KUWAIT: The privatization law approved earlier by the National Assembly is also applicable to the power and electricity sector that has recently implemented many future projects. This vital field has been undergoing a lot of pressure to cater to the huge demand and limited supply, taking into consideration the limited number of power plants in the country. Many might have experienced power outages during previous years as well. This summer too, heavy loads lead to a power cut off in many areas. The Parli
ament has passed a law to set up shareholding companies to build new power and water desalination plants. Furthermore, according to the development plan, KD 5 billion will be spent on agriculture, commerce, education, power generation and transportation.

According to the law, the new companies will sell utilities to the government based on contracts that are valid for 40 years. At present, the country's five desalination power and water plants are owned and run by the Ministry of Electricity and Water, which sells electricity and water at a heavily subsidized rate.

Suheila Maarefi, Head of Research and Studies Department at the Ministry of Power and Water said that nothing is finalized regarding future projects undertaken in the power sector. She, though, pointed out that any project which is going to be above 500 MW production will be transferred on a Build-Operate-Transfer(B-O-T) basis. With regard to the rest of projects, they will be performed by the ministry, Maarefi said.

As Maarefi stressed that nothing has officially been done. She pointed out that the EPC (Engineering Procurement Contracting) power plant project will be set up on a B-O-T basis or in other words, in terms of IWPP (Independent Water and Power Project). This project is of capacity of 1500 MW and 100 million gallons.

David Pfeiffer, Managing Partner at law firm Denton WildeSapte's Kuwait office commented on the subject saying that government officials have spent a lot of time since the Gulf War discussing power generation issues. One of the weaknesses of an open political society like Kuwait is that discussions over major projects like power plants are often protracted, as each constituency voices its concerns and protects its own interests. Competing groups and individuals have collectively hurt the country, as these
projects have been delayed year after year, he pointed out. "At some point, perhaps later this summer, we may pay the price," he considered. Nevertheless, when the new power plant comes on line next year, the worst scenario will have been averted, he said.

The problem is not just capacity, but also the quality of the distribution network, he added. The Ministry of Power and Water has acknowledged this. He hoped that the less glamorous projects, such as replacement of aging cabling, become a priority for there is a great new technology in the market that will allow wholesale changes in the distribution network without creating more shortages, as Pfeiffer mentioned.

As for privatization of power production, there is uneven experience with all forms of privatization practiced worldwide. One thing is clear, however, that private operators are driven by profits. Kuwait's current power system is highly subsidized, meaning that it will be a challenge to create a privatization program that takes advantage of the efficiencies that privatizations bring, while at the same time controlling pricing to ensure maintaining the historically inexpensive access to power. This is the challenge that all governments face when they try to privatize highly-subsidized industries. Kuwait will not be immune to this challenge, he concluded. - Kuwait Times