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US firm eyes Sh129bn local cash for expressway
The Nairobi Expressway Mlolongo Toll Station on June 26, 2022. The US firm indicated that it was designing the new road and doing the final feasibility study that would address concerns such as environmental issues.
US infrastructure investment firm, Everstrong Capital, will raise Sh129 billion from the local market for the construction of the 440-kilometre Nairobi-Mombasa Highway, as it targets to break ground by the end of the year.
The company on Thursday signed an agreement to spearhead fundraising of $1 billion (Sh129.2billion) from local banks and pension funds, marking a key step in the development of Usahihi Expressway, the key road that is expected to cut the trip between the capital and the coastal city down to 4.5 hours.
The Transaction Advisory and Placement Services Agreement signed between Everstrong and CPF Capital and Advisory, leaves the developer with a balance of $2.5 billion (Sh258 billion) to raise from external markets since the road is expected to cost $3.5 billion (Sh465.12billion).
Everstrong on Thursday indicated that it was in the middle of designing the road and doing the final feasibility study that would address concerns such as environmental issues and relocation of persons.
“We expect that in the middle of this year, we will be submitting the final presentation to the Public Private Partnership (PPP) unit and getting its approval and then working on the financing. At that point we can start construction, towards the end of the year,” said Kyle Mccarter, chairman of Usahihi Expressway Limited.
Mr Mccarter noted that Everstrong is providing Sh12.9 billion ($100 million) for land acquisition along the path the road will pass. He also indicated that some of the landowners will be provided with an opportunity to swap their property for equity in the road, with a promise of a 17.5 percent return.
“We are working with local landowners to give them a very fair price for their land. In fact, we are involving most of them as investors in the road because this is a great opportunity for them to invest as well.
“We are depending on CPF and its team to purchase the right of way that we need. Everstrong is actually providing $100 million to purchase the right of way for the road. This project pays for itself, it’s not on the balance sheet of Kenya,” he said.
The developer will purchase land from Kenyans along the path through CPF but use government land, where the road passes through the Tsavo. The road will run parallel to the current Nairobi-Mombasa Highway.
The US firm will operate the road for 30 years before returning it to the government. The company is banking on trucks that form the majority of the vehicles using the Nairobi-Mombasa route to generate about 75 percent of revenues from the toll road.
Key parties that are providing the Sh129 billion funding are a consortium of pension funds, fund managers, investment banks, and insurance firms under the name Pack Hunters Club.
CPF Group Managing Director Hosea Kili said that following the signing of the agreement, the parties would proceed to conclude negotiations with the government and sign the project agreement in the coming weeks, before starting the fundraising.
“This initiative highlights the strength of strategic partnerships between local and international investors, leveraging blended capital to bring large-scale projects to life. By fostering an investment-friendly environment, we are not just building a road; we are laying the foundation for sustainable development, job creation, and long-term prosperity,” Mr Kili said.
He said local investment banks and other interested investors would be involved in the structuring of the contract.
