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Project activities slowdown in third-quarter
November 4, 2017, 3:10 pm

Decision by Kuwait Authority for Partnership Projects (KAPP) to cancel the high-value 1500MW Al-Zour North 2 Independent Water & Power Project (IWPP) in August severely impacted the anticipated strong performance in project-signings for third-quarter of the year.

The cancellation of Al Zour North 2 IWPP, a project worth an estimated KD800 million, has left the total amount for contracts awarded in the third-quarter of 2017 at KD810 million — significantly lower than the five-year quarterly average of KD1.4 billion. Meanwhile, Year to Date (YTD) contracts awarded stood at KD2.93 billion — down 39 percent from the same period last year, says a report by the National Bank of Kuwait (NBK).

The cancellation of the highly-anticipated project by KAPP — the main body responsible for implementing Public-Private-Partnership (PPP) projects in Kuwait — more than a year after bids were submitted for the project, has raised concerns about the future of other ambitious PPP programs planned by Kuwait.

Although KAPP has clarified that it intends to re-tender the highly anticipated IWPP2 as an integrated Al-Zour North 3 IWPP in the near future, and Kuwait’s PPP program saw a major success with completion of the first stage of the Az-Zour North in November 2016, several PPP projects have since then struggled to even cross the bidding phase.

Among the projects still in limbo is the 500,000m3 per day Umm Al-Hayman Waste Water Treatment Plant, which is still stuck at the bid consideration phase nearly seven years after it was first mooted, and the Wastewater PPP project in Kuwait Southern area that was initially drafted in 2012.

The NBK report also notes that in line with previous quarters, activity in the construction sector was muted, with projects worth only a total of KD103 million being awarded in 3Q17. But this was relatively better than the transport sector, which showed the slowest activity for the first time in five consecutive quarters by contributing a meager KD31 million in the third-quarter. Delays in awarding contracts related to the South Al Mutlaa City, affected the performance of the transport sector in this quarter.

The silver lining during the third-quarter were the power and oil sectors, which saw project activity worth KD277 million and KD402 million respectively. The main driver of activity in the power sector was the Kabd Municipal Solid Waste Project, a waste-to-energy PPP project, which was awarded to a consortium led by France’s Constructions industrielles de la Méditerranée that bid KD236 million.

Activity in the power sector is likely to surge in the coming quarters with up to KD640 million in contracts anticipated to be awarded in the next four quarters. Among the main projects is the KD360 million Al-Dibdibah Solar PV power plant, which is expected to be awarded by Kuwait National Petroleum Company (KNPC) in first-quarter of 2018.
The Al-Dibdibah project, which will come up at the Shagaya Renewable Energy Complex located to the northwest of Kuwait City, is projected to generate 2.5GWh of power per year and will help contribute to the country’s long-term plan of sourcing 15 percent of its electricity needs from renewable energy by 2030.
In the oil sector, activity picked up in 3Q17 mainly from the awarding of two projects. The first was a feed pipeline for the new Al-Zour Refinery, which was awarded to the Italian company Saipem for KD255 million. The second main contract was for a crude transit pipeline from North Kuwait to the central mixing manifold in Al Ahmadi, which was awarded to Indian firm Larsen & Toubro for KD113 million.

Despite the cancellation and delays that impaired activity in the 3Q17, overall the projects pipeline in Kuwait remains healthy. Many of the projects delayed, especially in the transport and construction sectors, are likely to be released in the upcoming quarters.

In the next two quarters, 4Q17 and 1Q18, the transport sector has up to a total of KD2 billion in contracts that are expected to be awarded. The Ministry of Public Works (MPW) and Public Authority for Housing Welfare (PAHW), have a combined twelve contracts in the transport sector that are currently in the bidding phase.

Similarly, barring any unexpected delays, projects worth an estimated KD1 billion are also expected to be tendered in the construction sector in the coming quarters. The Jahra Ministries Complex is a possible KD260 million deal that could be awarded in the coming few quarters, most likely in the second-quarter of 2018. However, it is highly likely that prevailing tight oil prices and budgetary constraints will push many project awarding dates further down the quarters in 2018.


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