nairobi – nakuru - mau summit highway projects information

P R O J E C T S I N F O R M A T I O N M E M O R A N D U M

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P R O J E CT S I N F O R M AT I O N M E M O R A N D U M

Republic of Kenya

NAIROBI – NAKURU - MAUSUMMIT HIGHWAY

NOVEMBER 2016


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N A I R O B I – N A K U R U H I G H W A Y P P P

Republic of Kenya

PA R T N E R S

National Treasury


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The Government of Kenya has prioritised modernisation of the country’s infrastructure as critical to our future development. Kenya’s economic growth blueprint, Vision 2030, aspires to have a country firmly interconnected through a network of roads, railways, ports, airports, waterways, and telecommunications.

Our road network currently suffers from severe capacity constraints, inadequate maintenance and congestion leading to high levels of fuel wastage, high vehicle operating costs and loss of productivity.

Government alone does not have all the resources and expertise to deliver on all the infrastructure priorities set in our development blueprint. This deficit has significantly contributed to the huge backlog in both development and maintenance of our road infrastructure.

Therefore, in line with global practices, we have embraced the PPP model to help address the acute mismatch between traffic needs, existing infrastructure and financial deficits. We believe working with the private sector through this PPP model will offer the best solution to meeting our infrastructural needs that will move the country towards attainment of envisaged economic growth.

We have thus identified the First Mover PPP program for the road sector which includes the Nairobi – Nakuru – Mau Summit Highway (A8). With support from the World Bank, we have retained the services of Intercontinental Consultants and Technocrats (ICT) as transaction advisors who have supported us in the preparation of the tender and will continue to support us through to financial close.

We have invested significantly in the preparation of this PPP project and the supporting enabling environment and we are eager to partner with world class developers, operators and financiers in order to deliver this project for the benefit of all Kenyans and the region.

Karibuni

Eng. Peter Mundinia Director General, KeNHA

Director General’s Foreword


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Table of Contents

BACKGROUND 5

1.1 A Strong and Vibrant Economy 5

1.2 Economic Drivers 6

1.3 Efficient transportation key to the country’s and the region’s development 8

1.4 The Critical Importance of Roads 8

1.5 Roads to be Developed through PPP 9

1.6 Kenya is Ready for PPP 11

THE PROJECT 13

2.1 Vital part of the Country’s Road Network 13

2.2 The Road Today 13

2.3 One of the Busiest Roads in the Country 16

2.4 Rationale for Improvement and Expansion 18

2.5 Project Objectives 19

2.6 Positive Economic, Environmental and Social impact 20

2.7 Minimal Land Acquisition Requirements 20

PROPOSED PPP SCHEME 21

3.1 Structure in accordance with International Practices 21

3.2 Key Risk Allocation 22

3.3 Government Support Measures 22

3.4 Phase-wise Implementation 22


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Background

1.1 A strong and vibrant economy

Kenya is one of the largest and fastest growing economies in Sub-Saharan Africa. In the first half of 2016, the economy has grown by 6.2%, up from 5.6% in 2015, making it today the 4th largest economy in Sub-Saharan Africa – Kenya’s GDP in 2015 reached USD 63 billion. The IMF expects the economy to post 6% growth in 2017. Recent discoveries of potentially significant oil reserves promise to enhance economic growth further. According to the United Nations and World Bank statistics of 2013, Kenya’s Gross National Income Per Capita

(GNI) was estimated at USD 1,377 qualifying it as a lower-middle income country.

Of the major Sub-Saharan economies, Kenya is ranked second on the World Bank’s Ease of Doing Business Index, surpassed only by South Africa. The size of the economy, the above average economic growth and the conducive business environment make Kenya an attractive investment destination.

“And in part because of this political stability, Kenya’s economy is also emerging - and the entrepreneurial spirit that people rely on to survive in the streets of Kibera can now be seen in new businesses across the country.”

