Public-Private Partnership Projects in Kuwait 21 st Arab-German Business Forum.

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1 Public-Private Partnership Projects in Kuwait 21 st Arab-German Business Forum

2 AGENDA 1 - Kuwait National Development Plan 2 - Introduction to Kuwait s PPP Program 3 - Kuwait s PPP Law 4 Launching a Project Under Kuwait s PPP Law 5 Contractual Framework and the Role of Private Finance 6 - KAPP s Projects 7 - KAPP s Success Stories 2

3 Kuwait National Development Plan 3

Kuwait National Development Plan Development in Seven Pillars A Unified Direction for a Prosperous Sustainable Future Derived from His Highness the Emir, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah s

4 Kuwait National Development Plan Development in Seven Pillars A Unified Direction for a Prosperous Sustainable Future Derived from His Highness the Emir, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah s vision statement, the Kuwait National Development Plan mobilizes development efforts across seven pillars with the aim of transforming Kuwait into a financial, cultural, and institutional leader in the region by Transforming Kuwait into a financial and commercial hub which is attractive for investment, and developing an economy led by the private sector, fueled by the spirit of competition, while raising the productivity and efficiency with the support of state institutions. Maintaining values and social identity, while achieving human development, providing appropriate infrastructure, sophisticated legislation and encouraging business environment 4

5 Kuwait National Development Plan Development in Seven Pillars HEALTH CARE GLOBAL POSITION LIVING ENVIRONMENT PUBLIC ADMINISTRATION INFRASTRUCTURE ECONOMY HUMAN CAPITAL 5 Source:

6 Kuwait National Development Plan Development in Seven Pillars Emphasis on ECONOMY Develop a diversified economy to reduce the dependence on oil export revenues. Create a business environment for Private sector growth Implement PPP Projects 6

7 Introduction to Kuwait s PPP Program 7

8 Introduction to Kuwait s PPP Program PPP History in Kuwait PASSING OF PPP LAW 7/2008 AND ITS EXECUTIVE REGULATIONS SET-UP OF THE PARTNERSHIPS TECHNICAL BUREAU PASSING OF NEW PPP LAW 116/2014 TRANSITION FROM BUREAU TO AUTHORITY Bureau Authority o Set the governance for Kuwait s PPP program o Defines the roles of the: Council of Ministers Higher Committee Partnerships Technical Bureau (PTB) Relevant Public Entities o Stipulates private investors rights and obligations o PTB was set-up in 2008, under Article 12 of Law 7/2008 o Responsible for PPP projects implementation o Aims to utilize private sector expertise to: Increase Kuwait s GDP and diversify its sources Improve public sector service quality Create job opportunities for Kuwaiti nationals o New PPP Law was passed, aiming to: Strengthen Kuwait s institutional framework for PPPs Resolve shortfalls of PPP Law 7 of 2008 and Law 40 of 2010 Broaden the benefits of PPP projects in Kuwait o The new PPP Law 116/2014 changes the structure and role of PTB o Under the new Law, PTB is to become an Authority, referred to as the Kuwait Authority for Partnership Projects (KAPP). 8

9 Kuwait s PPP Law 9

10 Kuwait s PPP Law Key Benefits of Law No. 116 of 2014 STRENGTHENS THE INSTITUTIONAL FRAMEWORK for PPPs in Kuwait PPP LAW OF 2014 RESOLVES SHORTFALLS of PPP Law 7 of 2008 and Law 40 of 2010 BROADENS THE BENEFITS of PPP projects in Kuwait 10

11 Kuwait s PPP Law KAPP s Mandate as Defined in Law 116 of Project concept development and vetting of unsolicited proposals Feasibility study development and Transaction Advisor selection Procurement process management Arranging PPP contracts & project award to successful bidders and set up of public joint stock companies PPP Agreement implementation follow up 11 Kuwait PPP Law No. 116 of 2014

12 Kuwait s PPP Law KAPP s Key Objectives ENCOURAGE private sector participation and foreign investment INCREASE Kuwait s GDP and diversify its sources IMPROVE public sector service quality PROMOTE human development and CREATE job opportunities for Kuwaiti nationals SUPPORT scientific research and technological development 12

