Kuwait's PPP Law - Public Projects: Private Finance

In the last 12 months alone, the State of Kuwait has issued requests for qualifications for a multitude of large-scale infrastructure projects, the costs of which are likely to be in the tens of billions of dinars. In the past, Kuwait could only have considered such massive project finance obligations against the backdrop of the country's medium to long-term projected oil revenues. But, as they are fond of saying in the financial world, "this time things are different." Indeed, for Kuwait things may in fact be different this time insofar that it is not the government or public sector that is expected to be the primary financial backer of a diverse array of projects including, among others, the planned redevelopment of Failaka Island, a new physical rehabilitation hospital, a waste water treatment plant, a national rail road network, a power plant, as well as the comprehensive redevelopment of the country's international airport. Rather, such projects and many others, are expected to be developed under Kuwait's Public Private Partnership (PPP) Law (Law No. 7 of 2008). Under the PPP Law, projects with anticipated costs in excess of KD 250 million will be financed using a special purpose vehicle, established as a public joint stock company, which will raise the necessary development capital through the sale of its shares at auction. The committee administering the PPP program (Higher Committee) has discretion to choose alternative financing mechanisms (e.g., direct tender), for projects having finance costs between KD 60 million and KD 250 million. As alluded to above, the intention of the PPP Law is to create wider ownership in larger projects (i.e., to shift the development cost burden away from the government and toward private investors), while giving the investor management control of the joint stock company and the project. In this regard, where the joint stock company approach is used, Article 5 of the PPP Law prescribes the formula for allocating the company's shares:

40% of shares will be offered by the joint stock company in an open auction among companies listed on the Kuwait Stock Exchange and other companies approved by the Higher Committee. The...