Project. However, the lenders are concerned the detail of the regulations may prevent them from taking a leading role.

“The new regulations are good for the country,” says a source at a Kuwaiti bank. “But for the banking community we may need to try and get some leeway. Foreign developers have foreign exchange rate guarantees, so they have a preference for export credit agencies, where they can get better terms, over local banks.”

The financing will probably come from a mix of local and international banks, but competition will be high. The Kuwaiti government is seen as a very liquid, low-risk client.

Remaining doubts will be resolved as projects are tendered and awarded. However, this may not happen as fast as KAPP, which is under political pressure to produce results, would like.

“They will need to stagger the projects,” says the international financier. “The banks can take it, but the constraint will be on the developer side, particularly in the power sector, where four projects are in prequalification.”