Boston, MA -- (ReleaseWire) -- 04/29/2014 -- Kuwait's first public-private partnership for the construction of the 1.5GW al-Zour power plant and desalination plant has the potential to set a precedent for greater private sector engagement within Kuwait's infrastructure and power sectors. The country, which relies almost entirely on conventional thermal sources for electricity generation, has suffered from power shortages in recent months. With demand for power likely to continue rising rapidly in the years ahead, the government is keen to spur additional investment in the sector. That said, Kuwait's business environment remains challenging for international investors, and we question the timely realisation of the project given the barriers still left to overcome.
Conventional thermal sources will remain the dominant fuel for electricity generation in Kuwait over the coming years. Following the Fukushima tragedy in 2011, Kuwait ordered the National Nuclear Energy Committee to be dissolved and officially abandoned its pursuit of nuclear power. However, the country is nevertheless aiming to reduce its domestic oil consumption in an effort to free up additional barrels for export, with many power projects that are planned or under construction set to use gas.
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The electricity and water ministry wishes to more than double generating and desalination capacity by 2017 to cater for growing demand and an estimated US$2.5bn is expected to be invested over the medium term.
As part of these efforts, in late December 2013 the government awarded a US$2bn contract for the construction of the emirate's first independent water and power contract, granting private companies a stake in the country's energy sector for the first time in an effort to encourage investment. The government has also set ambitious targets with regard to the use of renewable energy, but there is a long way to go before renewables will play a major role in the country's energy mix. At the same time, the country's highly dysfunctional political system poses significant downside risks for the sector in the coming years, with bureaucratic wrangling regularly causing delays to the implementation of planned projects.
Key Trends And Developments
- The Kuwaiti government has secured US$1.4bn worth of financing from a consortium of lenders as part of the country's first Public-Private Partnership (PPP) for the 1.5GW Az-Zour North power plant and desalination facility. The consortium of banks includes NBK, JapanBank for International Cooperation, Bank of Tokyo-Mitsubishi and Standard Chartered Bank, and the project developer is South Korea's Hyundai Heavy Industries.
- In December 2013, Spain's Isolux Corsan was awarded a contract for the engineering, procurement and construction of 172km of 300kV transmission lines in Kuwait. It will be the company's first project in the Gulf state. The contract is valued at US$105mn, with work expected to be completed in 22 months.
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