The $7-8bn Kuwait Metro project is expected to involve the initial public offering (IPO) of up to six different companies as a result of the decision to split the project into multiple public-private partnership (PPP) contracts.
The project has been split into four infrastructure PPP contracts for the development of the track, one PPP contract for the supply of trains and integration of the network. The additional management contract for the operation of the metro will not be a PPP contract.
Kuwait’s Partnerships Technical Bureau (PTB), the government body behind the project, is also considering a sixth PPP contract for the development of a district cooling project for the metro stations. “Each one of these PPP contract will require an IPO, so there are potentially six new flotations,” says a source close to the project.
The feasibility study for district cooling the metro is currently under way. The PTB’s advisers are also currently at work writing the invitations for expressions of interest for the rolling stock and network integration contract, which is planned to be released before the end of February.
The four companies responsible for the development and maintenance of the track will be paid based on the availability of their section of the line. “For the four infrastructure PPPs, companies will bid an availability charge for the track, so they are not taking any risk on the rest of the track not working,” says another source involved in the project.
This structure means that the Kuwaiti government will carry the risk of the metro not running because one section of the track is not available and has been included to minimise the risk held BY the private sector. It is also intended to ensure that each of the PPP contracts, expected to be around $1-2bn each, can be more easily financed by the private sector.
The PTB has been discussing the possibility of splitting the metro scheme since late last year, and the Higher Committee of the PTB approved the plans in January 2012.