Kuwait’s IWPPs test market endurance but this time things will be different, says GlobalData

Published: 6 July 2020 - 7:54 a.m.
By: Carla Sertin

Following the news that Kuwait has given consultants until 23 July to submit bids for the contract to advise on the development of two power and water megaprojects worth a combined $7bn that will transform the oil states utilities sector;

Jennifer Aguinaldo, Energy & Technology Editor at GlobalData’s MEED, offers her view:

“Once complete, the two independent water and power projects (IWPPs) will be able to generate a combined 4.5GW of electricity and produce about 290 million gallons a day (mgd) of desalinated water, increasing the country’s current capacity by more than 25%. With a combined estimated value of about $7bn, the projects also represent the biggest ever opportunity for private investors in the country’s history. However, as anyone connected to the Kuwait market knows, the path to the delivery of major projects in Kuwait can be slow and uncertain - particularly where privatizations and public private partnerships (PPP) are concerned.

“Kuwait has struggled to make progress with its IWPP programme for much of the past decade. It is the second time the contract for the Al Zour North 2&3 and Al-Khiran projects has been tendered in its current form.

“The protracted procurement process for the country’s next IWPPs is testing the endurance of consultants and the confidence of investors. However, there are compelling reasons to believe that this time, things will be different - first and foremost being that Kuwait’s first liquefied natural gas (LNG) terminal at Al-Zour will be completed soon.

“In addition, Kuwait’s electricity and water ministry is under enormous pressure to deliver the new water and power production capacity. This urgency could see the government seek to bypass Kuwait’s lengthy approvals process that frequently results in rancorous disagreements with opposition groups in the country’s parliament over projects such as these.

“The award of transaction advisory contract will be a major milestone towards delivering two key projects for Kuwait, but there is still a long way to go before the plans become reality. And in the meantime, the slowdown in demand growth due to the Covid-19 lockdowns is adding a whole new layer of uncertainty.”

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