OVERVIEW OF THE PPP PROGRAM IN KENYA KENYA – SPAIN MULTULATERAL PARTNERSHIP MEETING, NAIROBI, DEC 8-11, 2013 PRESENTED BY: ENG. STANLEY K. KAMAU DIRECTOR – PPP UNIT REPUBLIC OF KENYA THE NATIONAL TREASURY

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KENYA  Area:583,000 sq. km  GDP: USD 38 Billion  Population: 40 million  GDP per Capita: USD 900 (USD 1700 in Purchasing Power Parity terms)  GDP % Growth: 4.6% in 2012; 5.7% projected in 2013  Debt/GDP: 45%  The Standard and Poor’s rating for Kenya is B+ stable  Fitch rating is B+ positive.  Gateway to:  East Africa Community (Kenya, Tanzania, Uganda, Rwanda, Burundi): 150 million people, among the fasted growing regions in the world (5.3% growth GDP compared to 3.8% world growth) – 150 million addition (DRC, Ethiopia, Southern Sudan, Somalia) The discovery of Oil, Rare Earth, others: A game changer

Funding Gap of USD Billion per Year.

SOME KEY AREAS OF FOCUS BY GOK 1.Improve logistics of doing business – Transport and Power 2.Agriculture and rural development 3.Business environment – administrative reforms, taxation, security 4.Investments in social sector - Education, Health 5.Exports 6

Rationale for PPPs in Kenya 7 Vision 2030 aims to transform Kenya into a middle income country by Heavy infrastructure investment is thus paramount Reduce funding gap -Additional funding from private sector Reduce Government sovereign borrowings Utilize private sector efficiency & innovation to deliver public services Increase business opportunitie s for the domestic market

Framework for PPPs in Kenya  Kenya has a New Constitution (2010) that provide democratic and governance institutions (stability, judiciary, etc.);  Conducive Regulatory framework to facilitate PPPs (Energy, Transport);  There is a strong Contract law (contracts will be honoured);  PPP Policy issued by Government in December, 2011;  The Public Private Partnerships Act, No. 27 of 2013 (PPP Act);  Draft Regulations for PPP Act, 2013;  Reforms in the Capital Markets to support long term PPPs; and  PPP Toolkit, Procedures and standard documents.

What Does the PPP Act provide? PPP Act 2013: Provide legal capacity for MDAs to enter into PPP contracts Address legal gaps, remove conflicts and overlaps in law Risk mitigation (Letters of Support, Guarantees (Demand/Traffic Guarantee), subsidies etc. Tariff setting framework Direct Agreement and step-in rights to Lenders Compensation for termination/ extra-ordinary events/ direct impact of change of Laws/political event Establishment of a Project Facilitation Fund (Viability Gap Fund, PDF, subsidies) A clear process for developing and procuring PPPs A clear institutional framework Minimum PPP contractual provisions

Preparation and Approval of a PPP Project

Selection of a Private Party  PPP Projects can be initiated in two ways:  Solicited bids; and  Privately initiated proposal.  Allowed only where:  there is an urgent need for continuity;  costs relating to intellectual property in relation to the project design is substantial;  there exists only one person capable of undertaking the project; or  there exists any of the circumstances as the Cabinet Secretary may subscribe.

This ensures: Level Playing Ground

….also Competition 13

Past PPP Projects in Kenya 1. Mtwapa and Nyali Bridges Concessions signed in 1959; Charges in 1984: Pedestrians (10cts), cattle head (20cts), motor cycle (50cts),salon (sh.2.00), w/wagon (sh. 2.50), lorry (sh ), bulldozer (sh.10). 2. Westmount 46 MW (not active), Iberafrica 1997 (56MW and 53 thermal power plant), the 74 MW Tsavo/Kipevu IPP, 2000, Orpower -Olkaria III 2000/2008 (48MW Geothermal Plant), Mumias (34MW power plant); 90 MW Rabai IPP in 2009, Mumias 26MW cogeneration. 3. KPLC, 2005, 2yr management contract; 4. Port of Mombasa Grain Terminal – BOO, 1998; 5. JKIA – Cargo Terminal, 1998; 6. Kenya – Uganda Railways 2006, Concession 7. Malindi water utility, 1999 – 5yr management contract 8. Nairobi Urban Toll Road, Failed

