Thursday, 9 May 2019

Kenya Pioneers East Africa in PPPs

A prototype of the Mombasa
 - Nairobi Expressway
Kenya is the pioneer is Public-Private - Partnerships, PPP, in East Africa with total PPP investment estimated of $6.4 billion already committed. Of these, an estimated $2 billion is already invested in the energy sector. The balance, an estimated $4.2 billion will be sunk into roads construction.
 Public-Private- Partnerships are the provision of public services by the private sector for a fee. The private investors charge a toll in case of roads or sign PPAs with the national distributor in case of electricity.
Investors sign a 25-year concession during which period they recoup their investment plus profit as they operate the projects they build. All the contracts in the energy sector are on a Build Own and operate (BOO) model while the in road construction, the contracts are on Build Operate and Transfer (BOT ) model.
PPP projects are spread across the country in a strategy designed to ensure equitable development. For instance, the US$23 billion LAPSSET will open a second transport Corridor in Northern Kenya which forms 67 per cent of the country’s land mass.  It will comprise  of; a mega Port, a high-speed railway line, an Oil pipeline and a trunk road, all covering more than 2000 Kilometres.
The energy and roads sub-sectors are popular with investors because of growing demand in the country. The Energy sector is the clear leader in terms of the investment already sunk and rendering service to the public. An estimated 500 MW of power is already live on the national grid through P3. Wind and geothermal power generation are popular with investors. An impressive US$ 2 billion has been sunk into clean and renewable energy industry. Wind power commands a large share followed by geothermal.
The largest of these is the US$700 million, 310 MW Lake Turkana wind Project billed as the largest wind farm in Africa.  This is already generating power for the national grid at US$0.08 per unit. There two other on-going projects worth US$200 million, bringing the total investment in the Wind generation sector to uS$900 million.
Geothermal power generation has also attracted significant interest. Or Power 22, a subsidiary of the US-based Or power Inc. has over the last two decades invested an estimated US$800 million in geothermal power generation. Or Power 22 is the largest independent power producer generating some 139MW to the national grid, second only to the state-owned KenGen which generates more than 500MW.
Route Map of Lappset  Corridor.
There are three other generators contracted to produce a total of 105 MW from Menengai fields owned by GDC, the state-owned exploration firm, whose major business is to drill the Wells, cap them and sell the steam to power generators to produce electricity.
Roads are taking Lion’s share with $4.4 billion slated for investment in roads. The Mombasa –Nairobi 473 Kilometre expressway will cost US$3billion. It will raise cruising speeds to 120 Km and cut travel time between the two cities to four hours, from eight to ten hours currently.  The contract was won by Betchel Executives of the US.  This road, together with the Nairobi-Mau summit section is on the busy Northern Corridor. The Nairobi- Mau Summit section will cost US 180 million and has been awarded to a French Consortia.
 The 520 Lamu- Isiolo highway will cost US$ 620 million. It is part of the proposed $23 billion LAPSSET corridor that will open Northern Kenya and link to Ethiopia and South Sudan. It has been awarded to a South Africa, consortia involving the South Africa Development Bank. The Corridor’s infrastructure, including a standard Gauge Railway Line, and a 32 berth deep-sea port at Lamu, will be developed on PPP basis according to the LAPSSET Authority.
In Nairobi, a 43 KM elevated road linking the city’s Westlands suburb and the Jomo Kenyatta International Airport  that will cost US$567 million, has been  awarded to a Chinese contractor
Construction of these roads is expected to begin during the next financial year.
The road transport sub-sector has registered rapid growth over the last four years with its Value in GDP rising from US$5.9 billion in 2014 to $7.8 billion in 2018, a 32 per cent

growth. This makes it an attractive venture for the private sector.
The shift from government provision of public services to the private sector is a masterstroke of sorts: Apart from improving the speed of construction, it eliminates the spectre of cost escalation due to delays. It also reduces public debt while ensuring that services reach as many people as possible in the shortest possible time.

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