Economy

China firm to get Sh106bn on city expressway toll fees

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Work in progress on Nairobi Expressway. FILE PHOTO | NMG

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Summary

  • The disclosures tabled in Parliament last week put the Chinese firm’s earnings at 163 percent of the $599.5 million (Sh65.5 billion) estimated cost of building the road.
  • CRBC also earns billions of shillings from running SGR through its Kenya subsidiary Africa Star Operations.
  • High-capacity vehicles like transit lorries will pay between $5 (Sh547) and $15 (Sh1,641) to use the expressway depending on distance travelled on the road, while low-capacity vehicles like saloon cars will pay between $1 (Sh109.4) and $3 (Sh328).

The Chinese firm that will build and operate the Nairobi Expressway will earn an estimated Sh106.8 billion profit for the 27 years it will own the double-decker road.

China Road and Bridge Corporation (CRBC), which built the Sh474 billion Mombasa-Naivasha standard gauge rail (SGR), will earn $977 million (Sh106.8 billion) as dividend and other incomes from the $2,765 million (Sh302.4 billion) revenues that are expected from the mega road.

This means that CRBC through its local arm — Moja Expressway Company — will pocket an estimated Sh3.9 billion annually or 35 percent of revenues generated from toll fees charged on motorists who will use the 27.1km road.

Motorists using the road linking Mlolongo to the Nairobi-Nakuru highway via Jomo Kenyatta International Airport (JKIA) will pay between $1 (Sh109.4) and $15 (Sh1,641) depending on the size of the cars and distance travelled.

The disclosures were tabled in Parliament last week and put the Chinese firm’s earnings at 163 percent of the $599.5 million (Sh65.5 billion) estimated cost of building the road.

CRBC also earns billions of shillings from running SGR through its Kenya subsidiary Africa Star Operations.

At Sh3.9 billion, CRBC’s forecast annual earnings from the double-decker road dwarfs the profits of the majority of firms listed on the Nairobi Securities Exchange (NSE) — underlining the outsized cash the expressway will generate over the 27 years.

“Total cash flow generated from operation activities-mainly toll revenue-during the concession period is estimated at Sh302.491 billion ($2.765 billion),” James Macharia, the Transport Cabinet Secretary said in submissions to Parliament.

“The main purpose of the road is to decongest the section of the road from Mlolongo to James Gichuru by transferring an estimated 30 percent of traffic volume from the existing road to the new expressway.”

Toll fees were introduced in the late 1980s but were scrapped in the mid-90s in favour of the roads maintenance levy currently charged at Sh18 per litre of petrol and diesel.

The return of toll fees is the result of using private investments in State infrastructure to build roads, energy plants and housing with investors recouping their cash from charging user fees like toll.

Kenya is seeking to maintain the pace of spending on new infrastructure with funding from private backers while reducing borrowings and budget deficit.

High-capacity vehicles like transit lorries will pay between $5 (Sh547) and $15 (Sh1,641) to use the expressway depending on distance travelled on the road, while low-capacity vehicles like saloon cars will pay between $1 (Sh109.4) and $3 (Sh328).

Motorbikes and three wheelers commonly known as Tuk Tuks are banned on the double-decker road whose construction started early this year and will take two years to complete.

The expressway involves a four-lane and six-lane dual carriageway within the existing median of Mombasa Road/Uhuru Highway/Waiyaki Way and 11 interchanges or exits and entry routes that will act as toll ramps.

Data submitted to the Senate committee on Roads and Transportation shows that the bulk of the proceeds from toll charges will go towards debt repayment, including interest, dividends, corporate tax and operational expenditure.

About $864 million (Sh94.5 billion) will be used for debt repayments for loans tapped by CRBC for construction of the expressway.

The cost of operating the road is set at $394 million (Sh43.1 billion) while dividends and lump sum pay called equity release will amount to $978 million (Sh106.9 billion).

The Kenya Revenue Authority (KRA) is also a key beneficiary of the project given the taxman is expected to get $434 million (Sh47.4 billion) for value added tax (VAT) and corporate tax over the 27 years.

After recouping its investments over the 27 years, CRBC will transfer ownership of the road to the State in 2050.

Besides the Nairobi Expressway, the Rironi-Nakuru-Mau Summit road will soon become a reality after the government entered into a public private partnership (PPP) with French Consortium of Companies to build the 233-kilometre highway at a cost of Sh160 billion.

The project will be funded by private investors and French companies led by Vinci Highways/Concessions, which will design, finance, build, operate, and maintain the road for 30 years and, thereafter, transfer it back to the government.

The two-lane highway will be expanded into a four-lane dual carriageway and later into six lanes at its busy sections.

The government is planning to put more highways to be constructed through the PPP arrangement under similar plans, depending on the success of the two.

Toll fees that will start upon completion of the two highways will add to the Sh18 per kilometre fuel levy currently charged for maintaining Kenya’s roads.