The KD300 million Az-Zour North Phase One Power and Water Desalination project, the first Public Private Partnership (PPP) in Kuwait’s energy and water sector, underlines how PPP projects in the country can delivered on time and operated profitably.
The Az-Zour North Phase One, which entered full commercial production last week, forms part of the overall Integrated Water and Power Production (IWPP) project planned for the Az-Zour area, which is expected to be developed over five phases. The remaining four phases of the IWPP are in different stages of being tendered and completion of these phases in a timely manner will be critical to meeting the country’s economic growth and development.
At a ceremony held last week to mark the commercial production, Shamal Azzour Al-Oula, the company that owns and operates Az-Zour North Phase One, announced that with the commencement of full production, the project has the capacity to generate 10 percent of Kuwait’s power requirements at peak capacity (1539MW) and 20 percent of the country’s water generation (487 million liters per day).
Speaking on the occasion, the General Manager of KAPP Mutlaq Al-Sanea said: “This is our first PPP project to be tendered and the first to be completed. All of us at KAPP are extremely proud of this achievement and the transparent and efficient tendering process it involved. The success of this project is proof of the benefits of PPP model and how the private sector, international partners and the State can all work together on delivering major infrastructure projects on schedule and on budget for the benefit for the people.“
Revealing that four projects worth an estimated KD1.8 billion were currently under technical evaluation by KAPP, Al-Sanei added that there had been some changes to Kuwait’s PPP body and the country’s legal framework since the contract for the country’s first PPP project was awarded in 2013. Due to new exemptions to taxes and fees for developing projects, Kuwait now offered a much more attractive PPP market than many other countries in the region, he said.
The Az-Zour North Phase One, which is partly owned and fully operated by Shamal Azzour Al-Oula cosnortium was completed to schedule and on budget. The project started construction in December 2013 and was the first to be awarded under the country’s Independent Water and Power Production (IWPP) projects.
Shamal Azzour Al-Oula is 40 percent owned by a private consortium comprising ENGIE, Sumitomo Corporation and A.H. Al-Sagar & Brothers. The remaining 60 percent is owned by the Government of Kuwait through the Kuwait Investment Authority (KIA) with 5 percent, the Public Institution for Social Security (PIFSS) with 5 percent and the Kuwait Authority for Partnership Projects (KAPP) with remaining 50 percent.
In line with its PPP policy, the Government of Kuwait is mandated to sell 50 percent of its total ownership through an Initial Public Offering (IPO) to Kuwaiti citizens, once the project is completed. Following the IPO, the government will retain only the remaining 10 percent stake in the company.
The entire power and desalinated water produced by the project will be supplied to the Ministry of Electricity and Water (MEW), which operates the country’s water and electricity grid, under a 40-year long-term Energy Conversion and Water Purchase Agreement (ECWPA). ENGIE and Sumitomo Corporation will undertake the Operation & Maintenance (O&M) of the plant on an equal share basis.
The Az-Zour North Phase One forms part of the government’s plan to significantly boost water and electricity capacity to meet growing demands and to fulfill the expected peak demand of 25GW of energy by 2025. When completed, the five phases of Az-Zour North will have a total capacity of 4,800 MW of electricity and 1.3 billion liters per day of desalinated water.