KPA seeks Sh17.4bn for Lamu port works

The Kenya Ports Authority (KPA) says it requires Sh17.4 billion to buy equipment and complete the construction of the two berths at the port of Lamu.

Tender documents show that the KPA targets borrowing Sh12.4billion from local and foreign banks, of which Sh3.2 billion will be used to complete construction works at the port that is not yet fully operational.

Some Sh3.1 billion from the loan is to be used to purchase marine equipment and Sh6.1 billion for yards operations, according to the State agency.

It further plans to raise Sh5 billion internally for general equipment security and ICT installations.

The launch of the Lamu Port had been delayed thrice over the past two years due to funding challenges and incomplete construction of all three berths.

The first berth was finally launched by President Uhuru Kenyatta in May this year, with equipment such as cranes, trailers, gantries and oil spill response borrowed from Mombasa.

As a result, it has only been able to attract ships that have their own gear for ship operations and roll-on/roll-off shipping like motor vehicle carriers as opposed to container shipping.

“Completion of construction of the project is expected on October 21 (subject to adequate funding) and the action plan for operalisation of the completed project on a bare minimum equipment has an estimated expenditure of Sh17,400 million,” KPA managing director John Mwangemi said in the tender documents.

Early this year, authorities had indicated they needed Sh16.4 billion, including Sh9.5 billion for equipment, Sh383 million for ICT, Sh2.1 billion for security, and Sh4.5 billion for additional dredging.

To make berths 2 and 3 operational, the port structure has to be fully established and new equipment acquired by mid-November this year.

The KPA says it needs to fund operations at the new port to generate money for servicing debt and creating room for borrowing to acquire new equipment.

The ports authority says it is targeting lower borrowing rates, grace periods, and long tenors from the contracted bank or development finance institutions to restructure its balance sheet.

The tender documents posted on its website with a missing page indicated the KPA needs to pay the Japanese government Sh437.5 million semiannually until 2047, an estimated total of Sh21.8 billion, in 25 years.

The agency is also expected to pay Sh32 billion between 2025 and 2055 in semiannual tranches used in Mombasa port development projects and take up an additional Sh30 billion for the Dogo Kundu special economic zone from Japan.

“The objective for proposals for the financing of the operalisation of Lamu Port will result in sustainable debt service- KPA seeks to optimise its annual debt costs,” the tender documents say.

“A sustainable debt service arrangement is expected to create headroom for the acquisition of equipment for Mombasa port to sustain the operations.”

The KPA is seeking contract a financial institution with a market capitalisation of over Sh5 billion or assets above Sh50 billion with enough dollar reserves.

The viability of the port has been put in question over low demand as it was expected to attract transshipment business mainly from Ethiopia and South Sudan.