Remarks by President Obama to the Kenyan People

(Safaricom Indoor Arena, Nairobi, Kenya, 2016)

SouthAfrica

Angola

Sudan

Kenya

EthiopiaTanzania

Ghana

CongoDR

Coted'Ivoire

Cameroon Nigeria

50

125

200

0% 6% 12%

EaseofD

oingBusinessRank

AverageGDPGrowth Rate2005- 2015

Kenya’sstrongeconomicgrowthisfoundedonattractivebusinessenvironment


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1.2 Economic Drivers

Agriculture is the backbone of Kenya’s economy and central to the Government’s development strategy. More than 75% of Kenyans make some part of their living from agriculture, and the sector accounts for more than a quarter of Kenya’s GDP. Horticulture, which comprises cut flowers and fresh vegetables, coffee and tea has grown considerably over the past decades and ranks among the country’s most sophisticated and best developed industries.

The tourism sector, at 12%, is the second largest contributor to GDP. The strong performance in the sector is attributable not only to continued demand for safaris and beach holidays from traditional European and North American visitors, but also from successful marketing in China, India and Japan, amongst others.

Kenya’s financial sector is the third-largest in Sub-Saharan Africa. It comprises competitive banking and insurance industries, including international, continental and local service providers, and a well-regulated financial market. The country also has thousands of savings and credit associations to which most Kenyan workers belong and which have become important avenues for the mobilization of savings. Kenyans appreciate the key role of macroeconomic stability has played in economic recovery and rapid growth experienced since 2003. This has resulted in low levels of inflation, strictly limited public sector deficits, a stable exchange rate, and low interest rates.

The technology sector is one the country’s fastest growing. Kenya is home to the world-renowned M-Pesa money transfer service and was also the testing ground of the globally recognized crowd-sourcing platform Ushahidi, (which means “testimony” or “witness” in Kiswahili)—just two of its pioneering tech successes that have seen the country christened the Silicon Savannah.

Kenya is a trading nation dating back to our early history. The Port of Mombasa which serves both Kenya and the large hinterland, continues to grow, with total cargo throughput increasing at an annual average rate of 7.6% since 2011 to 27 million tons in 2015, while container traffic grew by 8.7% annually to 1.1m TEUs over the same five-year period. As a founding member of the East African Community (EAC) and the Common Market for East and Central Africa (COMESA), Kenya enjoys preferential tariff rates on her exports to most African countries.

Kenya is also privileged to host the headquarters of many multi-nationals with operations on the African continent as well as the United Nations Environmental Program (UNEP), largely owing to the country’s business-friendly policies, a skilled, well-trained workforce and a fast expanding middle class.


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On the fiscal side, Kenya continues to manage its borrowing at sustainable levels with overall debt standing at 48% of the GDP at the moment.

2.2

2.4

2.6

2.8

2000 2005 2010 2015

Current population around 45 millionAnnual population growth (%)

0

500

1,000

1,500

2,000

2000 2005 2010 2015

GDP per capita has increased on average with 10% in past decade

-

10.00

20.00

30.00

2000 2005 2010 2015

Inflation has been stablized in recent yearsInflation per annum (%)

0

50

100

150

2000 2005 2010 2015

KSH:USD exchange rateAverage currency depreciation in last 15 years is 1.7%

KenyaSub-Saharan Africa (excluding high income)

2.2

2.4

2.6

2.8

2000 2005 2010 2015


0

500

1,000

1,500

2,000

2000 2005 2010 2015


-

10.00

20.00

30.00

2000 2005 2010 2015


0

50

100

150

2000 2005 2010 2015



2.2

2.4

2.6

2.8

2000 2005 2010 2015


0

500

1,000

1,500

2,000

2000 2005 2010 2015


-

10.00

20.00

30.00

2000 2005 2010 2015


0

50

100

150

2000 2005 2010 2015



2.2

2.4

2.6

2.8

2000 2005 2010 2015


0

500

1,000

1,500

2,000

2000 2005 2010 2015


-

10.00

20.00

30.00

2000 2005 2010 2015


0

50

100

150

2000 2005 2010 2015



Kenya’s population stands at around 45 million and the rate of growth is trending downwards consistent with Kenya’s progression to upper middle income status, improving education levels and improvements in gender equality.

