APAC: Standard Bank to back PowerChina’s Kenyan road PPP

07 September 2018 - 12:00 am UTC

PowerChina International has secured financing from Standard Bank of South Africa for its first road PPP project in Kenya.

The overseas unit of the state-owned engineering company will DBFOM the KES 6.75bn (USD 66m) Lot 32 Roads Annuity Project, which is also known as the Illasit-Njukini-Taveta Road. The Chinese company said the project is being carried out under the East African country’s Roads 10,000 Annuity Programme launched to attract private investors.

Initiated by Kenya National Highway Authority, the PPP involves construction and rehabilitation of a 67km road to augment the existing road network from Illasit — a settlement in southern Rift Valley Province — to Taveta town, which is a trading post between Kenya and Tanzania.

A source familiar said Standard Bank, which is Africa’s biggest lender by assets, has also shown interest in cooperating with PowerChina on financing future infrastructure PPP in Zambia and Uganda.   

The annuity programme is part of Kenya’s approach to upgrade 10,000km of roads facing public funding shortfall. The bundle of projects are expected to be carried out over the next five years at a cost of USD 2.8bn, while private investors are expected to design, build and maintain public roads using their own funds.    

Specifically, the works for the Lot 32 project will include upgrading to bitumen standards of gravel and earth roads and rehabilitation and reconstruction of bridges, culverts and road intersections. The BOT project, which will take two to three years to complete, has a concession period of ten years.

A payment modality will be agreed upon between the National Treasury, contractor and participating commercial banks. Private investors for the projects are likely to benefit from a semi-annual reimbursement from the Kenya’s National Treasury at a uniform rate over an agreed period of time.

Standard Bank worked with China’s ICBC in 2015 to provide debt financing and help introduce Chinese equity investors for a USD 2bn coal-fired power plant in Kenya undertaken by PowerChina which served as a EPC contractor. 

So far, Kenya has 10 road PPPs for the 2018-2020, according to a government document. By June 2018, contract negotiations with private investors are still ongoing for the following projects:

-Lot 8 (Bomas – Kiserian – Magadi, Bomas- Karen – Dagoret – Ruiru, Uplands-Githunguri-Ngewa-Ruiru)

-Lot 15 (select urban roads in Nyeri, Kirinyaga, Murang’a, Embu, Tharaka Nithi and Laikipia Counties.

-Lot 18 (select urban roads in Kakamega, Vihiga, Bungoma and Busia Counties o Lot 32 (Illasit – Njukini – Taveta)

The Lot 33, which comprises of the Kajiado – Imaroro and Ngong – Kiserian – Isinya roads with 91km in total lengths, reached financial close in February 2018. KCB Bank is financing Intex RAF for the development of the project. 

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