A Brief Overview of Kenya’s PPP Pipeline Status Report

Introduction

The Public Private Partnership Unit (PPP Unit), a specialized unit within the National Treasury, is responsible for the overall coordination, promotion and oversight of the implementation of the public private partnership (PPP) programme in Kenya. The PPP Unit is mandated by the Public Private Partnership Act, No.15 of 2013 (the PPP Act) to compile and maintain an inventory of PPP projects that are likely to attract private sector investment. Pursuant to this mandate, the PPP Unit published a report on the status and progress of Kenya’s PPP pipeline in September 2017 (the PPP status Report).

In this article, we review the PPP Status Report, highlighting the general PPP process and identifying opportunities available to the private sector at different stages of the PPP process.

How many PPP projects are in the pipeline?

There are currently 70 PPP projects in the pipeline. Out of these, 66 PPP projects were approved under the solicited process (60 being under the National Government and 6 being under the County Government) and 4 were approved as privately initiated investment proposal (PIIPs).

These PPP projects fall under 9 diverse sectors being: transport and infrastructure (17 projects), energy and petroleum (12 projects), education, science and technology (13 projects), environment, water and natural resources (11 projects), housing and urban development (4 projects), health (6 projects), agriculture, livestock and fisheries (1 project), East African affairs, commerce and tourism (4 projects) and information communication and technology (2 projects).

At what stages of the PPP project cycle are the PPP projects?

The projects in the pipeline are at varied levels of the PPP project cycle. We have generally categorized the projects from the earliest stage to the most advance stage of the PPP project cycle below.

1. Projects at the proposal stage

At this stage, a contracting authority has considered the strategic and operational benefits of entering into a PPP arrangement vis-à-vis undertaking the project by itself after which the contracting authority prepares and submits a PPP project proposal to the Public Private Partnership Committee (PPP Committee). The project at this stage have obtained approval from the PPP Committee and been granted authority to undertake a feasibility study in accordance with the PPP Act.

There are 20 projects at this stage: 2 in the Transport and infrastructure sector; 3 in the Energy and Petroleum sector; 7 in the education, science and technology sector; 1 in the environment, water and natural resources sector; 1 in the East African affairs, commerce and tourism sector; and 2 in the information, communications and technology sector.

A notable project at this stage of the PPP project cycle is the Lamu Port Development Project which will include the construction of port- associated infrastructure.

2. Projects at the feasibility stage

At this stage, a contracting authority generally appoints a transaction advisor to undertake a feasibility study which considers issues in relation to the project: the technical requirements; legal requirements to be met by the parties; the social, economic and environmental impact; and the affordability, value for money and public sector comparator.

There are 25 projects at this stage: 2 in the transport and infrastructure sector; 7 in the energy and petroleum sector; 9 in environment, water and natural resources; 2 in the health sector; 1 in agriculture, livestock and fisheries sector; 2 in the East African affairs, commerce and tourism sector; 1 in the environment, water and natural resources sector and 1 in the housing and urban development sector.

A notable project at this stage of the PPP project cycle is the Integrated Marine Transport system in Mombasa.

3. Projects exploring alternative methods

At this stage, the contracting authority is exploring alternative project delivery model which may or may not include PPP modality for reasons such as the feasibility study undertaken did not establish a PPP business case or concluded that substantially viability gap funding would be necessary to implement the project as a PPP. There are 4 projects at this stage: 3 in the transport and infrastructure sector and 1 in the health sector.

A notable project at this stage is the Nairobi Commuter Rail services for the rehabilitation of the existing 100km railway line.

4. Projects at the procurement stage

At this stage, the feasibility study has been completed and the contracting authority proceeds to prepare tender documents. The contracting authority will first issue a Request for Qualification (RFQ) and then issue a Requests for Proposals (RFP) to the short-listed bidders. There are 15 projects at this stage: 7 in the transport and infrastructure sector; 1 in the energy and petroleum sector; 5 in education, science and technology sector and 2 in the housing and urban development sector.

A notable project at this stage of the PPP project cycle is the second Nyali Bridge connecting Mombasa Island to the northern part of the mainland.

5. Projects at the contract negotiation stage

At this stage, the contracting authority has selected the preferred bidder and entered into negotiations with the preferred bidder on the terms and condition of the project agreement. Where the negotiations with the preferred bidder fail, a contracting authority is allowed to enter into negotiations with the second ranked bidder. There are 5 projects at this stage: 4 in the transport and infrastructure sector and 1 in the East Africa affairs, commerce and tourism sector.

A notable project at this stage of the PPP project cycle is the Phase 1 of the 10,000 km Road annuity programme for lots 1,8,12 and 32.

6. Projects at the commercial stage

At this stage, the contracting authority has finalized the negotiations with the preferred bidder and agreed on all the terms and conditions of the project agreement. The project agreement is executed by the accounting officer of the contracting authority. There are 3 projects at this stage: 1 in the transport and infrastructure sector, 1 in the energy and petroleum sector, and 1 in the education, science and technology sector.

A notable project at this stage of the PPP project cycle is the Kenyatta University Students Hostels project.

7. Projects at the financial close stage

At this stage, the financing documents in relation to a project agreement are executed by the financiers and the funding is made available to the project company. There are 3 projects at this stage: 2 in the energy and petroleum sector and 1 in the housing and urban development sector.

A notable project at this stage of the PPP project cycle is Phase 1 of the 460 MW Menengai electricity generation project.

What are the opportunities available to the private sector in the PPP Pipeline?

The opportunities available to private sector players are at the proposal, procurement and commercial stages. These opportunities include:

• acting as transaction advisor to a contracting authority, where the contracting authority lacks the capacity to undertake the project;
• bidding for the project upon the publication of the request for qualifications; and
• the opportunity to submit a privately initiated investment proposal to undertake the project for the contracting authority’s consideration.

At the procurement stage, a private party may bid to undertake a PPP project while at the commercial stage, a private party may finance the project as it gets in to the financial stage.