Govt secures deals for two new PPP-model road projects

The Government has completed a deal to develop two new major road projects in Western and Central parts of the country through the Public-Private Partnership model, the Kenya Urban Roads Authority (KURA) has announced.

The breakthrough happens at a time Kenya’s foremost mega highway project – the Nairobi Expressway, financed and constructed under PPP terms nears completion.

The road projects, marked as Lot 15 and Lot 18, according to KURA, will deliver 45.0 Kms spread across the Counties of Nyeri, Murang’a, Kirinyaga, Laikipia, Embu and Tharaka Nithi and 35.0 Km of roads in Vihiga, Kakamega, Bungoma & Busia counties respectively.

“The Lots were evaluated and screened and found suitable to be implemented under the programme through the Value for money (Vfm) analysis,” KURA said after the deals were finalized.

In a statement released at a ceremony to mark the signing of the financial close of the two road projects, the authority noted that the success in their implementation will unlock the potential that is available within the private sector and gives the much-needed confidence among the sector players that the country is mature and ready for innovative project financing ideas.

“The attainment of Financial Close for Lot 15 and Lot 18 projects under the Road Annuity Programme marks a major milestone in our quest to diversify the financing of infrastructure Development Initiatives in Kenya.”

“Participation of the Private sector is key in supplementing and complementing the Exchequer resources in the development of road infrastructure in Kenya and as KURA, we are fully committed to pursuing this opportunity to the latter;” the state agency under the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works said in the statement.

While lauding the achievement, KURA indicated that the process to get the deals over the line has been treacherous, taking close to eight years to complete. The Authority says this was the case for the reason that each of these steps involved includes elaborate approvals and clearances as stipulated under the PPP Act.

“The process involved several activities: Identification of roads, obtaining approvals, prequalification of the bidders, preparation of and issuance of RFP Documents, receipt and evaluation of bids, Negotiations and submission of project negotiation reports, negotiations for the Project Agreements, seeking and obtaining of Cabinet approvals, Legal Clearance from the Attorney General’s Office and fulfillment of all the Conditions Precedent to Financial Close.” The Authority noted in the statement to newsrooms

KURA says the latest projects are part of the Road Annuity Programme aimed at helping the country to develop 10,000 km of new roads in order to increase the paved road network from the current 14,000 km to 24,000km thus providing necessary stimulation to the primary sectors of the economy.

The programme was intended to create mechanism through which the government would tap into the private sector to fast-track some of the priorities stated under the Vision 2030.

The two deals completed recently were part of Ten (10) Lots with a total of 364.38Kms covering urban roads spread across various counties that had been identified and were being pursued by KURA.

“Due to the challenges associated with this new concept, only three lots (Lot 15, 18 & 20) were able to progress to the project negotiation stage. Lot 20 has not been able to progress beyond the negotiation stage due to challenges associated with the sufficiency of funds,” the Authority disclosed

The two projects, according to KURA, will see construction of the project roads within the first two years and performance-based maintenance for eight years during which the Project Company will receive prescribed payments as per the agreement.

Other than KURA, some of the state institutions that participated in the negotiations include the Ministry of Transport, the PPP Directorate, the National Treasury, the Office of the Attorney General, the transaction advisors, and the project company together with the financiers.

As the lead institution in the management, development, rehabilitation and maintenance of urban national trunk roads, KURA has been actively engaged in the process of procuring the projects under the Road Annuity programme.

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