A consortium of 24 retirement schemes says it is looking to invest in the 143km road project which runs through Wajir and Mandera counties by participating in an upcoming bond to be issued through private placement.
The Kenya Pension Funds Investment Consortium (KEPFIC) has identified the project, whose total cost is estimated at $188.88 million (Sh21.46 billion), as a viable option for its members who are said to control about Sh500 billion in assets under management.
The consortium, launched in October 2020, is championing “diversification of local pension portfolios and the need for greater private infrastructure funding”.
Pension schemes have lined up Sh2 billion to partly finance the construction of a key road in northern Kenya, making it the first major project under the public-private partnership (PPP) model to be funded through retirement savings.
A consortium of 24 retirement schemes says it is looking to invest in the 143km road project which runs through Wajir and Mandera counties by participating in an upcoming bond to be issued through private placement.
The Kenya Pension Funds Investment Consortium (KEPFIC) has identified the project, whose total cost is estimated at $188.88 million (Sh21.46 billion), as a viable option for its members who are said to control about Sh500 billion in assets under management.
The project, which is being constructed under the Treasury’s road annuity programme, is part of alternative investment options, largely in infrastructure development, worth Sh16 billion that KEPFIC has identified this year.
The consortium, launched in October 2020, is championing “diversification of local pension portfolios and the need for greater private infrastructure funding”.
“As much as these (infrastructural development) opportunities have a very significant social impact in them, it’s also important to note that they meet the return expectations of the pension schemes who are investing hard-working Kenyans’ money,” said head of the KEPFIC secretariat Ngatia Kirungie.
“So our mandate, together with our partners like World Bank and USAid, is to bring to the table viable investment opportunities that our membership and all pension schemes at large can invest in.”
Under the annuity financing model, contractors access loans guaranteed by the State from banks and other sources, enabling them to design, construct and maintain the roads.
The Treasury will repay the loans in equal instalments (annuity) from the time the road is completed.
The PPP project, which the Treasury awarded to GVR-Hass Consortium, consists of a 68km Wajir-Samatar stretch and a 75km Rhamu-Mandera section.
GVR-Hass Consortium comprises Hass Infrastructure (a unit of Hass Petroleum), Kenya's GVR Infra Projects and China’s Shandong Hi-Speed Group.
Robert Murai, the head of debt capital markets at Stanbic Bank Kenya, an advisor for GVR-Hass Consortium’s road annuity project, said the bond will have a tenor of eight years with a return benchmarked against interest rate for the government’s eight-year securities.
Investors in the amortised bond, which is fully guaranteed by UK’s GuarantCo, will receive repayments every three months, Mr Murai told a forum of pension scheme managers and trustees in Nairobi Thursday.
The Retirement Benefits Authority (RBA) rules allow pension funds to directly invest up to 10 percent of their portfolio in infrastructure debt instruments.
“It gives them a chance to diversify their investments, hedge against inflation … and also contribute to the development of our country by investing in projects,” RBA chief executive Nzomo Mutuku said.
Pension schemes have the bulk of their assets in government paper and listed equities, with significant holdings in property and fixed deposits as well.
