WTE Wassertechnik GmbH’s UMM AL Hayman Wastewater Treatment Plant PPP Project in Kuwait

ASAR – Al Ruwayeh & Partners (ASAR) acted as Kuwaiti legal counsel to the consortium of WTE Wassertechnik GmbH (WTE) and International Financial Advisors Holding KSCP, who were awarded the Umm Al Hayman Wastewater Treatment Plant PPP Project in Kuwait.

The Umm Al Hayman Wastewater Treatment Plant Project consists of the construction of a new sewage treatment plant within the boundaries of the current Umm Al-Hayman water purification plant and which will utilise the latest wastewater treatment technology. WTE, as the main contractor, will be responsible for the design and construction of the sewage treatment plant with a contract value of approximately $719 million. With an estimated total construction cost of approximately USD 1.8 billion (excluding financing and operating costs), the Umm Al Hayman Wastewater Treatment Plant Project will be one of the world’s largest and most complex water treatment projects.

The ASAR team comprised Ibrahim Sattout (Partner), Mohammed Abulwafa (Partner), Akusa Batwala (Partner), Dania Dib (Senior Associate), and Talal Bijjani (Senior Associate) along with other associates in the firm.

An Interview With Ibrahim Sattout, Partner at Al Ruawayeh & Partners

What challenges arose as you worked on this deal? How did you navigate them?

The project structure combines both the build, operate and transfer system and the design, build and operate system in one project agreement, creating unique interface challenges for the sponsors, the lenders and legal counsels in terms of contractual structuring, documentation and financing.

In addition, this is the first PPP project to be procured under the PPP Law in Kuwait with untested procurement and tendering process, not to mention the new Capital Markets Authority and the Companies Laws which recently came into play.

Also, financial close was delayed due to COVID-19 and we had to deal with various complications which resulted from the effects of the pandemic, including rescheduling the financial close, reallocation of certain risks, finalising and perfecting the security package, etc.

Why is this a good deal for all parties concerned?

The project has numerous benefits. This is a great opportunity for the Kuwaiti government to develop the plant and expand its capacity and its pipelines and pumping stations networks, given the population growth in Kuwait. The plant will be also a great source of water to be used for irrigation. It is also a long-term investment for WTE with a 25-year operation term, with a possible expansion from 500,000 cubic metres/day to 700,000 cubic metres/day.

What precedents does this set for future PPP projects in Kuwait?

This project sets numerous precedents in terms of the documentation, structuring, procuring and financing of PPP projects in Kuwait. Of note, the corporate structure utilised is unprecedented for a project financing of this sort. In addition, one of the main innovations is the security package provided by the project company and the successful bidders, which is one of the first developed under the new PPP law.

Also, a number of new provisions of various laws came into play including the new financing regime under the PPP Law, the new regulations of the Capital Markets Authority and the amended Companies Law.

This project therefore sets a precedent in the implementation of PPP projects, and I believe it will influence future PPP projects in Kuwait and probably in the rest of the GCC.