At the same time income levels are rising. Per capita incomes have increased at the rate of 10% per annum over the last decade up to USD 1,377, well above the 6% average growth rate for the Sub-Saharan region.

After some years of volatility, the country’s inflation rate has been stabilised in recent years to a level of around 6% as targeted by the Government and supported by the Central Bank’s monetary policy, whilst the currency has depreciated steadily and fairly predictably against the US dollar.

Kenya’s sovereign ratings by Standard & Poors is B for immediate term and B+ for long term, with Moody’s rating Kenya at B1. These ratings benchmark favourably with Kenya’s peers and across the continent as a whole.


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1.3 Efficient transportation key to the country’s and the region’s development

As a leading member of the East African Community and the region’s leading economy, investments towards this infrastructure will position Kenya as the most efficient and effective transport hub within the East and Central African region and thereby promoting regional aspirations for socio-economic development.In recent years, Kenya has invested significantly in transport infrastructure including expansion of the port of Mombasa, creation of a new economic corridor (LAPSSET), expansion of leading airports including Nairobi’s international airport, and construction of the Standard Gauge Railway (SGR) from Mombasa, ultimately to the border with Uganda – the region’s and one of Africa’s largest ever infrastructure projects.

The Mombasa-Nairobi section is the first phase of the project. It will shorten the passenger travel time from Mombasa to Nairobi from more than ten hours to a little more than four hours. Freight trains will complete the journey in less than eight hours. Construction of this section will be completed in 2017.

Preparations are underway for SGR Phase 2 from Nairobi to Naivasha.

Standard Gauge Railway

The SGR project is proposed to connect Mombasa to Malaba on the border with Uganda and continue onward to Kampala, Uganda’s capital city and further on to Rwanda and Burundi.

1.4 The critical importance of roads

Notwithstanding this investment into rail, roads will continue to be the dominant mode of transport in Kenya. However, substantial investment is needed, given that out of an estimated 61,936 KM of classified roads, only 8,869 KM, or 15%, is currently paved.

Funding for the maintenance for Kenya’s road network comes primarily from the Fuel Levy whose funds are already overstretched. In order to fund expansion of the network, and, in particular, the proposed investments into strategically important highways and road infrastructure, the Government plans to introduce road tolls.

Responsibility for the management of Kenya’s roads was established under the Kenya Roads Act of 2007, which established the legal and institutional framework for the sector, as summarised below.

Institution Key Responsibilities

Ministry of Transport, Infrastructure, Housing and Urban Development (MOTIHUD)

Policy and strategy including regulatory matters such as technical standards. Also approves development budgets of the implementing agencies

Kenya Roads Board (KRB) Funds (through the Fuel Levy) maintenance of all roads, approves Roads Maintenance Levy Fund (RMLF) funded maintenance work and carries out technical and financial audits of the maintenance works

Kenya National Highways Authority (KeNHA) Development, management and maintenance of national highways and interurban roads

Kenya Urban Roads Authority (KURA) Development, management and maintenance of urban roads in urban centres

Kenya Rural Roads Authority (KeRRA) Development, management and maintenance of rural and small town roads, special purpose roads and unclassified roads

Kenya Wildlife Service (KWS) Development, management and maintenance of roads in National Parks and National Reserves as well as access roads allocated to it by MOTIHUD


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Two additional institutions have also been constituted within the infrastructure sector i.e., The National Construction and The National Transport and Safety Authorities which were constituted under the National Construction Authority Act No. 41 of 2011 and National Transport and Safety Act No. 33 of 2012 respectively. Their roles are as summarized below:

Under the Transition to Devolved Governments Acts, 2012 Legal Notice 2, the Government gazetted the new road reclassification system which has defined roads to be managed under both the National and County Governments

1.5 Roads to be Developed through PPP

In line with the Government’s commitment to infrastructure development to achieve its Vision 2030 goals, and in line with its desire to mobilise private sector capital and expertise, the Government has prioritized four road sector projects to be undertaken on a PPP basis.

