Key Points
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In July 2014, the Government of Kuwait enacted “Law No. 116 of 2014 Regarding Public Private Partnerships” (the “PPP Law”), which was officially published in August 2014. In March 2015, the Government of Kuwait published executive regulations relating to the PPP Law in accordance with Article 46 of the PPP Law.
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The PPP Law replaced “Law No. 7 of 2008 regarding the Regulation of Build, Operate and Transfer (BOT) Operations and Similar Operations” (the “2008 Law”).
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The PPP Law is intended to be more comprehensive and an improvement on the 2008 Law.
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This note highlights the more significant elements of the PPP Law.
Establishment of the Higher Committee and KAPP
Under the PPA Law, the Higher Committee is empowered to approve the procurement of all PPP projects. In addition, the PPP Law mandates the establishment of KAPP (to replace the existing Partnership Technical Bureau established under the 2008 Law). The significant difference between the PPA Law and the 2008 Law is that the Higher Committee under the PPP Law has considerably more approval powers over the ability of individual public entities to enter into PPP based projects. Therefore, more uniformity across projects can be expected.
Nature of the Project Company
Under the PPP Law, the project company may be fully owned by the consortium members for any project estimated to cost less than 60 million KWD. Where project costs exceed 60 million KWD, a public joint stock company must be established (by KAPP) of which 50% of the shares must be offered to the general public (of Kuwait). The remaining 50% of shares may be split between the successful bidding consortium and the applicable public procuring entity– however, the successful bidding consortium will always be entitled to at least 26% of the shares.
The ownership of the applicable project company is exempted from the nationality requirement of Law No. 68 of 1980. In addition, in case any provision of the PPP Law as relates to ownership conflicts with the requirements of Decree Law No. 25 of 2012 (relating to Companies Law), the provisions of the PPP Law will take precedence.
Commercial Elements
Some other elements to note that would apply to projects developed under the PPP Law include:
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The maximum term of the PPP agreement can be no greater than 50 years – with assets to be transferred to the state at the end of the term. There are possibilities for extensions of the term but these would be subject to a competitive bid process (with some advantage to the incumbent).
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Parties providing proposals for unsolicited projects shall have some advantage in the competitive bid process in the event such projects are developed.
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The PPP Law contemplates that the projects will need to be project financed and allows owners to pledge their interests in the project company.
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The PPP Law requires an ownership lock-up period during which no transfer of ownership in the project company will be allowed – but the actual timeframe is to be determined on a project-by-project basis.
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The PPP Law contemplates state incentives, e.g., exemptions from tax, duties, fees, but does not make these mandatory nor provide any details.
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The PPP Law is silent on repatriation of funds by foreign owners – to the extent there are laws in Kuwait that limit this, these restrictions would not be overruled by the PPP Law.
Conclusion
The Kuwait PPP prospects are very encouraging given reports that the country has a pipeline of several billion USD worth of projects to award. In addition to Kuwait’s prospects, other investment PPP opportunities in the region exist in Saudi Arabia, Egypt, Oman and the UAE (a PPP law was issued in Dubai in 2015).
