Kuwait on hold for PPP bylaws

23 November 2014

Project delays caused by wait for Council of Ministers to agree new regulations

Kuwait’s Partnerships Technical Bureau (PTB) is unable to issue tenders until the Council of Ministers issues executive regulations for two laws relating to public-private partnerships (PPPs).

By law, the executive regulations are due six months after the law was passed by the Kuwaiti National Assembly. However, the Council of Ministers has yet to set a date to discuss the laws.

Executive regulations for the foreign investment law have been delayed by more than a year.

A 2008 law covering independent power projects (IPPs) was amended in mid-2014, after the much delayed tender for Al-Zour North independent water and power project (IWPP). The contract was awarded to Hyundai Heavy Industries after a protracted four-year tendering process.

“There were growing pains,” says Philip Kotsis, a partner at UAE law firm Tamimi & Company. “The process faced many challenges, which were resolved along the way.” The amendments are intended to reflect the way these issues were worked out during the Al-Zour North tender process, clarify the law and meet international standards.

The executive regulations, due in January 2015, are needed before the amendments can be applied to schemes in the pipeline.

The National Assembly passed another PPP law in mid-2014, which covers all other types of projects. The executive regulations should be issued by March 2015.

“There will be a different name and legal structure for the PTB,” says a spokesperson for the bureau. “It will have more independence and autonomy.” The staff and assets of the PTB are expected to remain largely the same.

However, there are doubts about the future of the bureau, which has taken time to build the capacity to deal with large projects. “They are trying their best, but they shouldn’t have done everything via the PTB when it was first created,” says a consultant working in the country. “They’re being sidelined and projects are being given back to ministries.”

The major projects taken from the PTB include the metro, now owned by the Ministry of Communications, and the Kuwait International airport expansion, now owned by the Ministry of Public Works.

Kuwait is currently facing a power crisis, with peak demand growing by 6-8 per cent a year. Not only does the country urgently need to install 9,000MW of electricity generation capacity by 2020, it also needs to replace or upgrade ageing plants. However, Kuwaiti law also requires that power projects above 500MW are tendered on a PPP basis.

The PTB cannot progress with tenders for the Al-Zour North 2 and Al-Khiran IWPPs until it receives the executive regulations. Al-Zour North 2 will have a generation capacity of 1,500MW and a water desalination capacity of 102 million imperial gallons a day (MIGD). The Al-Khiran IWPP will have a capacity of 1,500MW of power and 125 MIGD of desalinated water. Both projects have stalled since 2013.

Interest in the Kuwait projects market has remained high, despite the setbacks. Moving away from PPPs now would be a step backwards for the projects market, especially now the procedures have finally fallen into place. “The PTB has learnt from experience and it’s doing a good job,” says Kotsis. “The systems just need tuning.”

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