Estimated Costs (USD Million)

Project Road Sections Length (km)

Initial Phase Future Augmentations

PPP Mode

Mombasa – Nairobi Highway

1. A8 Jomo Kenyatta International Airport – Kibwezi

2. A8 Kibwezi – Voi

3. A8 Voi – Mombasa

174

132

160

1,300 1,000 DBFMO1

Nairobi – Nakuru – Mau Summit Highway

1. A8 Gitaru – Mau Summit

2. A8 South Rironi – Naivasha

3. UCA2 Nairobi Southern Bypass

187

58

28

550 450 DBFMO

Nairobi – Thika Highway

A2 Nairobi - Thika 50 35 - O&M2

2nd Nyali Bridge Bridge connecting mainland Mombasa with CBD

Connecting roads

TBD 200 - DBFMO

1Design Build Finance Maintain Operate 2Operations and Maintenance

Institution Key Responsibilities

National Construction Authority Regulation of construction industry

National Transport and Safety Authority Regulation of Road Transport Systems and Management of Road Safety


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NAIROBI - NAKURU - MAU SUMMIT

MOMBASA - NAIROBI

2ND NYALI BRIDGE

NAIROBI - THIKA


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Consistent with the “user pays” principle established by Kenya’s National Surface Transport Policy, the Government intends that all of these projects be tolled on the following basis:

• Tolling will be implemented once the road is put into service or O&M contractors are in place, for those already in service

• A third party private sector tolling operator will be procured through an international process to design, supply, finance, install, roll-out and operate tolling across all the projects under a performance-based operations and maintenance contract procured under the PPP Act

• Bidders for the road PPPs may also, if they wish, bid for the Tolling Operator PPP

• Tolling technology will be appropriate to the particular project but Government’s policy is towards electronic free flow tolling

• A draft Tolling Policy is imminently to be considered by Cabinet and after approval will be supported by necessary legislation

• A National Toll Fund will be established into which toll revenue from all of the four PPP projects will be paid and out of which Service Payments will be made to the Special Purpose Vehicle

• Toll levels will be consistent with international norms and will be set taking into account ability and willingness to pay, user benefits and costs imposed on the projects by different categories of users

• There will be no free alternatives, but social impact will be moderated through use of local and frequent user discounts

1.6 Kenya is Ready for PPP

Throughout Kenya’s modern history, the country has pursued pro-private sector investment policies across all sectors of the economy, including infrastructure. In the power sector, for example, private sector investments in the shape of Independent Power

Producers have supported Government power generation for the last two decades.

These successes, coupled with a continuing desire to diversify financing sources, and to tap private sector expertise for public infrastructure expansion and modernisation, has led to the prioritization of Public Private Partnerships (PPPs) as an important delivery model for social and economic infrastructure.

The Economist Intelligence Unit in its Infrascope Review 2015 recently ranked the country top 3 in Africa in the ‘PPP Readiness Report’. This framework evaluates countries’ readiness and capacity to implement sustainable and efficient concession projects in key infrastructure sectors, principally transport, water, and energy.

Kenya’s PPP Policy was adopted by the Government in 2011 and laid the foundations for enactment of the PPP Act of 2013 and the establishment of the following key institutions:

• Contracting Authorities responsible for implementing PPP projects

• PPP Unit embedded within Treasury and responsible for overall coordination of PPP activity and for providing assistance to Contracting Authorities;

• PPP Committee composed of senior officials from various governmental departments and responsible for approving, inter alia, PPP projects;

• PPP Petition Committee to address appeals, if any.

2ND NYALI BRIDGE


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“Kenya has made significant progress in the PPP landscape over the past few years” - The Economist

0 10 20 30 40 50 60 70 80

D.R. Congo

Angola

Zambia

Nigeria

Cameroon

Ghana

Rwanda

Uganda

Tunisia

Cote d'ivore

Tanzania

Egypt

Kenya

Morocco

South Africa

Third most conducive country for PPP in Africa

PPP readiness scope as per infrascope 2015


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The Project

• Dualling 175 km of highway

• Strengthening 58 km of road

• Developing 3 km of grade separation

• Operating and maintaining 1,000 lane kilometres

2.1 Vital part of the Country’s Road Network

The main road between Nairobi and Mau Summit is part of the A8 highway and of the Northern Corridor which connects the Port of Mombasa via Nairobi to Malaba at the border with Uganda and onwards to Kampala.