13 Kuwait s PPP Law Efficient PPP Process FACTOR DESCRIPTION EFFECTS LAWS POLICIES GOVERNANCE Kuwait s PPP Law (Law No. 116/2014) governs effectively all aspects of tendering and implementing a PPP project KAPP is developing relevant policies in relation to different project aspects. The adoption of these policies across projects expedites the procurement process The Higher Committee is taking an active role in monitoring project procurement and tracking key milestones to ensure timely procurement and implementation Increased Efficiency and Transparency in Project Procurement + Increased Market Interest in PPP Project(s) 13

the PPP program by government entities in Kuwait will allow them to move

14 Kuwait s PPP Law Regulatory Oversight Operator Regulator Regulator Role with Financial Support Pure Regulatory Role The increasing adoption of the PPP program by government entities in Kuwait will allow them to move from the predominantly operator role towards regulatory and monitoring roles 14

15 Launching a Project Under Kuwait s PPP Law 15

16 Launching a Project Under Kuwait s PPP Law Mechanism of Launching a Project Under Law No. 116 of OPTIONAL EVALUATION OF PROJECT PROPOSALS HIRE TRANSACTION ADVISOR PREPARATION OF FEASIBILITY STUDY EXPRESSION OF INTEREST ANNOUNCEMENT PREPARATION OF REQUEST FOR QUALIFICATION o Evaluate Project Proposals Submitted by the Public or Private Sector o Results submitted to Higher Committee for approval o Acquire the services of a Transaction Advisor to prepare an adequate feasibility study and then proceed to the procurement process o Prepare and review Feasibility Study o Market Testing for Project o Prepare and approve the Request for Qualification document in accordance with Law 116 of

17 Launching a Project Under Kuwait s PPP Law Mechanism of Launching a Project Under Law No. 116 of EVALUATION OF QUALIFICATIONS PREPARATION OF REQUEST FOR PROPOSALS AND PPP CONTRACT SELECTION OF THE PREFFERED INVESTOR NEGOTIATIONS AND CONTRACT SIGNING o Evaluate the Submission of Qualifications o Qualified investors are chosen based on the evaluation criteria o Prepare the Request for Proposals documents including the PPP contract and other contracts related to the Project in accordance with Law no.116 of o Evaluate technical and financial proposals based on provided evaluation criteria o Selection of the preferred investor o Negotiations with Preferred Investor o Sign direct agreement with Successful Investor after successful negotiations and obtain all required approvals from the State Audit Bureau 17

18 Launching a Project Under Kuwait s PPP Law Project Classification PROJECTS UNDER KWD 60 MILLION PROJECTS THAT EXCEED KWD 60 MILLION The Successful Investor Establishes the Project Company KAPP Establishes a Public Joint Stock Company 18

19 Launching a Project Under Kuwait s PPP Law Distribution of Shares in Projects Requiring Public Joint Stock Companies Public Entities 6% 24% Successful Investor 26% 44% Kuwaiti Citizens 50% Minimum Allocation Additional Allocation 19

20 Launching a Project Under Kuwait s PPP Law Key Benefits of Share Distribution A significant portion of the Project is Equity Financed by Kuwaiti Citizens Increase in Market Capitalization and Trading Volume in Kuwait Stock Exchange Kuwaiti Citizens can be a part of the PPP Project and realize financial returns 20

21 Contractual Framework and the Role of Project Finance 21

22 Contractual Framework and the Role of Project Finance Contractual Legal Framework Public Entities Kuwaiti Citizens Successful Investor EPC Contractor 6% - 24 % Not more than 50 % EPC Contract Project Company Shareholders Agreement (SHA) > 60 million KD O&M Contract 26% - 44 % O&M Contractor Lenders Step-In and Substitution Agreement (SISA) Financing Agreements Public Entity (Representing the Government 28 April 2011 of the State of Kuwait) 22 Land Lease Agreement(s) (LLA)

