A section of JKIA: New terminals and parking areas will be built to enable the facility handle up to 20 million passengers yearly in the next five years. Photo/File
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Finance minister Njeru Githae said KAA successfully negotiated the loan facility equivalent to Sh7.99 billion to finance the JKIA project that will enhance capacity from 2.5 million passengers annually to 9.3 million in 2015.
The loan guarantee was approved in line with Section 58 (1) of the Public Financial Management Act, 2012 which requires Parliament’s approval.
The Kenya Airports Authority (KAA) can now move to secure an Sh8 billion ($93 million) loan from the European Investment Bank (EIB) for expansion of the Jomo Kenyatta International Airport after MPs approved a government guarantee.
MPs also granted the Treasury authority to increase the country’s total indebtedness in respect of principal amount borrowed or credit obtained from $9.3 billion (Sh800 billion) to $14 billion (Sh1.2 trillion).
EIB is a government-owned overseas development assistance institution.
Finance minister Njeru Githae said KAA successfully negotiated the loan facility equivalent to Sh7.99 billion to finance the JKIA project that will enhance capacity from 2.5 million passengers annually to 9.3 million in 2015.
Mr Githae said the approval on Wednesday night clears the way for the start of the third phase of JKIA expansion that entails rehabilitation of terminals 1, 2 and 3 and the construction of a new infill building to be completed by December 2014.
The upgrade, according to a policy paper signed by Mr Githae and Transport minister Amos Kimunya, says the interest rate for the loan is based on EIB cost of funds plus a margin of 0.5 per cent.
“Additional charges on the loan include commitment fee of 0.5 per cent per annum of disbursed loan amounts and one time appraisal fee of $55, 000,” the paper says.
Mr Githae said KAA is expected to boost the total project financing by about 30 per cent (Sh4.5 billion) in the overall expansion covering three phases of the project.
The first phase covering expansion of apron for parking of aircraft was completed in April 2008.
The second phase that includes building a new terminal 4, a multi-storey car park and grade parking known as Greenfield project, was scheduled for completion in October 2012.
The Greenfield project, expected to cost Sh56 billion has been dogged by controversies after Mr Kimunya tried to stop the award of the tender to Chinese firms — Anhui Construction Engineering Group and China National Aero-Technology International Engineering Corporation — but the Cabinet overruled the minister and directed that KAA sign the contract.
The projected is expected to start in November and is scheduled to be completed in 2017.
It includes a new runway that will double the handling capacity of Kenya’s largest airport to more than 20 million passengers annually.
“On completion of phases 2 and 3, the capacity of the airport will be raised from the current 2.5 million passengers per annum to 9.3 million passengers per annum,” Mr Kimunya said in the paper approved by Parliament.
Based on KAA’s performance record which takes into account cash flows relating to JKIA expansion project, the government said the agency will be able to meet the debt serving obligations.
Mr Githae told MPs the current total contingent liabilities in respect of the amount is Sh47.4 billion, which is within the ceiling of the guaranteed debts of Sh200 billion set by Parliament.
The loan guarantee was approved in line with Section 58 (1) of the Public Financial Management Act, 2012 which requires Parliament’s approval.
The Treasury said it went for the loan to modernise the aerodrome in the context of the Vision 2030, the long-term development plan.
“To achieve and sustain an economic growth rate of 10 per cent annually, there is need to revitalise the delivery of efficient and effective transport services in road, rail, and air to spur the growth in infrastructural development and increase efficiency of air transport in order to meet the standards of International Civil Aviation Organisation (ICAO) and the US Federal Aviation Administration (FAA),” says the document.
Mr Githae assured MPs the level of indebtedness and loans guarantees will not increase while the interest rates and inflation will be in check for macro-economic stability.