The Northern Corridor is the busiest and most important transport corridor in East and Central Africa, providing a gateway through Kenya from Mombasa Port via road, rail and pipeline to the landlocked countries of Uganda, Rwanda, Burundi, South Sudan and Eastern DR Congo.

The East African Community is also served by the Central Corridor, which connects the port of Dar es Salam via Isaka with Rwanda, Burundi and onwards to the DR Congo and Uganda.

2.2 The Road Today

The proposed project road comprises three distinct components:

1. The A8 Highway from Gitaru to Mau Summit

2. The A8 South Road which runs parallel to the A8 Highway from Rironi to Naivasha

3. The Nairobi Southern Bypass which bypasses the centre of Nairobi to the south and the west of the City, starting on the Nairobi-Mombasa Highway and sweeping around to re-connect with the A8 Highway at Gitaru


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Project Road Map


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Nairobi - Nakuru - Mau Summit Highway (A8) and A8 South Road

At Gitaru junction the Bypass connects with the A8 (formerly classified as A104). Gitaru is like a market centre some 16 km west of Nairobi, and is part of the greater Nairobi metropolitan area. Nairobi has a population of around 3.4 million, whilst the Greater Nairobi Metropolitan region, which consists of 4 of the 47 counties of Kenya, and generates about 60% of the nation’s GDP, has a population of around 6.5 million people.

The A8 from Gitaru up to the Rironi interchange, a distance of approximately 12 kilometres, is also a dual carriageway at the moment. This road is scheduled to be widened to a 6-lane highway under a construction contract awarded to China Wu Yi company and financed by the World bank. Completion is scheduled within 3 years.

Between the Rironi interchange and Naivasha, users can opt to continue on the A8 single carriageway or use the parallel A8 South (formerly classified as B3/C88) Road, which is also a single carriageway. Both roads have a length of approximately 58 km. Freight vehicles are currently required by KeNHA regulation to use the A8 South route (which is scheduled to be revoked upon implementation of the project).

These two routes join up again just beyond Naivasha and the road continues as a single lane highway towards Nakuru, Kenya’s 4th largest city with a population of around 300,000. At Nakuru, the road becomes a dual carriageway again for a further 17 kilometres as it passes through Nakuru town. After Nakuru, the road becomes again a single carriageway until it reaches Mau Summit.

Nairobi Southern Bypass

Nairobi Southern Bypass is a 4-lane dual carriageway. Construction commenced in early 2012, and commissioned in early November 2016. It is currently in operation. The road consists of 28 km of dual carriageway with 12 km of slip roads and 8 km of service roads. The project was financed by the Government and the China Exim Bank at a cost of around USD 200 million.


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2.3 One of the Busiest Roads in the Country

The A8 highway serves as an access and communications link for around 6 million people (approximately 15% of the total population of Kenya). It is located in the most densely populated part of the country.

The average number of vehicles per day between Nairobi and Mau Summit on both routes – the A8 and the A8 South – amounts to some 16,000 vehicles. The traffic peak is in Nakuru with daily traffic levels exceeding 40,000 vehicles.

The diagram below indicates the traffic levels measured as Average Daily Traffic (ADT) for the different sections of the Project Road. It also indicates for each section the Level of Service (LoS). LoS A is most optimal indicating a free flow and F is the lowest indicating forced or breakdown flow. For most parts of the Project Road the LoS is below LOS B indicating a service that does not provide for a free flow of traffic.

Source: Traffic Counts 2015ProjectRoad

Popula/onDensity

The road passes mostly through plain terrain with occasional sections of rolling and hilly terrain. Beyond the urban limits of Nakuru Town, the road climbs up the Western Rift Valley until the end of the project road with frequent stretches of climbing lanes for heavy vehicles.

The road also passes through/along a number of lakes, forests and national parks and wildlife conservancies including Manguo Lake, Kikuyu Escarpment Forest, Lake Naivasha, Kigio Wildlife Conservancy, Lake Elementeita Wetland, Soysambu Conservancy, Lake Nakuru and its National Park, and South-Western Mau National Reserve.