23 Contractual Framework and the Role of Private Finance The Role of Private Finance Using private finance in the form of bank debt brings about a number of key advantages to PPP projects which contribute to their overall quality and success ALIGNED INCENTIVES ADDED PROJECT OVERSIGHT All project stakeholders, including banks, have aligned incentives and interest in project success Each stakeholder adds value to the project based on their area of expertise Involvement of banks in projects adds another layer of oversight and monitoring to the project structure EXPEDITED IMPLEMENTATION Bank debt repayment being tied to the generation of project revenue creates an incentive for expedited implementation EFFICIENT USE OF GOVERMENT S FUNDS Removal of the burden of large upfront capital investments from the government Government can focus on other non-ppp projects due to spread out project costs 23

24 KAPP s Projects 24

25 KAPP s Projects Sectors KAPP is Currently Involved in Power Solid Waste Management Water and Wastewater Management Real Estate 25

26 KAPP s Projects KAPP s Current Projects Power Sector ` AZ-ZOUR NORTH IWPP PHASE 1 STATUS Operational Awarded Tendering DESCRIPTION CAPACITY LAW OF PROCUREMENT The Project involves the development, design, engineering, construction, operation, maintenance, and transfer of a power and desalination plant. Power: MW / Water: 107 MIGD - Fully Operational in November 2016 IWPP Law No. 39 of 2010 & Law No. 7 of 2008 ` AZ-ZOUR NORTH IWPP PHASE 2 & 3 Investment Opportunity DESCRIPTION The Project involves the development, design, engineering, construction, operation, maintenance, and transfer of a power and desalination plant. CAPACITY LAW OF PROCUREMENT Power: Min. 2,700 MW / Water: Min. 165 MIGPD IWPP Law No. 39 of 2010 & Law No. 116 of

27 KAPP s Projects KAPP s Current Projects Power Sector ` AL-KHAIRAN IWPP PHASE 1 STATUS Operational Awarded Tendering DESCRIPTION CAPACITY LAW OF PROCUREMENT An Independent Water and Power Producer Project is being planned to generate power through a conventional thermal steam power plant (using low sulfur fuel oil, gas oil, crude oil, and/or natural gas). The Project will also include a sea water desalination plant. Power: Min. 2,500 MW / Water: Min. 125 MIGPD IWPP Law No. 39 of 2010 & Law No. 116 of 2014 Investment Opportunity 27

28 KAPP s Projects KAPP s Current Projects Water and Wastewater Sector ` UMM AL HAYMAN WWTP STATUS Operational Awarded Tendering DESCRIPTION CAPACITY LAW OF PROCUREMENT The Project is a part of the Ministry of Public Works plan to improve the sewerage system in Kuwait s southern area and includes the design, financing, building, rehabilitation, testing, commissioning, operation and maintenance of a new wastewater treatment plant (WWTP), along with several other components. WWTP initial treatment cap.: 500,000 m3/d Ability to expand up to: 700,000 m3/d (by 2020) Law No. 116 of 2014 Investment Opportunity 28

29 KAPP s Projects KAPP s Current Projects Solid Waste Management Sector ` KABD TREATMENT SWTP STATUS Operational Awarded Tendering DESCRIPTION CAPACITY LAW OF PROCUREMENT The Project involves the treatment of municipal solid waste and to generate alternative power sources to be purchased by the Ministry of Electricity and Water. The Project will provide services such as treatment using incinerators (for generating electricity) and landfilling the ash from the remains of the incineration. The Plant is expected to receive 50% of total municipal solid waste produced in Kuwait. Law No. 116 of 2014 Investment Opportunity 29

KAPP s Projects KAPP s Current Projects Real Estate Sector ` SOUTH JAHRA LABOR CITY STATUS Operational Awarded DESCRIPTION CAPACITY LAW OF PROCUREMENT The Project involves the finance, design,

