Infrastructure overhaul gains impetus in Kuwait

15 March 2011

Kuwait’s government is determined to push forward with plans to improve transport links across the country, with billions of dollars planned for investment through the state’s privatisation programme

In numbers

$7bn: The planned cost of the four-line Kuwait metro network

$3.5bn: The combined cost of projects due to take place at Kuwait International airport

Source: MEED

Kuwait is planning to invest more than $23bn in the coming years to improve its transport infrastructure to meet the needs of its rapidly rising population.

The country’s population currently stands at about 3.2 million. By 2030, it is forecast to reach nearly 5.3 million. The government has responded to the challenge by commissioning a National Transport Masterplan, which was submitted in 2009 by a consortium consisting of the UK’s Atkins, the US’ Parsons Brinckerhoff and local firm Gulf Consult.

Transport development within the programme … is pivotal and the rail aspects will link with …the GCC rail network

Richard Birks, Eversheds

The plan maps out the development of Kuwait’s transport project until 2035. It estimates that about 99 per cent of the population lives inside the metropolitan area, Kuwait City, where the existing transport infrastructure is ageing and will not be able to support the predicted growth. The planned programme of projects offers immense opportunities for both local and international firms.

Infrastructure development drive

“Infrastructure in the Gulf is a fantastic market to be in at the moment and will be given even greater impetus by Qatar’s successful Fifa 2022 bid,” says Richard Birks, partner at law firm Eversheds in Doha. “The Kuwait PPP [public-private partnership] programme is probably the most wide-ranging in the GCC and a market that no one in the region can ignore. The transport development within the programme, as more widely around the region, is pivotal and the rail aspects will link in with the wider plans for the GCC rail network.”

Some of the major projects planned include the $10bn national railway, a $7bn metro network and $3.5bn-worth of investment at Kuwait International airport.

The most advanced and important urban project is the development of the Kuwait metro. A UK consortium led by Ernst & Young is the transaction adviser on the project and is carrying out the feasibility study for the metro network. The consortium, which includes Atkins as technical adviser and Ashurst as legal adviser, won the contract in August 2010. The feasibility study will take several months to complete. Once the study has been reviewed by the government, the next stage will be procurement. This could start within four to six months.

The metro itself will comprise four lines and will have 171 kilometres of incline sections, about 72km of elevated track and a 115km tunnel. About 60km will be built underground.

The metro forms an integral part of the masterplan and those developing the network will need to ensure there is seamless integration between it and the railway network.

Invitations to bid for the main construction contract are expected to be issued in the second quarter of 2011 with a contract tentatively pencilled in to be awarded by the end of the year. A private developer will design, build, finance, operate and maintain the metro network. The developer will own 40 per cent of the project company, which is expected to be called the Kuwait Metro Company once established. The government will own 10 per cent and will sell off the remaining 50 per cent through an initial public offering (IPO).

“Kuwait has a number of hot centres that are very heavily populated. The most significant advantage [of the metro] is to ease congestion,” says Varun Dev Sharma, head of transaction advisory services at Ernst & Young in Kuwait.

GCC transport links

The other major rail project planned for Kuwait is the passenger and freight railway that will eventually form part of the GCC railway network. The first phase of the railway will run 245km, from the border of Iraq to the border of Saudi Arabia. It will also have spurs that will serve Kuwait’s three major ports at Shuwaikh, Shuaiba and Bubiyan.

The line will run around the edge of Kuwait City itself, but will have a minimum of four interconnections that will feed into the Kuwait metro. The interconnections will potentially be at Al-Jahra, Kuwait International airport, Fahaheel and a new central railway station to the southwest of the capital. Like the metro, the railway will be carried out through a design, build, finance, operate and maintain contract with the government selling 50 per cent of the shares through an IPO. The remaining shares will be held by the developer and the state.

Kuwait’s Partnerships Technical Bureau (PTB), the body managing the country’s privatisation schemes, says it is due to announce the transaction adviser for the railway project in mid-March. Once this has been awarded, the details of tenders will become clearer.

The rail bridge that will run to Bubiyan port is currently being built by a team of China Harbour Engineering Company and two local firms Gulf Dredging & General Contracting Company and Shaheen Alghanim Roads & Bridges Contracting Company. The work is being carried out on a design and build basis and is due to be completed in early 2011.

There is a definite political will [in Kuwait] to achieve the vast development envisaged by using PPPs

Richard Birks, Eversheds

The other major area of focus for the government is the expansion of Kuwait International airport. The existing airport is old and inefficient. The Directorate General of Civil Aviation (DGCA) says there are about $3.5bn-worth of projects planned for the airport. The expansion and upgrade of the airport will be divided between the DGCA and the PTB.

The DGCA will oversee the construction of a new $747m terminal at the airport. UK-based Foster & Partners has completed the design for the terminal, which will have a capacity for 13 million passengers a year. This will bring the airport’s total capacity to nearly 20 million people, when it opens in 2016. 

Project awards

The DGCA deadline for prequalifying firms to bid on package three at the airport is the end of March, says Mahdy al-Dakheel, director of projects department at the DGCA. Package three involves building a new 4.5km runway, and reconstructing and extending the existing eastern runway. It also comprises building primary and secondary access roads and taxiways.

The PTB has awarded Germany’s Deutsche Bank the transaction advisory contract for five PPP projects at Kuwait airport. Deutsche Bank will oversee the development of projects that include establishing a company to provide aircraft maintenance, repair and overhaul for local, regional and international airlines, establishing cargo handling services and facilities within Kuwait Cargo City.

The remaining three packages involve the construction of a catering facility and services for the airlines and airline operators, establishing gas and maintenance stations and the construction of a five-star hotel.

Other plans involve the privatisation of Kuwait’s national carrier Kuwait Airways. A consortium of the local Abdulhameed al-Sarraf & Partners and the US’ Baker & MacKenzie are working as legal advisers on the project and are currently working on transferring the legal structure, including the transfer of assets and liabilities, to a shareholding company. The legal transfer of Kuwait Airways Corporation was due to take place by 1 March 2011, however this has now been extended.

The US’ Citigroup, Ernst & Young and US aviation services firm Seabury were appointed to handle the privatisation of the airline.

The long-awaited Subiya project, also known as Sheikh Jaber al-Ahmad al-Sabah causeway, will also move forward this year. On 24 February, Kuwait’s Central Tenders Committee approved the award of a KD738.8m ($2.6bn) contract to a consortium of South Korea’s Hyundai Engineering & Construction and the local Combined Group Contracting Company to develop the causeway. Work is scheduled to start in June this year and is expected to take five years to complete.

The execution of the transport projects is part of the Kuwait government’s efforts to reshape its economy. The PTB will oversee 32 privatisation projects over the next four years that represent a total capital injection of $28bn. This is intended to raise large sums for the government through the sale of state-owned assets and improve the country’s image as a place to do business.

“There is a definite political will to achieve the vast development envisaged by using PPPs, as evidenced by the public-private partnership law [that] allows private-sector involvement in the project financing,” says Birks. “In the PTB, Kuwait also has a specifically established body to execute the procurement.”

Transport hub

The ultimate plan is to transform Kuwait into a regional transportation hub, with state-of-the-art land, air and sea infrastructure in place. Its neighbours in the region are already way ahead of Kuwait in terms of airport development with huge projects under way in Abu Dhabi, Medina, Jeddah, Muscat, Salalah, Bahrain and Doha.

In the past, some politicians have opposed Kuwait’s proposed privatisation schemes, which has caused some projects to be derailed, as well as the ruling cabinet to resign several times. But when it comes to transportation schemes, there appears to be a new sense of determination in the air.

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