Financing PPP projects has always been a complex endeavour; such complexity is exacerbated by a set of unique challenges stemming from the regulatory environment and practices in Kuwait. With wise words of the vastly experienced Mr. Faisal Sarkhou, Chief Executive Officer of KAMCO Invest, still in the air from previous discussions, panel 3, moderated by Mr. Ibrahim Sattout, Partner at ASAR, addressed the challenges facing PPP project financing from the Kuwait perspective and what could be improved to increase the bankability of projects. Supporting the comments from Mr. Hassan F. Choudhry, the Chief Financial Officer at the Umm Al Hayman for Wastewater Treatment Company K.S.P.C. who participated in the earlier 2nd panel, Mr. Joachim Dudey, Chief Executive Officer of Umm Al Hayman for Wastewater Treatment Company K.S.P.C. identified three key issues he has experienced with PPPs in Kuwait:
- the misalignment of the PPP necessities and contractual obligations across different authorities,
- the inability to use hedge in tender documents in Kuwaiti Dinars,
- and the sudden departure of qualified governmental advisors after deals have closed.
Mr. Choudhry, who has had the unique experience of being the CFO of two of the primary mega PPPs in Kuwait, had highlight that, in his opinion, building a track record of successful PPP projects, adopting a whole life costing approach when structuring the financing for PPP projects and identifying a reliable sponsor and / or consortium with a strong technical history of delivery of similar projects were some of the crucial factors in ensuring a successful PPP. He pointed out that it was essential that the government maintained the services of it transaction advisors post contract signing to ensure that the project implementation run smoothly. He mentioned that it was crucial that government authorities involved in any aspect of the project should be made aware of the implications of the PPP Laws that they would be required to implement in order for them to act as true partners in the PPP projects being procured by the government.
Panel 3 felt that the three issues outlined by Mr. Dudey affected bankability of PPP projects in Kuwait and pointed out that this was also impacted by a lack of security and reliability of revenues with PPP projects and clauses in contracts that didn’t secure payments or made bidders uncomfortable. However, the panel comprised of Mr. Gerard Snabian (Vice Chairman and Chief Executive Officer of AlShall Group), Mr. Kapil Kumra (Deputy GM & Head of Project Finance at National Bank of Kuwait) and Mr. Derek Kirton (Partner at Covington & Burling LLP) noted that these issues could be addressed by setting up the suggested “one stop shop” initiative to deal with PPPs and using a specific template across all projects and bidders to simplify the process. This would speed up the PPP process and bring more projects to fruition in Kuwait. Addressing the finance perspectives, the panel noted that Kuwait banks had money to invest in projects and there were sufficient private sector deposits to move forward with PPP projects. Nonetheless, it was noted that investors were still hesitant to move forward. They believed this could be attributed to the time delay between bids and procurement of projects which need to be significantly reduced. Often economic aspects change during this period causing further delays as investors need to go back to the bank.
Lastly, the panel emphasised the need for Kuwait to clearly lay down their objectives and guidelines in terms of decarbonisation. Investors are hesitant to move forward with deals where they do not have a clear understanding of all the requirements and banks do not want to lend money if projects do not meet international and local policies on carbon emissions. In closing, the panel reiterated its belief that PPPs are beneficial for economic growth and that money is available for investment, but a more streamlined process, with a well-defined legal framework and clear policies on green energy, would make projects more attractive to investors. Panel 4 was moderated by the Mr. Amr Wageeh, Chief Legal Officer and FDI Policy Adviser, Kuwait Direct Investment Promotion Authority (KDIPA). A fruitful discussion took place that unpacked the PPP initiative, detailing thoughts and opinions from distinguished General Counsels (GCs) from the region.
Through his experience as Executive Counsel at GE Gas Power, Mr. Munib Khan was able to discuss the importance of in-house lawyers in advising their clients. He spoke about the input provided by in-house lawyers, especially when dealing with customers who have great technical expertise in their field but not as much experience when it comes to the procurements of mega PPP projects. He stressed that in-house lawyers have had to step up and advise their employers on the need to engage professional advisors to help the navigate complex and sophisticated project documentation. He also emphasised the need for in-house lawyers to be able to operate beyond the narrow speciality of their companies, in order to add value to their employers. Mr. Hisham Al-Hajjar, General Counsel at Wafra International Investment Company, echoed this notion from the perspective of the public sector. Drawing on his experience as in-house counsel at KAPP, he felt it was important for lawyers working in the public sector to understand the objectives of the private sector. He stated that this greater understanding would help public sector attorneys bridge the objectives gap between the two parties.
Lastly, Al-Hajjar accentuated the need for in-house lawyers to stay abreast of the latest developments in the legal arena to ensure their relevance in documentation negotiations. The panel concluded by stating that GCs provide crucial legal advice on participation in PPP projects following thorough due diligence. They offer strategic counsel to the management team and often participate in the decision-making processes and play a significant role in the negotiation, drafting and review of PPP contracts.
Being the premier PPP practice in Kuwait, ASAR is the preferred PPP legal advisor on PPPs. It has advised the government, sponsors and lenders on PPP projects and can provide the necessary guidance to entities that are navigating the PPP process in Kuwait. In closing, Kuwait can drive its economic growth through transformative PPPs, and with ASAR at the helm, this would be to the benefit of Kuwait as a nation and would ensure sustainable economic growth for future generations.