30 KAPP s Projects KAPP s Current Projects Real Estate Sector ` SOUTH JAHRA LABOR CITY STATUS Operational Awarded DESCRIPTION CAPACITY LAW OF PROCUREMENT The Project involves the finance, design, construction, operation, and transfer of a 1,015,000 m2 Labor City which will provide adequate housing for male bachelor expatriate workers. 20,000 expatriate workers Law No. 116 of 2014 Tendering ` SERVICES AND ENTERTAINMENT CENTER - EGAILA Investment Opportunity DESCRIPTION LAW OF PROCUREMENT The Project involves the finance, design, building, operation, maintenance, and transfer of a multi-floor recreational, cultural, commercial, and sports center with an allowable build up area of 112,400 m2. Law No. 116 of

31 KAPP s Projects Projects in Pipeline EXPANDING & DEVELOPING THE SEWAGE TREATMENT SYSTEM IN THE WESTERN AREA OF KUWAIT DESCRIPTION EXPECTED CAPACITY LAW OF PROCUREMENT The Project is part of the Ministry of Public Works plan to improve the sewage treatment system in Kuwait s western area. The Project includes designing, financing, building, expanding, and operating the sewage treatment system plant in the western area of Kuwait, along with several other components. The Project consists of a major sewage treatment plant in Kabd and two pump stations in Shdadiya and Jahra, in addition to a pipeline system between the different areas. KABBD Sewage Treatment Plant: 1,000,000 m3/d. Law No. 116 of 2014 KUWAIT CAR AUCTION DESCRIPTION AREA & LOCATION LAW OF PROCUREMENT The Project is under the Ministry of Commerce and Industry s plan. The Project includes designing, financing, building, and operating a Kuwait Car Auction, which will provide integrated technical services for the car auctions in a state of the art facility. The Project will include two main parts; a car auction arena and car showrooms. West Arifjan (Undeveloped area) South of Kuwait- Total Area of (400,000) m2 Law No. 116 of

32 KAPP s Projects Projects in Pipeline SHAGAYA RENEWABLE ENERGY COMPLEX DESCRIPTION EXPECTED CAPACITY LAW OF PROCUREMENT Shagaya Renewable Energy Complex Phase III is an extension of Kuwait s Vision of producing up to 15% of energy from renewable energy sources by The Project is introduced by the Kuwait Institute for Science and Research (KISR) and is a part of the Ministry of Electricity & Water (MEW) project plans. The Project includes designing, financing, building, and operating the renewable energy complex located in the Shagaya area west of Kuwait. Renewable Energy Produced: 2,000 MW Law No. 39 of 2010 & Law No. 116 of

33 KAPP s Success Stories 33

is a joint stock company founded for the development of Az-Zour North One Power and Water Plant under Law No. 39 of 2010.

34 KAPP s Success Stories Shamal Az-Zour Al-Oula SHAMAL AZ-ZOUR AL-OULA for the Building, Execution, Operation, Management and Maintenance of the First Phase of Az-Zour Power Plant K.S.C. is a joint stock company founded for the development of Az-Zour North One Power and Water Plant under Law No. 39 of AZ-ZOUR NORTH ONE POWER AND WATER PLANT is the first public-private partnership project with a net contracted power capacity of MW and a net water output of 107 MIGD (18 months to production) 34

KAPP s Success Stories Az-Zour North One Power and Water Plant Kuwait s first and only independent power and water plant. Power generated after 18.

35 KAPP s Success Stories Az-Zour North One Power and Water Plant Kuwait s first and only independent power and water plant. Power generated after 18.5 months since the start of development. Power and water generated represents ten and twenty percent respectively of Kuwait s installed power generation and water desalination capacities. 35

KAPP s Success Stories IPO Contract Signing The Kuwait Authority for Partnership Projects has signed with NBK Capital-led consortium as the advisor and

36 KAPP s Success Stories IPO Contract Signing The Kuwait Authority for Partnership Projects has signed with NBK Capital-led consortium as the advisor and offering manager for the distribution and transfer of shares in Shamal AzZour Al-Oula K.S.C, which are currently held by KAPP, on behalf of Kuwaiti citizens. 36

37 Thank you 37

FEED-IN TARIFF POLICY APPLICATION AND IMPLEMENTATION GUIDELINES

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