Wartsila Kuwait offer may be too good to go ahead
29 August 2024
Finnish power equipment manufacturer Wartsila's offer to build a $1.4bn, 1.5GW power plant in Kuwait, despite what seems to be perfect timing, may be too good to go ahead.
The company said it could complete the power plant in 18 months, plans to finance the project entirely and sell electricity at KD0.11 a kilowatt-hour (kWh), or approximately 3.6 $cents/kWh.
This rate seems competitive given that the average levelised electricity cost from gas-fired generation plants ranges between $c4-10/kWh, depending on the location and cost of fuel, according to an expert.
The offer also comes when many areas in Kuwait have been struggling with power outages lasting between one to two hours a day since June, as temperatures soared driving peak demand to their highest levels and stressing available generation and distribution capacity.
Related read: Heatwave causes dramatic Kuwait power outage
It also comes as the procurement process continues to drag for Kuwait's plans to develop its next two gas-fired independent water and power projects, Al-Zour North 2 & 3, and Al-Khiran 1, which will have a total combined power generation capacity of 4.5GW.
The procurement process for Kuwait's first utility-scale solar power plant is also under way but might still take some time to get to the award and construction stages.
In the semi-likely scenario that the Al-Zour North 2 & 3 contract gets awarded six months after bids are submitted in September, early power from that plant – and relief from the routine summer power outages – may only become available by the summer of 2027.
As such, Wartsila's proposal to build a power plant within 18 months will, if accepted, potentially beat the timeline for Al-Zour North 2 & 3.
Yet, despite the practical value of Wartsila's offer – and those made by others before it – its proposal will likely face the same chronic issues other projects have to deal with.
For one, it is unclear which Kuwait government agency received Wartsila's offer. And, despite the initial optimism over improved project activity upon the dissolution of Kuwait's parliament over three months ago, indecision continues to persist for most projects and investments including in the utility sector.
Crucially, Wartsila is best known for supplying and building small power generation plants whose individual capacities are nowhere near what it proposes to build in Kuwait. It is also unclear if the company has previously implemented any independent power producer (IPP) project in the region.
Photo credit: Wartsila
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