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A8 South

28Gitaru

40Rironi

98Naivasha

154Elementeita Rd

169Njoro Rd

215Mau Summit

Nakuru

KM

A8

21,98417,160

E

14,779

41,669

10,889

8,327In ADT

B E D C DLoS

Traffic Volumes

0MombasaRoad

NairobiSouthernBypass

Traffic on the A8 comprises mainly cars (43%), freight (27%) and so-called Matatus - privately owned minibuses (18%). Freight traffic is mostly (63%) through traffic reflecting the importance of the project road as an international trade corridor, whereas the origin and destination of cars are mostly (64%) within the Project Road.

Traffic is projected to increase further in the coming years because of continuing growth of the population and of the East African economies.


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2.4 Rationale for Improvement and Expansion

The A8 and A8 South road connections are mostly in fair to good condition (except for the eastern part of A8 South road section), but they are unable to accommodate the ever-increasing traffic leading to extended travel times and worsening road safety. In particular, the slow moving heavy goods vehicles that do not have the power to maintain their speed in the hilly terrain, slow down the traffic which leads to dangerous situations upon overtaking. Average speed is rarely more than 60 km/hr which is below the desired level for an international standard highway.

The road is listed among the most dangerous in the world – between 2012 and 2014, 575 people were killed on the highway according to police statistics. The main risks are lack of barriers, poor condition of vehicles, poor driving techniques and inclement weather.

Road Sections A8 A8 South

Geometric deficiencies Existing Geometrics are of fair standards for the specified design speed except a few sharp horizontal curves and steep gradients in the Great Rift Valley and Western Rift Valley sections

Severe deficient and substandard geometrics eastern section, several sharp curves, broken back curves and steep gradients.

Pavement Condition Fair condition throughout except for some minor cracks and potholes in the Rift Valley sections and Nakuru Town location

Pavement distress due to heavy loading is observed in the eastern section and will require partial reconstruction at several locations

Level of Service/Traffic Congestion

Congestion is observed in urban locations and capacity saturation is achieved in most of the rural sections as well

Severe congestion is observed in eastern section and in the Naivasha and Longonot urban locations

The table below summarises the road condition of the respective sections.

2012 2013 2014

Slight Accidents Serious Accidents Fatal Accidents

500

450

400

350

300

250

200

150

100

50

0

ROAD ACCIDENT DATA


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The Southern Bypass is a new highway and in good condition throughout its length.

In addition, the limited availability of facilities for parking and rest areas forces trucks to park on the side of the road, particularly overnight adding to safety problems. In particular, beyond Nakuru at Salgaa and further at Mau Summit, a number of trucks stop for parking on road shoulders and adjoining service roads given the absence of the necessary facilities.

2.5 Project Objectives

The main objective of the Project is to expand the road capacity and improve the road quality between Nairobi and Mau Summit in order to accommodate the increasing traffic in a safe and sustainable manner.

In summary, the Project includes:

• Operation and Maintenance of Nairobi Southern Bypass (28 km)

• Operation and Maintenance of A8 Gitaru to Rironi section3 (12 km)

• Widening to a four-lane separated highway, and Operation and Maintenance of A8 from Rironi to Mau summit4 (175 Km)

• Strengthening, Operation and Maintenance of A8 South from Rironi to Naivasha (58 Km)

To address the congestion in Nakuru town, it has been assessed that the most feasible option, owing to land acquisition and socio-economic impact constraints, is the provision of grade separated sections, although KeNHA remains open to alternative alternative solutions.

All the works have to be designed and delivered in accordance with the Government’s design standards. An outline reference design has already been prepared and will be made available to Pre-Qualified Bidders.

The total construction costs for the scope of work is indicatively estimated at around USD 550 million.

3This section is being improved under a World Bank financed project and O&M responsibilities will commence once development is complete 4Subsequent widening of some sections to 6 and 8 lanes will be accommodated under the PPP arrangement once traffic thresholds have been reached

40

370

140 550

A8 South A8 Rironi - Nakuru A8 Nakuru - Mau Summit

Total Construction Costs

Subject to future traffic demand, further augmentations are envisaged and necessary provisions have been made under the project agreement to cater for this.


