Long delays on PPP projects are causing jitters in investment community
The first round of delays to the Kuwait Authority for Partnership Projects (KAPPs) upcoming power schemes were brushed off as minor concessions to the complexity of the projects.
The Al-Zour North 2 independent water and power project (IWPP) is a test case for recent reforms to Kuwaits public-private partnership (PPP) law. Excitement was high in 2015 as the country looked to become a huge power developer market.
There have now been five extensions to the bidding deadline for the IWPP. Developers, financiers and their advisers are starting to worry that Kuwait is returning to its old habits of delays, bureaucracy and political jockeying.
The latest postponement has been attributed to the appointment of a new general manager of KAPP, Mutlaq al-Sanei.
He will need some time to familiarise himself with KAPPs massive project pipeline. Five schemes are currently out to tender, including the Al-Abdaliya integrated solar combined-cycle power plant and the Umm Al-Hayman wastewater treatment plant expansion.
The success of the PPP projects is important to Kuwait, which needs to build power capacity urgently to meet demand, as well as attract foreign investment while oil prices are low.
The projects are also important to the project finance industry in the region. Without the KAPP programme, GCC transactions in late 2016 and 2017 will be limited.
Omans power capacity expansion programme is winding down, with only the Ibri/Sohar independent power project (IPP) and smaller water schemes coming up for tender. Saudi Arabia has just one major project, the Fadhili IPP, on the horizon. The UAE is focused on solar schemes, once its Hassyan coal-fired IPP closes its financing. Qatar has no pipeline at all, although Bahrain may be heating up.
It took KAPP more than five years and multiple reversals of decisions to reach a financial close on its first scheme, the Al-Zour North 1 IWPP, in 2013. The industry is hoping history does not repeat itself for Al-Zour North 2.
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