Cabinet Secretary for National Treasury and Economic Planning, Hon. John Mbadi has told the Senate Committee on Roads, Transportation and Housing that Adani Airport Holdings Limited submitted a Privately Initiated Proposal (PIP) to KAA in line with Section 40(1) of the PPP Act, 2021 and paid USD 50,000 appraisal fee as set in law.

This was in relation to a PIP submitted to the Kenya Airports Authority (KAA) by Adani Airports for the development and expansion of Jomo Kenyatta International Airport (JKIA).

CS Mbadi explained that the State Department of Transport forwarded a letter to the National Treasury on 1st March 2024, requesting assessment and approval of the PIP in accordance with Section 40(4) of the PPP Act, 2021. An Evaluation Committee with members from KAA and the National Treasury was established to review the proposal as per Section 42 of the PPP Act.

“The Evaluation Committee, in evaluating the proposal, applied the criteria specified in Section 42(3) of the PPP Act to scrutinize the proposal, i.e. public interest criteria, project feasibility criteria, PPP suitability criteria and affordability criteria. The Committee identified 22 issues in the PIP proposal and recommended that the issues be addressed by Adani Airport Holdings Limited at the Project Development Phase,” CS stated.

When asked about the approval of the PIP by the PPP Committee, CS Mbadi clarified that the Committee reviewed the evaluation report and allowed the project to move forward to the Project Development Phase under Section 43 of the PPP Act. Additionally, both the Private Party and the Contracting Authority were tasked with addressing several concerns, including tax compliance, which would be verified by the Kenyan High Commission in India. The first phase of the project, proposed for 2025-2029 needed to be shortened due to its urgency. The thirty-year concession period under the Build-Operate-Transfer (BOT) model was to be determined based on a detailed financial analysis.

To facilitate this assessment, the proponents were required to provide a financial model, detailed EPC cost estimates, O&M cost estimates and financing terms. The equity IRR of 18% proposed by the proponents would also be subject to negotiation.

The CS emphasized that compensation for the value of the asset transferred at the end of the concession period would apply if the proponent had not achieved its targeted return. Aero and non-aeronautical charges would need to comply with relevant national and international laws including negotiations with third parties that have existing contracts with KAA.

He also highlighted the importance of aligning land acquisition or allocation with the JKIA Masterplan, subject to land availability and necessary approvals from bodies such as the KAA Board and the National Land Commission. KAA was expected to provide the Proponent with details of land available for city-side development, which would be a key part of the feasibility study.

“The risk matrix should be reviewed including social risks and risks allocated appropriately, with the Proponent providing a proper mitigation plan. All commitments must be made in line with Kenyan laws, and any proposed amendments to the laws should follow established legislative processes,” the CS added.

Regarding the Project Development Phase, Hon Mbadi reported that KAA and Adani Airports had not yet entered into a Project Development Agreement under Section 43(7) of the PPP Act. After receiving approval to proceed to the Project Development Phase, the Proponent conducted a feasibility study which was then submitted to KAA for review.

On 4th April 2024, the State Department of Transport forwarded the feasibility study to the PPP Directorate for consideration by the PPP Committee. 

Furthermore, CS Mbadi informed the Committee that the PPP Directorate has not approved any stage of the PIP by Adani without the approval of the PPP Committee.