In July the Kuwait Authority for Private Partnerships Projects (KAPP) announced it was accepting expressions of interest from private firms for the construction of two power and water desalination plants.

The projects are the Al Khairan Phase 1 development and the Az Zour North 2 and 3 project.

The Al Khairan project, located 100 km south of Kuwait City, will involve the design, build, finance, operation and transfer of a power generation and water desalination plant. The combined-cycle power facility will have net power capacity of 1800 MW and net water capacity of 125m imperial gallons per day (MIGD).

The government PPP offering is for the first of three phases. Once fully complete, the facility is expected to provide a total capacity of 4500 MW and around 125 MIGD to Kuwait’s electricity grid and power transmission network.

The Az Zour development, located adjacent to Al Khairan, is a gas-fired, combined-cycle power plant, of which the first stage was completed in 2016 and currently comprises 10% of Kuwait’s installed power generation capacity.

The initial stage was developed in a partnership between the Kuwait government (60%) and a consortium led by French multinational Engie (17.5%), Japanese firm Sumitomo (17.5%), and Kuwait’s Abdullah Hamad Al Sagar and Brothers (5%).

The second and third phases, currently being offered for tender, involve the design, supply, construction, testing and installation of an independent water and power plant with a capacity of 2700 MW and a desalination plant capable of producing 165 MIGD. Once all five stages are complete, it is expected to generate a total of 4800 MW of electricity and approximately 280 MIGD of desalinated water.

KAPP will be accepting expressions of interest for the projects, which are open to international, regional and local companies, until November 18.

Projects to boost energy capacity amid increasing demand

The Al Khairan and Az Zour projects form part of the government’s efforts to meet the country’s rising power demand, which is expected to reach 25 GW by 2025.

As of June this year Ministry of Electricity and Water data showed that installed production capacity stood at 18.7 GW of electricity and 623.8 MIGD of water, with a significant proportion of domestic energy consumption used to desalinate water.

With average rainfall of just 110mm annually and no surface water, Kuwait is ranked as the world’s joint most water-stressed country, along with Saudi Arabia, Bahrain, Oman, the UAE and Singapore, among others, according to research organisation the World Resources Institute.

As a result, the country depends on desalination for much of its fresh water, and uses salty groundwater for irrigation in some regions. There are currently 10 desalination stations in Kuwait, including reverse osmosis plants, which complement the output of some of the larger facilities.

Rapid population growth, which has expanded by more than 160% since the mid-1990s to reach around 4.5m, is expected to fuel more demand for both power and water resources.

To help address these pressures, the government is aiming to produce 15% of the country’s power demand from renewable sources – such as solar and wind – by 2030, with the Kuwait Institute for Scientific Research in March signing a deal with two South Korean companies, KEPCO E&C and SAM UN, to share scientific research on sustainable energy sources.

Government looks to PPPs amid economic reform strategy

As the country rolls out new energy projects, the government is increasingly looking to employ the PPP model as a way of encouraging greater private sector participation while keeping state costs down.

While the water and energy sectors have traditionally been controlled by public enterprises, the drop in the price of oil in recent years saw the government pass PPP regulations in 2014 and 2015, which have subsequently led to greater private sector investment in the sector.

One such example was the first stage of the Az Zour North project, concluded in 2016, which included investment from French, Japanese and local companies, while in December last year KAPP awarded a consortium led by German company Wassertechnik Group the rights to implement the Um Al Hayman Wastewater project, expected to have a capacity of 500 cu metres per day.

Overall, the authority has 12 potential PPP projects at either the tender or pre-tender stage, of which five are in the utilities sector, five in real estate and one each in both transport and education.

© Oxford Business Group 2018