Road Annuity Project in Kenya (Lot 3)
This summary covers equity investments from SDHS Nile (HK) Ltd (“SDHS Nile (HK)”) and Shandong International Economics (HK) Ltd (“SIE (HK)”); and debt financing by potential lenders to the HASS-Consortium GVR Infra Ltd (the “Project Company”) forthe road annuity project in Kenya (Lot 3) (the “Project”). SDHS Nile (HK), SIE (HK), and potential lenders have applied for MIGA guarantees to cover their equity investments, non-shareholder loans (including interest and interest rate swap), and loan guarantees totaling US$154.2 million for a guarantee period of up to ten years against the risks of Transfer Restriction, Expropriation, Breach of Contract, and War and Civil Disturbance.
The Project involves the construction, rehabilitation, operation, and maintenance of two existing roads from Rhamu to Mandera (75km) and from Modogashe to Habaswein and Samatar (68km) (also known as A13 Roads) in Kenya. The total investment for the Project is estimated at US$173.9 million, including US$20 million in equity, US$82.9 million of commercial senior debt financing, US$20 million subordinated debt from the proceeds of corporate bonds to be issued by the Project Company, US$22.7 million grants from the Government of Kenya (“GoK”) support, and US$28.3 million investment from the Project’s annuity payment revenue. The investments will be recovered through the payment by Kenya National Highways Authority (“KeNHA”) from Road Annuity Fund (the “Fund”) set up by the GoK. The Project is expected to start construction in July 2021.
By investing in the construction and rehabilitation of the roads, the Project will bring important economic and social benefits for local communities. Upon completion, the Project is expected to generate time travel savings, improve road safety and reduce transportation and vehicle operating costs. At the same time, the rehabilitation of the roads will create new business opportunities for local shops, traders and vendors. The economic impact of the Project will be amplified by the creation of new employment opportunities, directly and indirectly at vendors during construction and maintenance of the roads. In addition, the Project is located in the very poor, fragile and conflict-affected areas of Kenya and the successful implementation will contribute to poverty reduction by facilitating regional trade, increasing access to regional market and, therefore, contributing to greater integration of the region with the rest of the country.
The Project is consistent with the GoK’s 2nd Medium Term Plan, which operationalized Kenya’s Vision 2030 goals and promotes safe and efficient transport network. The Project supports World Bank Group (“WBG”)’s twin goals of eliminating extreme poverty and boosting shared prosperity, as well as WBG’s Maximizing Finance for Development Approach. The Project is also aligned with MIGA’s FY21-23 Strategy by increasing investment and expanding development impacts in an IDA-eligible country.