The Nairobi Expressway operator reported a wider net loss of Sh1.84 billion in the six months to December, as revenues from the 67,298 vehicles that use the road daily failed to cover its debt and operational costs.
Treasury disclosures show motorists paid Sh7.16 billion in toll fees during the period against Sh9 billion in costs, including loan repayment, operations and maintenance expenses.
It posted a Sh1.2 billion loss in the year to June 30, 2024, when traffic averaged 11,000 vehicles daily, an indication of a surge in use this year.
The losses point to the struggles of what is hailed as Kenya’s first significant and visible private partnership project.
The Chinese operator Moja Expressway would have absorbed deeper losses had it heeded regulatory calls to cut its toll charges following a drop in inflation and strengthening of the shilling against the dollar.
The Kenya National Highways Authority (KeNHA), which regulates the expressway, reckons that the strengthening of the shilling and lower inflation should trigger a drop in the toll charges that were reviewed upwards on January 1, 2024.
Some 67,298 vehicles used the dual carriageway daily last year, paying toll fees of between Sh170 and Sh500 for the 27-kilometre stretch from Mlolongo in Machakos County to Westlands, Nairobi.
The Treasury disclosures did not provide a breakdown of Nairobi Expressway’s costs, with debt expected to form a substantial part of the expenses.
Data shows that 12.5 million vehicles went through the expressway in the six months to December.
The expressway involves a four-lane and six-lane dual carriageway and 11 interchanges or exits and entry routes that will act as toll ramps.
The toll charges are forecast to generate Sh302.5 billion in revenues, which are expected to offer the Chinese firm an average annual profit of Sh3.9 billion.
The Chinese firm, which will build and operate the Nairobi Expressway, is expected to earn an estimated Sh106.8 billion profit for the 27 years it will own the double-decker road.
Its losses, despite increased usage, indicate finance costs from debt used to build the road ate into revenues.
Motorists had hoped for lower rates to be announced from July 1, 2024 in line with macro-economic changes.
The law gives the Cabinet Secretary for Transport powers to adjust the toll rates downwards if inflation falls and the shilling strengthens as part of the public-private partnership (PPP) that the country inked with Moja Expressway, a subsidiary of China Road and Bridge Construction (CRBC).
The current toll charges were based on inflation at 6.85 percent and the shilling at Sh143.75 against the dollar.
The shilling has remained little changed against the dollar since May last year as Kenya’s settlement of the Eurobond that matured in June 2024 calmed investors, pushing the local unit to Sh129.24 from Sh157.32 at the start of last year.
Inflation stood at 4.6 percent last month compared to 4.5 percent in August, keeping the cost of living measure within the State’s target range of 2.5 percent to 7.5 percent since.The shilling was volatile in 2023, oscillating between Sh123 and Sh156 to the dollar, an instability that prompted the increase in the toll charges in January last year.
It has calmed to trade at a range of Sh129.24 and Sh130 since July last year, leading KeNHA to recommend a cut on the toll.
After the adjustment of toll fees in January last year, motorists driving saloon cars from Mlolongo to Westlands saw their user fees increase by 38.9 percent to Sh500 from the rate of Sh360 that had been set earlier in April 2022.
Driving the same vehicle from Westlands to Jomo Kenyatta International Airport (JKIA) costs Sh410, an increase of more than a third from Sh300.
The reluctance to reduce the toll rates has parallels with the rocket-and-feather pricing, where upstream changes are adjusted upwards at rocket speed while the lower prices come down at the pace of a feather.
The State opened a window allowing the Chinese company to adjust the Nairobi Expressway toll charges annually based on inflation in fees that will be paid in dollars.
The inaugural toll charges were based on the dollar trading at Sh103.79 and reviewed based on inflation and the rate of Kenyan shilling to the dollar.
This technically means that the toll charges are dollar-based and will cushion the Chinese operator from exchange rate losses. It has since reviewed the rates upwards twice.
