Local private investors will be given the opportunity to co-finance the $3.6 billion (Sh472.9 billion) highway from Mombasa to Nairobi after the Kenya National Highways Authority (Kenha) and US-based private equity firm Everstrong Capital LLC signed a deal to establish the start-up. In construction of toll road.
The construction of the toll road, dubbed the Osahihi Expressway, is one of the deals signed during President William Ruto's three-day visit to the United States, and is seen as rivaling the Mombasa-Nairobi standard gauge railway line built by China.
“The project expects to attract investments totaling $3.6 billion, coming from international investors, development agencies, pension funds and an exceptionally large number of Kenyan private investors,” Everstrong said in a statement.
The PPP project will be implemented for three to four years, with financing led by “US development institutions and significant investments from Kenyan private investors and pension funds,” Everstrong added.
Once this is done, Everstrong and its partners will charge a 30-year pass when they are expected to recoup their investment.
Earlier this year, the Treasury revealed that the Public-Private Partnership Commission granted approval for the first phase of the Mombasa-Nairobi Expressway.
The idea of building the 475-kilometre high-speed expressway had been mooted by the administration of retired President Uhuru Kenyatta, and it was to be undertaken by Bechtel, an American construction company.
Construction of the highway was scheduled to begin in 2018, as the United States sought to create a transportation network to rival the SGR, one of China's largest investments in Africa.
The expressway, which was scheduled to have four lanes and 19 interchanges, is expected to significantly reduce travel time between the coastal city of Mombasa and the capital, Nairobi, from 10 to four and a half hours.
However, the project was canceled after Kenya and the contractor failed to agree on the financing model to be adopted.
Bechtel would later return to the negotiating table with revised prices after teaming up with Everstrong, an American private equity firm.
Previous reports indicated that Bechtel and the Kenyan government disagreed over how to finance the then $2 billion road, which led to its delay.
Everstrong said at a recent US Chamber of Commerce summit that the two sides have since agreed on a financing model.
Under the current financing structure, project financing will also come from local companies, including banks, insurance companies and pension funds, the company said.
The Mombasa-Nairobi Expressway was initially planned to be built with funding from US and British sources, and was expected to significantly reduce travel time between the coastal city of Mombasa and Nairobi.
However, the agreement did not make any progress after a dispute over how to finance the construction of the project. A 2021 report published by the Parliamentary Budget Office (PBO) showed that the American company rejected Kenya's offer to build the road and recoup its investment by imposing toll fees on motorists.
Besides Bechtel, another company that initially showed interest in the project is the Korea Overseas Infrastructure and Development Corporation (KIND), which also submitted a preliminary feasibility study report for developing the expressway based on a public-private partnership model.
As financiers turn to public-private partnerships in financing infrastructure projects in Africa, China appears to have taken the lead in this field.
Chinese investors have already built and are currently operating the Nairobi Expressway.
The Chinese are also said to be seeking to expand Mao Peak into a four-lane dual carriageway.
The government recently announced that it has completed the construction of the Nairobi-Nakuru-Mau toll road, which was awarded to a consortium of French contractors.
Along the way, Kenya also bagged big deals during President Ruto's visit. The United States has designated Kenya as a major non-NATO ally, making it the first country in sub-Saharan Africa to receive this designation. Kenya now joins 18 other countries designated as non-NATO allies, including Israel, Brazil and the Philippines.
The United States also allocated $250 million for new investments in Kenya through the International Development Finance Corporation, including $180 million for a large affordable housing project. This would bring IFC's portfolio in Kenya to more than $1 billion.