Kuwait to tender railroad and metro schemes

06 October 2015

Procurement for long-delayed PPPs estimated to commence in early 2016

  • Ernst & Young, other partners assisting KAPP in updating feasibility studies
  • The rail road and metro projects carry budgets estimated at $10bn and $7bn, respectively
  • Hybrid PPP-design and build schemes could be considered

The Kuwait Authority for Partnership Projects (KAPP) will be tendering the various packages for its multibillion national rail road (KNRR) and metropolitan rapid transit (KMRT) schemes by first quarter of 2016.

The feasibility studies for both projects are currently being updated and refreshed by Ernst & Young (EY) and its partners. “The contract with the transaction advisers were signed in August, and we should be ready to start the procurement process in the first quarter of 2016,” said Fatima al-Kandari, project manager of KNRR and KMRT, at MEED’s Mena Rail and Metro Summit in Dubai on 5 October.

EY and several partners conducted the first round of feasibility studies back in 2010, prior to the schemes being put on hold when the Communications Ministry decided to review all schemes that were designed to be undertaken as public-private partnership (PPP) projects.

The 574-kilometre KNRR, which includes a passenger and freight line, will be divided into two phases. The first phase comprises a 317km of mainline that will cater to the GCC rail and link to the south of Kuwait and with the Saudi border, while the 257km secondary line will link the mainline network to the border with Iraq to the north and include a link to the Bubiyan port.

Each phase will have a separate civils work package, and the package for the systems, rolling stock and operator are currently being reviewed.

The 160-km KMRT will have 68 stations – nine of which will be located in the capital Kuwait City. It will be built in five phases, with four separate packages for infrastructure, systems, rolling stock and operator.

An updated PPP law that came into effect in March 2015 has brought both schemes back to the government’s top agenda.

Both the railroad and metro schemes, estimated to carry a budget value of $10bn and $7bn, respectively, were originally designed as PPP projects, whose design-build-finance-maintain (DBFM) contracts were to extend over a 30-year period as mandated by the state’s PPP framework. Under the original plan, the special purpose vehicles or project companies that will be formed for both schemes were mandated to offer 50 per cent of their shares to the public.

“The project’s direct stakeholders, particularly the Kuwaiti government, recognise that they either do these projects now or they will never do it,” Khaled Amri, EY director for infrastructure and PPP advisory services told MEED on th sidelines of the summit.

Amri also indicated that their review could include evaluating the various packages more closely to assess if a combination of PPP and the more traditional design and build (D&B) scheme could be considered given the sizable investments required by both projects.

Some experts recommend that a combination of PPP and traditional procurement could address the financing requirements in greenfield rail projects. Globally, experts say, the traditional design and build approach could be adopted for the civils work, while PPPs are usually applied to the supply of rolling stock, systems and operations. PPPs are often recommended for the latter given that the procurement cost comprises only a fraction of the total life cycle costs for these packages over a 20- or 30-year period.

Amri said that while they have a tight target to meet, they will make sure that the main stakeholder is thoroughly prepared prior to tendering. “When you build a [greenfield] rail project, you plan for 50 years, if not 100 years. This means it is imperative to invest several years in the feasibility phase and in conducting due diligence to ensure the readiness of stakeholders,” he explains.


A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications