New legislation is boosting investment in Kuwait

Kuwait

Ibrahim Sattout, partner at ASAR, talks to The Energy Year about momentum in Kuwait’s energy and infrastructure sectors and the challenges of structuring successful PPPs. ASAR is a full-service corporate and commercial law firm that operates in the jurisdictions of Kuwait and Bahrain.

What is your outlook for Kuwait’s energy sector in light of recent reforms and developments?
There has been significant momentum in Kuwait’s energy and infrastructure sectors. Projects are being reactivated, and legislative changes such as the public debt law are opening the door to more financing options.
On the project front, Az Zour North Phase 2 and Phase 3 have reached the bidding stage, though it seems only one consortium – which we are advising – has submitted a proposal. We expect KAPP [Kuwait Authority for Partnership Projects] to announce the award by mid-2025. It is unlikely the government would cancel this project again, given the need to meet Kuwait’s energy needs.
Other major developments include the Al Dibdibah Solar Project in the Shagaya Renewable Energy Park, which is still awaiting its RFP [request for proposal], and the fixed telecoms project with the Ministry of Communications, which saw multiple bids and may be awarded by summer.
Separately, projects such as the GCC Rail, which just awarded its design phase to Turkey’s Proyapi, and the Chinese-backed Mubarak Al Kabeer port and renewables venture show that foreign engagement is intensifying.

What do these developments mean for Kuwait’s renewable energy goals?
Kuwait has made significant progress in advancing its renewable energy sector to accomplish its Kuwait Vision 2035 objectives. The country has pledged to achieve net-zero emissions by 2060, and the upstream oil segment, in particular, is targeting net-zero emissions by 2050, indicating a proactive approach within the industry. Recent developments include Kuwait’s announcement of investments of more than USD 3 billion in the renewables sector, the release by The Kuwait Foundation for the Advancement of Sciences of a comprehensive roadmap setting out strategies for energy efficiency and a sector-wide integration of renewable energy, and the signing of a technical agreement with the Chinese government to implement renewable energy projects in Abdali and Shagaya.
While these initiatives demonstrate a clear commitment by the Kuwaiti government to renewable energy, several challenges remain. The country’s heavy reliance on fossil fuels, coupled with the need for substantial infrastructure development and regulatory reforms, represents hurdles to achieving the government’s ambitious goals. However, the ongoing projects, investments and initiatives signal a positive trajectory towards a more sustainable energy future.

How significant is the energy industry for ASAR’s overall practice?
The power infrastructure sector represents a key area of interest and expertise of our firm. We support the Kuwaiti government’s energy initiatives and constantly advise lenders and sponsors on the implementation of power projects, which is mostly done through PPPs.
Our firm’s longstanding expertise in the power infrastructure sector is evident. We have been involved in nearly every state-sponsored PPP energy project over the past decade, and continue to assist our clients with energy project procurements. From Az Zour North Phase 1 IWPP to today’s Az Zour North Phase 2 and Phase 3 IWPPs, as well as Phase 1 of Al Khairan IWPP, we have advised both government bodies and private-sector bidders.
We assisted with the Clean Fuel Project, worked with KNPC on the structuring of KIPIC [Kuwait Integrated Petroleum Industries Company], and are advising KOC on its renewable energy initiatives. Further, we are advising Chinese clients on energy projects to be undertaken in Kuwait on the basis of the agreements signed between the state of Kuwait and China. Our expertise allows to easily anticipate, identify and resolve legal issues, whether it be during the feasibility, financing or implementation phases.
Even though some initiatives, such as KOC’s renewable plans, are still under internal review, our role in feasibility and advisory positions us strategically. Our experience allows us to anticipate issues and deliver solutions efficiently.
I should also mention that our firm consistently ranks among the most experienced in the energy and infrastructure sectors by legal ranking agencies, such as Legal 500 and Chambers and Partners. Our lawyers are regarded as experts in their fields.

You mentioned involvement in KIPIC’s structuring. What is your view on the potential KNPC-KIPIC merger?
The announced merger between KNPC and KIPIC, whereby KNPC will absorb KIPIC, makes strategic sense. KNPC focuses on refining, while KIPIC is active in integrated refining, petrochemicals and LNG import. Combining them consolidates resources and experience, which will likely enhance competitiveness both regionally and globally.
It should be noted that the merger comes as part of a broader trend in the GCC. GCC governments are restructuring their state-owned oil and gas corporate groups, as seen in ARAMCO’s purchase of 70% of SABIC in Saudi Arabia, the merger between RasGas and Qatargas and the merger of Oman Oil and Orpic Group to form OQ.
The merger between KNPC and KIPC would nudge Kuwait’s distillation capacity, which will be key as Kuwait navigates the challenges emanating from the energy transition and fluctuating oil prices. From a legal standpoint, corporate transactions involving state-owned entities require multiple layers of government approval – KPC’s board, the Supreme Petroleum Council, the Council of Ministers – which may have an impact on the speed of implementation.
On a related note, we had the honour of advising on KIPIC’s original formation years ago, and we are happy to see that KIPIC has come a long way since then as Kuwait’s leading petrochemicals company.

What is ASAR’s exposure to capital markets and debt financing in Kuwait, and are there any developments to highlight in that space?
We are uniquely positioned to advise clients on their capital market transactions and debt issuances, whether by way of bonds or sukuk (Islamic bonds), for the benefit of government and private entities. For example, we advised the Kuwaiti government on, and assisted it with, its inaugural international sovereign bond issuance in 2017, and we have advised on nearly every major debt issuance in Kuwait ever since, including those launched by banks such as the National Bank of Kuwait, Warba Bank, Burgan Bank and others. We have also advised on the privatisation of Boursa Kuwait.
Our longstanding expertise puts us in an ideal spot to advise the government on any future sovereign debt issuances. The newly-issued public debt law allows the issuance of up to KWD 30 billion [USD 97.5 billion], and is a game-changer for Kuwaiti sovereign borrowing. It brings more flexibility in instruments, maturity periods and borrowing structures, and it empowers the government to tap domestic and international debt markets to fund large-scale development projects aligned with Kuwait Vision 2035.
Importantly, the new law exempts government issuances from Capital Markets Authority approval, streamlining the process. Our past involvement with KIA [Kuwait Investment Authority] and the Ministry of Finance gives us deep insight into regulatory, legal and jurisdictional considerations, including arbitration clauses, taxation and sovereign immunity.

What legal challenges do you see for renewable energy and PPP projects in Kuwait?
A key issue is the lack of precedent and the absence of a unified and detailed legal framework to govern energy projects outside of the PPP sphere. Since 2008, only two PPP projects have reached financial close. The process remains lengthy and sometimes out of sync with the expectations of regional investors. Power purchase agreements often contain risk provisions that may make bankability challenging. Foreign investors, especially those from Europe or Japan, are also constrained by decarbonisation deadlines at home – they simply can’t back long-term fossil projects that extend beyond 2030.
On renewables, there is not yet a standard policy that sets out in detail the expectations and requirements of the Kuwaiti government from investors concerning renewables, or the standards and principles they must abide by. Further, there is a legislative vacuum when it comes to infrastructure projects based on inter-governmental agreements with foreign countries, as such projects are typically implemented based on said agreements only, without clear guidance on the interaction between such agreements and existing laws.
Notwithstanding the above, KAPP is aware and is working to align its agreements more closely with regional norms. Further, the Kuwaiti government keeps pursuing infrastructure projects implementation with foreign governments, such as China.

ASAR is a tier-one firm in corporate law. What is behind that recognition?
It is our track record. We have worked on most of the major deals in Kuwait, from the Americana acquisition and the Boursa Kuwait privatisation to the merger between KFH and AUB-Kuwait. We also handled the recent acquisition by Warba Bank of a large stake in Gulf Bank.
What sets us apart is our balance of legal precision and practical, business-oriented solutions. We are problem solvers. Every significant document goes through a senior partner. Our internal training ensures junior lawyers grow into leadership roles. Clients come back to us because we get deals done.

What message do you have for foreign investors considering Kuwait?
Foreign investors are advised to carry out both a financial and a legal assessment. Foreign ownership remains restricted, but Law No. (1) of 2024 may bring new openings. KDIPA [Kuwait Direct Investment Promotion Authority] exemptions exist and can offer full ownership. Meanwhile, local company structures can be tailored to ensure foreign investors maintain operational control and receive a larger share of profits through legally sound agreements.
There are ways to maximise value and control, even under the current framework. Kuwait is increasingly attractive for foreign investors, but the key is structuring the entry correctly from the beginning, understanding the particularities of doing business in Kuwait, including legal interpretations and implementations and the specificities of regulatory practices, and assessing the risks. For all these reasons, it is important for foreign investors to hire the right legal counsel.

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