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The Jomo Kenyatta International Airport (JKIA) expansion plan will be funded through a debt-equity arrangement, as the government yesterday announced its intention to break ground in June this year.
The 70-30 formula will see the government utilise the newly established National Infrastructure Fund (NIF) to attract other investors such as pension funds.
However, while the developer will cater for the 70 per cent, the government will only take a portion of the 30 per cent, leaving the rest to the private sector.
The government remains tight-lipped on the total cost of the project.
However, the Adani proposal that was withdrawn estimated the JKIA expansion at Sh206 billion.
The Sh5 trillion NIF, signed into law on Monday, is expected to be liquid once the government completes the sale of its 15 per cent stake in Safaricom to Vodacom for Sh244 billion and proceeds from the listing of Kenya Pipeline Company (KPC), which raised over Sh112 billion.
Transport Cabinet Secretary Davis Chirchir said on Tuesday that while borrowing may be cheap, considering the seven or eight per cent interest rate, equity remains costly. This is why the government intends to invest in the project—preferably 60 per cent of the 30 per cent—to encourage private sector participation.
“If we are taking 60 per cent of the 30 per cent, we will only be investing 18 per cent, and the remaining 12 per cent will come from debt,” the CS explained during a presentation at a Nairobi hotel.
Pension funds are among the targeted investors, with the CS maintaining that their return on equity will be at market rate—around 10 to 12 per cent.
He stated that the government aims to develop a scalable, bankable project that can handle not only the increasing passenger numbers but also provide the desired returns to investors.
“We have sized the project so that we do not invest in unnecessary infrastructure,” he said, adding that experts have considered the current and projected future space requirements of the airport over the next 15 years.
While the plan is to ensure JKIA offers services comparable to other international airports, the government is cautious not to make these amenities too expensive for passengers.
“What the experts have done is to dimension the adequacy of the floor space that is required today, tomorrow and in the next 15 years for the investor so that it does not make us an expensive destination where we will be required to increase the passenger tax beyond what people expect,” said the CS.
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The Jomo Kenyatta International Airport (JKIA) expansion plan will be funded through a debt-equity arrangement, as the government yesterday announced its intention to break ground in June this year.
The 70-30 formula will see the government utilise
the newly established
National Infrastructure Fund (NIF) to attract other investors such as pension funds.
However, while the developer will cater for the 70 per cent, the government will only take a portion of the 30 per cent, leaving the rest to the private sector.
The government remains tight-lipped on the total cost of the project.
However, the Adani proposal that was withdrawn estimated the JKIA expansion at Sh206 billion.
The Sh5 trillion NIF, signed into law on Monday, is expected to be liquid once the government completes the sale of its 15 per cent stake in Safaricom to Vodacom for Sh244 billion and proceeds from the listing of Kenya Pipeline Company (KPC), which raised over Sh112 billion.
Transport Cabinet Secretary Davis Chirchir said on Tuesday that while borrowing may be cheap, considering the seven or eight per cent interest rate, equity remains costly. This is why the government intends to invest in the project—preferably 60 per cent of the 30 per cent—to encourage private sector participation.
“If we are taking 60 per cent of the 30 per cent, we will only be investing 18 per cent, and the remaining 12 per cent will come from debt,” the CS explained during a presentation at a Nairobi hotel.
Pension funds are among the targeted investors, with the CS maintaining that their return on equity will be at market rate—around 10 to 12 per cent.
He stated that the government aims to develop a scalable, bankable project that can handle not only the increasing passenger numbers but also provide the desired returns to investors.
“We have sized the project so that we do not invest in unnecessary infrastructure,” he said, adding that experts have considered the current and projected future space requirements of the airport over the next 15 years.
While the plan is to ensure JKIA offers services comparable to other international airports, the government is cautious not to make these amenities too expensive for passengers.
“What the experts have done is to dimension the adequacy of the floor space that is required today, tomorrow and in the next 15 years for the investor so that it does not make us an expensive destination where we will be required to increase the passenger tax beyond what people expect,” said the CS.
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By Graham Kajilwa