More than two years after Kuwait’s first independent water and power project was commissioned, developers are hopeful that progress will be made with the next major private utilities projects in 2019.

Finished in December 2016, the Al-Zour North 1 independent water and power project (IWPP) marked a significant milestone for Kuwait. It was the first project delivered as a public-private partnership (PPP) and was supposed to be the trailblazer for a long list of major utilities projects to be developed by the private sector.

Reforms and legal amendments have delayed the country’s PPP programme since the completion of the first phase of the Al-Zour cogeneration development. However, after finalising agreements for the next PPP project in late 2018, the Umm al-Hayman wastewater treatment plant, developers are optimistic that progress can be made with the next raft of projects, starting with the Al-Zour North phase 2&3 scheme.
Rising demand

The planned IWPPs will be critical in meeting the rising demand for electricity and water in Kuwait, which are both increasing at a rapid rate. In 2016, the last year for which data is available, peak demand for electricity and water grew by 4.5% and 6% respectively.

Demand for utilities is expected to grow rapidly up to 2030 as the government pushes ahead with major housing, industrial and hydrocarbon projects. The Ministry of Electricity & Water forecasts that an additional 17GW of power capacity and 450 million imperial gallons a day (MIGD) of desalination capacity will be required by 2030 to meet expected demand.

Progress picks up

The cancellation of the planned Al-Zour North 2 IWPP in August 2017, more than a year after bids were submitted, led many investors and contractors in the region’s utilities market to question whether Kuwait was a viable market to participate in.

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The project had already faced numerous delays following the restructuring of the government’s PPP body, which changed its name from the Partnerships Technical Bureau (PTB) to the Kuwait Authority for Partnership Projects (KAPP), and revisions to the country’s PPP law. The cancellation of the tender resulted in further disillusionment with Kuwait’s PPP programme, which at one point had promised $30bn of investment opportunities.

However, the signing of the letter of award (LOA) for the Umm al-Hayman wastewater treatment plant in November, which followed on from the approval of the Kabd solid waste PPP, has led to fresh optimism that Kuwait’s utilities market can deliver on its promises.

Next phase

Shortly after the award of the Umm al-Hayman scheme, KAPP received expressions of interest (EOI) from developers for the next phase of the Al-Zour North IWPP and the Al-Khiran IWPP. MEED recently reported that KAPP was evaluating bids from three groups for the advisory services roles on the IWPPs, having received proposals in early 2019.

The Al-Zour phase 2&3 IWPP will merge the previously planned second and third phases, and is planned to have a generation capacity of 2,700MW and a desalination capacity of 165 MIGD. The Al-Khiran 1 IWPP will have a generation capacity of 1,800MW and a desalination component of 125 MIGD.

Following the appointment of advisers, KAPP is planning to tender the projects six months apart, with the Al-Zour North 2&3 IWPP expected to be the first to reach the market.

“We are going to have a six-month gap between the two tenders,” Muneera al-Bahar, senior engineer at KAPP, previously told MEED. “We came to this decision following a workshop we had with investors, and the view was that this gap is important for financing as most of them are interested in investing in both.”

Closing the gap

Delivering the projects is becoming a major priority for Kuwait’s utility providers, with increased consumption and rising summer temperatures leading to a tightening of available supply to meet the growing demand for electricity.

On 9 July last year, Mohammed Boushahri, undersecretary of the Ministry of Electricity & Water, declared that consumption reached 13,790kW as temperatures soared to 49 degrees Celsius.

With consumption levels expected to rise to 14,500KW this year, dangerously close to the current production limit of 16,000KW, it is vital that the next phase of IWPPs is delivered in tandem with the ministry’s efforts to reduce consumption by the residential and industrial sectors, which record some of the highest consumption levels per capita in the world.

In line with the regional move towards integrating significant renewable energy into the power sector to reduce fuel costs and carbon emissions, Kuwait has set a target for 15% of its total energy requirements to be produced by clean energy sources by 2030.

To date, Kuwait’s installed renewable capacity has been limited to rooftop projects on government buildings and pilot projects at the Shagaya renewable energy park, with solar and wind projects to produce up to 70MW for the initial phase when commissioned.

Kuwait, however, has grand plans for the Shagaya renewable energy development, with the site scheduled to house an installed capacity of 3GW by 2030. The first large-scale project is due to be delivered by state oil major Kuwait National Petroleum Company (KNPC), which has tendered a 1.5GW photovoltaic (PV) project. Up to eight international consortiums are preparing to submit proposals on 16 April for the project, which is planned to be developed under an engineering, procurement and construction plus-finance (EPC+F) contract.

If Kuwait is to avoid any shortfalls in power and water production in the coming years, it must ensure that it can succeed with its IWPP and clean energy programmes this time around. While recent events have increased optimism over the next projects, investors are waiting for plans to evolve into delivery.

This article is sourced from Power Technology sister publication, a leading source of high-value business intelligence and economic analysis about the Middle East and North Africa. To access more MEED content register for the 30-day Free Guest User Programme.