Ongoing PPP Transactions  Independent Power Producers (IPPs): IPP NameTypeCapacity MWRemarks Thika PowerThermal87Financial Close TriumphThermal82Financial Close Gulf PowerThermal80Financial Close OrpowerGeothermal52Financial Close Lake TurkanaWind300Under negotiations LongonotGeothermal140Under negotiations KinangopWind60Under negotiations TOTAL 750

PPP Pipeline – Transport Sector 16

b) Ports: Conversion of Berth into Container terminals; O&M for 2 nd Container Terminal, expansion of 2 nd Container Terminal c) Seaports: Kisumu Port 17

d) Airports: O&M for Greenfield Terminal, Terminal Building -Wilson Airport, Flying School e) Rail: O&M - Standard Gauge Railway, Commuter Rail in Nairobi, Mombasa and Kisumu 18

PPP Pipeline – Energy Sector 19

Independent Power Project (IPP) Structure

PPP Pipeline – Education Sector 21

PPP Pipeline – Housing Sector 22

Project TitleSectorSTATUS Kenyatta University - HostelsEducationTender Award (IFC) 2 nd Nyali Bridge, MombasaTransport/RoadsTransaction Advisory Nairobi - Thika Road ( O&M)Transport/RoadsTender/ ADB Mombasa – Nairobi Road (400km)Transport/RoadsTransaction Nairobi Commuter RailTransportTransaction Kisumu Sea PortTransport/ AirportTransaction Advisory Nairobi Jomo Kenyatta Airport ExpansionTransport/ AirportTransaction Advisory 2nd Container Terminal MombasaTransport/PortsTransaction Advisory 60 MW wind power in NgongPowerPPA Negotiations Kinangop Wind Power projectPowerLoS Issued 700 MW LNG, MombasaPowerTransaction Advisory 960MW Coal (140MW RFP issued)PowerTransaction Advisory 560MW Geothermal IPPs, Olkeria (140mw Issued)PowerTransaction/structuring 400 Geothermal IPPs, Menengai (90MW RfP Issued)PowerTransaction Advisory/AfDB Cancer/Diagnostic CenterHealthFeasibility Summary - PPP Project Pipeline

Project TitleSectorSTATUS ICT services at KNHHealthFeasibility Shared Gov’t servicesICTTransaction Advisory Solid waste management in Nairobi and other citiesEnvironmentFeasibility Low Cost Housing 100,000 UnitsHousingFeasibility Parking silosUrban InfrastructureConcept Embu Water SupplyWaterFeasibility Nyayo StadiumO&MFeasibility Southern bypassO&MTransaction Several Irrigation schemes (value addition chain)AgricultureConcept Mombasa Conventional CentreTourismFeasibility LAPSSET – OIL PIPELINEEnergy Concept/negotiations with GOSS SEZ - MombasaTradeFeasibility Konza Techno cityICTProject Structuring CABLE CARS – Nyali, Nairobi, Mt KenyaTourismConcept Summary - PPP Project Pipeline

KENYA IFPPP PROJECT  Kenya Infrastructure Finance and Public Private Partnership (IFPPP) Project supported by the World Bank to provide a bankable pipeline of PPP projects:  USD 40 Million Credit approved in Dec 2012, effective Feb 2013  Institutional support and regulatory reform: Institutions (PPPU, PPPC, Nodes) Legal and Regulatory reforms Institutional developments to financial products Debt yield curve, depth of domestic market, VGF, PRG, Financial intermediary lending  Support for Preparation of Individual PPPs  Developing a Fiscal Commitment and Contingent Liability Framework.

Questions? THANK YOU!