The International Project Finance Association (IPFA) invited representatives from the Uganda National Roads Authority (UNRA), the Kenyan National Roads Authority (KeNHA) and the Kenyan PPP Unit to give an update of roads projects and financing. The briefing themed ‘Roads PPPs Taking Shape across East Africa’ took place at KPMG’S offices in Nairobi.
The event was attended by 120 delegates, supported by the East African Branch of the International Project Finance Association and co-sponsored by Gowling WLG and KMPG.
Co-hosted by Gowling WLG and KMPG, delegates from various public sector bodies, international and regional developers and banks, DFIs, investors, and advisory firms attended. The event provided UNRA and KeNHA with the opportunity to update the attendees on the progress of the Kampala – Jinja expressway and the Kenyan roads Public-Private Partnerships (PPP) programme.
It also gave the audience the chance to question a panel featuring representatives from the roads authorities, the Kenyan PPP Unit, Gowling WLG and Nedbank on various technical, financial and legal issues critical to the projects’ success.
The event was opened by Andrew Jackson (Head of Advisory, KMPG East Africa), with keynote addresses from Eng. Patrick Muleme (Head of Design, UNRA), Eng. George Kiiru (Head of PPP Section, KeNHA) and Eng. Stanley Kamau (Director Kenyan PPP Unit). Patrick, George and Stanley were later joined for a panel discussion by Daniel Odongo (Regional Coverage, Nedbank) and Tom Gray (Projects and Construction, Gowling WLG). The session was chaired by James Woodward (Head of Infrastructure Hub, KPMG East Africa).
Eng. Muleme spoke about the Kampala – Jinja expressway project, Eng. Kiiru gave an update on the Nairobi – Nakuru – Mau Summit PPP and the other roads projects yet to be launched in Kenya (including the Nairobi – Mombasa road, the second Nyali Bridge, and the concession for all tolling operations) and Eng. Stanley discussed the role of the Kenyan PPP Unit in the management of PPPs in Kenya.
In addition, the panel debate covered various issues such as the successes and lessons learnt from the procurements to date, the impact of regional elections, the form and strength of the government guarantee/letter of support intended to be issued to concessionaires and land acquisition issues pertinent to linear transport projects.
Financing PPPs in East Africa
The Kampala – Jinja PPP is set to benefit from the support of a number of development finance institutions (DFIs) and multi-lateral banks, providing viability gap funding and various credit enhancement products to mitigate certain risks which investors had previously raised. The phased project will receive grant funding from the European Union and French Development Agency, as well as a partial risk guarantee from the African Development Bank (AfDB) and anchor investment from the same institution into a bond issuance to cover the local currency portion of the debt.
As with any linear transport project such as a road or railway, the land acquisition process and its timely completion is a critical issue to developers considering bidding the Kenya and Uganda roads projects (and their lenders). In both Uganda and Kenya, the Governments have committed to providing the required land package, and the necessary rights of way, easements and access, to each concessionaire.
In Uganda, it is planned that these payments will be at least partially guaranteed by the AfDB, through a partial risk guarantee backstopping the Government’s payment obligation. KeNHA has yet to publically discuss how it will guarantee the availability payments, and it is hoped that the publication of the National Tolling Policy (which we understood has been approved by Cabinet but remains un-issued) will provide some more detail on how this fund is to be managed. The traditional form of Government support letter in Kenya is currently being discussed, and what will replace it is unknown.
In conclusion, Kenya and Uganda remain confident of retaining momentum as various projects move towards request for qualifications (RFQ) launch or short listing.