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American contractor locks out China to build Kenya's first expressway at a cost of $3 billion

Once complete, motorists will be able to cruise uninterrupted on the highway at speeds of up to 120km per hour, halving travel time to four hours from current Eight hours.

Bechtel executives met with Treasury officials last week to fine-tune the financing of the 473km road and made public the firm’s estimate.

“The financing model was reviewed on March 13, 2018 with National Treasury, and shows a net cash positive position of $5.7 billion (Ksh570 billion) for the Government of Kenya over 25 years under the Bechtel government-to-government model,” the contractor said according to a local business daily.

The luxury of cruising at high speeds uninterrupted compared to dealing with low speeds and heavy congestion will however come at a fee and users will pay toll charges to use the facility.

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The new dual carriageway will have two lanes on either sides and will run parallel to the current Nairobi-Mombasa Road.

The road will have interchanges to connect to the standard gauge railway and existing roads, along with 76 overpasses and 21 underpasses.

Besides creating jobs, suppliers of constructions materials are set to emerge as big winners.

Early estimates indicate the project will consume 100,000 tonnes of cement and 40,000 tonnes of steel.

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“The project can start construction in July 2018, with the first useable section of the expressway to be delivered in early 2020, and an additional 50 km opening every six months thereafter.

This sectional approach provides useable sections which can be tolled during construction.”

The project contract was signed last August and was single-sourced to the American firm, in line with the tradition of state-to-state financing deals that favour companies from the financing country, effectively locking out China who is responsible for major road works in Kenya Sh32 billion ($360 million) including Thika superhighway.

Bechtel is expected to execute the entire project, including preparation of road designs, sourcing of equipment and materials as well as actual construction under the engineering, procurement and construction (EPC) contract.

The American contractor, which recently set up its regional offices in Nairobi, is lobbying Kenyan authorities to choose the EPC model, arguing that the alternative public private partnership (PPP) would cost five times more at $15 billion (Ksh1.5 trillion) and take much longer to complete.

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Bechtel warns that should Kenya opt for the alternative route, it will find itself in a negative cash flow territory and the State would be left with the burden of paying out $5.4 billion (Ksh540 billion) over 25 years.

“This clearly shows that the Bechtel model is significantly more advantageous in financial terms,” says the contractor.

The Kenya National Highways Authority (KeNHA) director-general, Peter Mundinia, on Monday said construction would take the EPC model but operations, maintenance and tolling would be done under PPP.

“The Government of Kenya has several options available to bring in the private sector. By securitising or privatising the asset, the government can reduce its contributions during construction, and/or retire the debt obligations. The government could do this as early as end of 2021, or wait until 2023/2024 when the project is almost complete,” Bechtel says in the document.

“The longer the government waits to securitise or privatise the revenue, the better return on the asset the government is likely to achieve.”

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