Kenya turns to development banks for financing airport growth, following the abandonment of the deal with Adani.
Kenya Shifts Airport Expansion Financing Strategy
Kenya is seeking new financing for the expansion of Jomo Kenyatta International Airport (JKIA) after cancelling a previous deal with India's Adani Group. The new financing strategy involves leveraging development lenders such as the Japan International Cooperation Agency (JICA), European Investment Bank (EIB), African Development Bank (AfDB), KfW (German development bank), and China Exim Bank.
The Adani deal was cancelled due to controversies, including the indictment of its founder in the United States. The new financing model focuses on a securitised bond strategy, where the bonds will be backed by JKIA’s revenues to attract funding while retaining airport ownership and control.
The expansion includes a new terminal and a second runway, aiming for completion by 2027 to address capacity strain as JKIA handled 12 million passengers in 2023, exceeding its 8 million capacity. This approach contrasts with the previous concession model proposed by Adani, where the company would have managed the airport for 30 years.
The government also plans a potential new high-capacity airport to further ease congestion and compete regionally with neighboring countries expanding their own aviation hubs. For the road construction bond, the government plans to securitise a portion of the fuel levy it charges motorists.
The expansion is being financed through a securitized bond for 175 billion shillings, with the bond for road construction split into two halves for both a local and an offshore listing. The government has not disclosed the exact amount for the bond issue for road construction.
Transport Minister, Davis Chirchir, has written to development agencies for potential financing for the airport expansion. The Jomo Kenyatta International Airport will be the location for the airport expansion. Instead of having a concessionaire build the airport and then operate it for a lease, the government plans to build the airport first and then concession it later.
The Adani Group has rejected the allegations as "baseless" and is cooperating with legal processes. The government's decision to seek new financing for infrastructure projects is due to rising debt in the country. It is too early to say in which foreign market the bond for road construction will be sold.
Investing in the securitized bond strategy for Jomo Kenyatta International Airport expansion, which will be backed by the airport's revenues, presents a potential opportunity for businesses engaging in real-estate and finance, as the project aims to build a new terminal and a second runway, diversifying Kenya's business landscape and contributing to the aviation sector. The government's new financing model for the airport's expansion also involves approaching development lenders such as the European Investment Bank, Japan International Cooperation Agency, and African Development Bank, among others, indicating a shift in Kenya's business approach towards collaborating with global partners for infrastructure development.