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2.6 Positive Economic, Environmental and Social Impact

A Preliminary Environmental and Social Impact assessment has been conducted which has identified a number of positive impacts including:

• travel time reduction;

• reduction of vehicle operating costs arising from improved road condition and maintenance;

• reduction in vehicular pollution;

• enhanced safety levels for users through better road signage, better information to users, and provision of non-motorized traffic facilities;

• reduction in accidents;

• generation of direct and indirect employment in the region.

There are also a number of potential cumulative negative impacts which briefly include:

• degradation of land and environment with increased demand for road construction materials including hard stone aggregate, gravel and water;

• likely adverse impacts on flora and fauna during construction and operations as the project road is passing in the vicinity of national parks, conservancies and World Heritage sites;

• loss of vegetation and habitat along the road corridor as well as increased risk of poaching;

• other social risks including HIV/AIDS, drug trafficking.

To address the negative impacts, mitigation measures have been developed, some of which have already been included in the reference design and will be further incorporated into the specifications for the concessionaire of the project upon preparation of the tender documents.

An economic analysis assessing the quantifiable benefits such as reduction of vehicle operating costs and travel time against the development costs and operating expenditures has concluded that the economic rate of return of the project comfortably exceeds the threshold applied by the Government and multilateral development institutions.

2.7 Minimal Land Acquisition Requirements

Based on the outline reference design, a detailed inventory has been undertaken of the land required and resettlement needed for the initial widening, as well as for future augmentations. The conclusion is that for the initial widening, 93% of the necessary Right of Way is already available to KeNHA. Out of the 92 hectares that needs to be acquired for the project, 86 hectares is needed for the Nakuru - Mau Summit stretch and just 6 hectares – or less than 1% - is required for Nairobi to Nakuru.

KeNHA has already initiated the land acquisition process which is scheduled to be completed well before the targeted commencement date for construction.


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Proposed PPP Scheme

3.1 Structure in accordance with International Practices

KeNHA intends to procure the works and services through a 30-year Design Build Finance Operate Maintain Transfer PPP scheme which will involve the Successful Bidder establishing a dedicated Special Purpose Vehicle which will enter into a Project Agreement with KeNHA, all under the provisions of Kenya’s PPP Act, 2013.

Payments to the Project Company will be in the form of performance-related Service Payments largely linked to Project Road availability.

In order to fund the Project Road, tolling will be introduced. A third party private toll operator will be contracted for the purpose of establishing the tolling systems and subsequently collecting the tolls. The tolling revenues will be used to fund the Service Payments. Preliminary assessments indicate that the proceeds from tolling over the life of the project should be sufficient to cover the Service Payment obligations but in the event of a shortfall, Government will make good any deficit.

It is anticipated that the project’s construction costs will be financed by the Project Company through a mix of shareholder equity contributions and long term bank/ financial institution debt. The Government has already engaged with development and commercial banks to gauge interest and facilitate financing support.

Government

KeNHA

Project Company

Toll OperatorDedicated

FundingFacility

Backstopping in case of revenue shortfall

Service Payments

Project Agreement

Investors

Lenders

Users

Toll


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3.2 Key Risk Allocation

The table below summarises the intended allocation of Key Rights, Responsibilities and Risks in the PPP Scheme.

Rights, Responsibilities, Risks Project Company Contracting Authority

Design √

Land Acquisition √

Necessary Approvals √

Construction √

Financing √

Force Majeure √ √

Traffic Volume – Cost Implications √

Axle Overloading √

Revenue √

Operations & Maintenance √

Performance √

Local Currency Inflation √ 5

USD:KSH Exchange Rate √ 6

Local Currency Interest Rate √ 7

Political √

3.3 Government Support Measures

The Government is preparing a guiding framework aimed at supporting public infrastructure development thus improving the conditions under which private sector participation shall be sustainable.

