APPETITE FOR PPPS

Kuwait 2018 | ECONOMY | INTERVIEW

TBY talks to Mutlaq Mubarak Al-Sanei, General Manager of Kuwait Authority for Partnership Projects (KAPP), on potential projects and the role of PPPs in Kuwait and the region.

Mutlaq Mubarak Al-Sanei
BIOGRAPHY
Mutlaq Mubarak Al-Sanei is the General Manager of KAPP. He has a degree in economics from Kuwait University and was previously the Director of Follow Up Department – General Reservation sector at Kuwait Investment Authority. He has more than 30 years of experience in the management of diversified investments across the Middle East and North Africa and 10 years in the management of real estate and tourism projects in North Africa.

What have been the main milestones and accomplishments of KAPP over the past year?

We have reached the preferred bidders stage in two major projects in our pipeline. One is the solid waste treatment facility, which transforms waste into energy. We have sent the project documents to the State Audit Bureau and are awaiting its review. The second project is the Umm Al Hayman (UAH) wastewater project, a large project with an estimated total capital expenditure of around USD2.6 billion. We have finalized discussions with the preferred bidders over certain technical issues to be amended in the contracts, and will send the documents to the State Audit Bureau as well. Hopefully, we can determine the winning bidder and reach the financial closure of this project in 1Q2018.

Lower oil prices have strained government finances throughout the Middle East. How do you assess the role PPPs can play to fill this gap and give impetus to the Kuwaiti economy?

Governments in the region use PPPs as a tool to attract direct investments rather than solve fiscal difficulties. PPP projects are typically used to offer investors opportunities with a reasonable distribution of risk between the public and private sectors. It has become a tool to enhance FDI as well as local investment and, to some extent, solve some bureaucracy issues in the public sector to develop projects and manage public utilities. By inviting experienced private investors with the relevant know-how to participate in development projects, they can become part of the infrastructure management of the country. PPPs are not a tool to solve fiscal difficulties but to create a new channel to attract direct investment. KAPP can play a role in transferring ownership from the public sector to the private sector in greenfield projects, and in shifting the management of infrastructure projects from the public to the private sector. Privatization has proven to lead to higher efficiency and lower operational costs. The government and investors will reap the benefits of this policy.

Are you seeing a growth in acceptance of the PPP model in the business community?

PPP is a rather new model in this country; however, Kuwait started creating PPP regulations before other countries in the region. The appetite among investors for PPP projects was above expectations. The attractive distribution of risk enhances interest among investors for PPP projects in Kuwait. The offtake agreement with the government removes the demand risk, and the partnership with the government, therefore, has a high rating from international rating agencies. This is why investors from Asia and Europe are keen to participate in PPP projects in Kuwait.

Do you see KAPP as a gateway for foreign investors to come to Kuwait?

KAPP has to be one of the gateways for direct investment in Kuwait, though it cannot take full responsibility. Large PPP project capital expenditure is typically focused on infrastructure projects, and KAPP offers foreign investors the opportunity to deploy a significant sum with reasonable risk through a partnership for a long period of time, sometimes exceeding 25 years. Such an investment opportunity is particularly interesting when taking into consideration that Kuwait has a strong solvency status, and these factors have been behind the appetite among investors to participate in the power station projects, the solid waste treatment facility, and the UAH wastewater project. In PPPs, the financial structure typically relies on leverage, and the fact that banks have assessed the opportunities and accepted to go to this level of leverage means that there is general acceptance for the investment proposition. KAPP could therefore be a gateway to attract foreign investment to Kuwait.