The financial close of the 1500 MW and 105 MIGD Az Zour North independent water and power project (IWPP) in January 2014 served as the trailblazer for the start of the public-private partnership (PPP) programme in Kuwait, representing the first project under the new PPP Law. The development of the Kuwaiti PPP projects market hinges on the publication of the executive regulations to the new PPP law which was published in August 2014. The Director General of the Partnerships Technical Bureau (PTB) suggested that the executive regulations are substantially complete and on schedule for publication in early 2015 at the recent MEED Kuwait Projects conference held in November this year.
Executive Regulations Target 2015 Launch
The new PPP law provides that the executive regulations should be published within six months of the new PPP law, which suggests a long-stop date of sometime in February 2015. According to Kuwait’s National Assembly Financial and Economic Affairs Committee, given Kuwait’s need for mega-financing and advanced technology transfer, all new projects are intended to be implemented pursuant to the new law.
5 Considerations of Kuwait’s New PPP Law
Project developers and lenders should be aware that Kuwait’s new PPP law impacts:
- Existing Projects: Permitted to continue in accordance with the terms of their concession and related licenses until they expire, or terminate earlier in accordance with their terms but no amendments to the concession or related licenses are permitted after the new PPP law takes effect. This is an important provision for developers of and lenders to existing projects who may be questioning what impact such a change in law may have on their existing projects.
- New Regulators: The Supreme Committee for Projects will be replaced by the Supreme Committee for PPPs (SCPPP) who will, among other things, approve new PPP projects, handle land allocations for such projects and approve both the successful bidder and the project documents. The PTB will also be replaced by the Public Authority for PPPs (PAPPP) who will, among other things, nominate the successful bidder and prepare the project documents and establish the public joint stock company which will undertake the project. PTB’s transition to a formal government entity should help expedite the procurement process and it is anticipated an updated PPP Project Guidebook will shortly follow to reflect how the new law and executive regulations will impact project procurement and implementation.
- Shareholdings: The previously set 26 percent floor continues to apply to the successful bidder and although it is a floor, depending on the proposed shareholding offered to bidders, developers (and lenders) will be focused on how the successful bidder secures management and board control in the project company. Conversely, the 24 percent ceiling continues to apply to the relevant public authority, although there is now also a 6 percent floor. In addition, the 50 percent allocation for public offering continues to apply. PAPPP is envisaged to subscribe for the shares allocated to both the relevant public authority and the public.
- Project Financing: Lenders may be interested to learn that whilst restrictions still exist on taking security over the land allocated for the project, the project company may encumber the other project assets as part of the security package. As was the case under the old laws, it seems only the successful bidder may, with the SCPPP’s approval, pledge its shares in the project company.
- Extended Term: Whereas the old laws limit the concession period from 25 to 40 years, projects may now have up to a 50 year concession period.
New projects such as the 1500 MW and 100 MIGD Az Zour North IWPP Phase 2, the 2500 MW and 125 MIGD Al Khairan IWPP and the 280 MW Al Abdaliyah Integrated Solar Combined Cycle Project along with many others, have been on hold pending the publication of the new executive regulations. Consequently, 2015 could be a very active year for developers and lenders in the Kuwaiti projects market.