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AIIF4 invests in Kenya’s Road Annuity Programme

Staff writer
Nov. 24, 2022, 11:59 a.m.
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AIIM, Africa’s largest dedicated infrastructure private equity manager, has committed to invest $34m into Kenya’s Road Annuity Programme through its pan-African AIIF4 Fund.

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AIIM, Africa’s largest dedicated infrastructure private equity manager, has committed to invest $34m into Kenya’s Road Annuity Programme through its pan-African AIIF4 Fund.

AIIF4 has acquired a 74% stake in Lots 15 and 18 of Kenya’s Road Annuity Programme from Mota-Engil, and its investment will fund road improvements to reduce travel times, bypass densely populated areas, lower vehicle operating costs, increase fuel efficiency and improve Kenya’s flood resilience.

As most of the transport activity in Kenya occurs on a network of gravel and earth roads, the Government of Kenya (GoK) is aiming to modernise its road network by paving around 10,000 kilometres of road across the country.

To fund improvements, the GoK has embraced public-private partnership programmes to boost investment into its Road Annuity Programme by dividing Kenya’s road network into investable lots.

Lot 15 and Lot 18 were tendered by the Kenya Urban Roads Authority (KURA) and awarded to the Mota-Engil and Lee Construction consortium in 2015 under an international public procurement process, achieving financial close in February 2022.

The Lot 15 and 18 projects, currently under construction, will upgrade roads from gravel to asphalt standards and cover approximately 44.9 kilometres and 35.1 kilometres of roads in central and western Kenya, respectively.

They are financed with a 75:25 debt-to-equity ratio, with Stanbic Bank providing the required loans in Kenya Shillings, AIIF4 providing 74% of the required equity and Mota-Engil and Lee Construction Limited providing the remaining 26% equity. Mota-Engil and Lee Construction will also act as the roads’ EPC and O&M contractors. These improvements will help Kenyan residents across 10 counties navigate more quickly, safely, and efficiently and create opportunities for nearby SMEs to sell road construction-related products. AIIM will also focus on improving gender equality, seeking to employ a high ratio of women during the project implementation phase.

Ed Stumpf, Investment Director at AIIM, said, “We look forward to partnering with Mota-Engil, Lee Construction, Stanbic Bank, MIGA, and the Government of Kenya in this expansive project, which will better link regional communities to neighbouring markets and national transport networks, facilitating more efficient logistics and fostering economic growth. The project will also create employment opportunities with up to 400 staff at its peak construction phase.”

Roberto Ferreira, Executive Director-Business Development at Mota Engil, said, “As an engineering and infrastructure expert with over 70 years of experience in Africa, we are proud to be involved in the Kenyan Government’s Road Annuity Programme with Lee Construction and AIIM. Over a 10-year period, we will improve and maintain the Lot 15 and 18 road networks to strengthen transport links for residents of 10 counties in Kenya.”

MIGA has issued guarantees of $212m covering equity by Mota-Engil Africa of Portugal and a company acquired by AIIM, through AIIF4, as well as loans from Stanbic Bank Kenya Limited to support Kenya’s Roads Annuity Program (Lots 15 and 18), which aim to improve the country’s national road network.

The guarantees provide protection from the risks of transfer restriction for Mota-Engil Africa and AIIM, and from expropriation, war and civil disturbance, and breach of contract for the three guarantee holders. The guarantees extend over 10 years, covering financing, design, rehabilitation and upgrade, and maintenance of road sections in Central and Western Kenya

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