5 Mitigation through Payment Mechanism6 ibid 7 ibid

Further details on the proposed rights, responsibilities and risk allocations will be presented in the draft PPP Project Agreement which will be included in the Request for Proposal issued to Prequalified Bidders.


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3.4 Phase-wise Implementation

Taking into account the need for land acquisition and resettlement, the planned development of the project will be implemented in phases as follows.

Sl No Project Road Section

Road Classification and Number

Length (Km)

Development Obligations

Phase I

1 Rironi to Nakuru A8 129 Strengthening of existing road and widening to 4 lanes with paved shoulders to dual carriageway standards, including development of grade separated sections near and through Nakuru (assumed to be Elevated Expressway)

Operation and Maintenance of Project Road during and after construction

2 Rironi to Naivasha A8 South 58 Strengthening, Operation and Maintenance

3 Gitaru to Rironi A8 12 Operation and Maintenance of the Project Road once development is complete under separate World Bank financed contract

4 Nairobi Southern Bypass

UCA2 28 Operation and Maintenance

Phase II – once necessary land acquisition is complete

5 Nakuru to Mau Summit

A8 46 Strengthening of existing road and widening to 4 lanes with paved shoulders to dual carriageway standards

Operation and Maintenance of Project Road during and after construction

Further augmentations of the respective sections are subject to traffic demand in reference to specified performance standards and relevant provisions shall be included in the PPP agreement stipulating the rights and obligations for any augmentation(s).


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The information provided to Prospective Bidder(s) or any other person, in this Project Information Memorandum (PIM) and any other information, whether verbal or written, provided by KeNHA or any of its employees or advisors, or on behalf of KeNHA, is provided to Prospective Bidders on the terms and conditions set out in the RFQ and such other terms and conditions as may be set out from time to time.

The PIM is not an agreement and is neither an offer nor an invitation by KeNHA to the Prospective Bidders or any other person. KeNHA, its employees and advisors are not bound by any of the contents of this PIM. The purpose of the PIM is to provide interested parties with information that may be useful to them in preparing their Qualification Documents pursuant to the RFQ. The RFQ includes statements that reflect various assumptions and assessments arrived at by KeNHA in relation to the Project. Such assumptions, assessments and statements do not purport to contain all the information that each Prospective Bidder or any other person may require. The PIM may not be appropriate for all persons, and it is not possible for KeNHA, its employees or advisors to consider the investment objectives, financial situation and particular needs of each party who reads or uses this PIM. The assumptions, assessments, statements and information contained in the PIM and any other associated documents may not be complete, adequate, accurate or correct. Each Prospective Bidder should, therefore, conduct its own investigations and analysis and should check the completeness, adequacy, accuracy, correctness, and reliability of the assumptions, assessments, statements and information contained in this PIM and obtain independent advice from appropriate sources.

Information provided in the PIM is on a wide range of matters, some of which may depend upon interpretation of law. The information given is not intended to be an exhaustive account of statutory requirements and should not be regarded as a complete or authoritative statement of law. KeNHA accepts no responsibility for the accuracy or otherwise of any opinion or interpretation of law expressed herein.

KeNHA, its employees and advisors make no undertaking, assurance, representation or warranty and shall have no liability to any person, including any Prospective Bidder, under any law, statute, rules or regulations, tort, principles of restitution or unjust enrichment or otherwise, for any loss, damages, cost or expense that may arise from or be incurred or suffered on account of anything contained in the PIM or other information provided to Prospective Bidders or any other person, including the completeness, adequacy, accuracy, correctness, and reliability of the PIM and any assessment, assumption, statement or information contained therein or deemed to form part of the PIM or arising in any way from participation in the Bidding Process.

KeNHA may, in its absolute discretion, but without being under any obligation to do so, amend, update, or supplement the information, assessments or assumptions contained in the PIM. However, KeNHA, its employees and advisors shall not be liable to any Prospective Bidder (including to the Pre-Qualified Bidders) in respect of any failure to (i) disclose or make available any information, documents or data; (ii) amend, update, or supplement the PIM; or (iii) provide any information regarding any inaccuracy, error, omission, defect or inadequacy in the PIM.

Disclaimer


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Republic of Kenya