Kenya Plans Tenders for $2 Billion Toll-Road Deals in May

Kenya plans to start tendering in May for toll-road contracts estimated by the government to be worth $2 billion to improve the efficiency of the East African nation’s biggest commercial routes, a Treasury official said.

The contracts will be in addition to the 45 deals worth about $3.2 billion that the government will start awarding as early as next week, to double the nation’s paved-road network through an annuity program.

The government is planning to introduce five toll projects covering about 800 kilometers (500 miles), including a new 482-kilometer dual-carriage highway between the port city of Mombasa and the capital, Nairobi, Stanley Kamau, director of the Public Private Partnership Unit at the Treasury, said in an interview on Monday.

“We have engaged transaction advisers and we are now working on the feasibility, final cost estimates, possible toll charges and the time of recouping investors money,” Kamau said.

Kenya is retaining PricewaterhouseCoopers LLP to advise on the development and maintenance of the Nairobi-Mombasa highway, while it hired Intercontinental Consultants and Technocrats Pvt. Ltd. of India for the same scope of work for a new 176-kilometer highway connecting the capital to the southwestern city of Nakuru. Intercontinental consultants will also advise on the operation and maintenance of the 80-kilometer Nairobi-Thika road, according to the Treasury.

Regional Hub

The toll roads will be constructed for use over as long as three decades, according to Kamau. The Treasury is drawing from a $40-million World Bank loan to do feasibility studies for the projects and partly finance land acquisition.

Kenya is seeking funds from private sources to support its plans expand transport infrastructure and create a regional transportation hub that will help it accelerate economic growth to 10 percent by 2017 from 5.4 percent last year.

“With the private sector, we can do what government aspires for in infrastructure development faster, than when relying on public funds alone,” Kamau said. “We should have toll guidelines by April, then start the tendering process.”

John Musonik, infrastructure principal secretary at the Transport Ministry said winners of the first contracts under the road annuity program could be announced next week. The government is setting up a Road Annuity Fund to expedite construction of roads in a country where less than 10 percent of the 161,000-kilometer network is paved, according to the Kenya Roads Board.

Annuity Fund

Unlike the toll-road projects, where investors will charge a fee to recoup their investment, the other roads will be paid for under the annuity program, in terms of which investors build roads and are then repaid over a period of time, Musonik said Monday in a separate interview in Nairobi.

The government has capped the cost for building roads under the annuity fund at 30 million shillings per kilometer for rural roads, 55 million shillings for the same length in urban areas and 70 million shillings for highways. These roads will be built to last for 10 to 15 years.

“In the past, we had situations where roads were costed at 120 million shillings per kilometer, and we think that’s not right for all roads,” Musonik said.

Kamau said they talks were held with bankers last week to address their concerns about the annuity program.

“They wanted assurances that government wont delay payments and how we would address foreign-exchange risks,” he said. “We told them the annuity fund is created to also ensure payments are available and made on time, and on the forex risk, we agreed they would bid in the currency of their choice; shillings or dollars.”

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