Cabinet gives nod to Sh7.9 billion financing for airport’s expansion

Kenya Airports Authority has received a Cabinet nod to borrow Sh7.9 billion from a European bank, giving the ongoing airport expansion project a boost.

During its sitting on Thursday, the Cabinet approved the loan from European Investment Bank by the Kenya Airports Authority (KAA) for the expansion and upgrading of facilities at the Jomo Kenyatta International Airport (JKIA).

“This will enable JKIA to remain competitive and an international aviation hub,” the Cabinet brief said without disclosing the terms of the loan.

The loan approval comes days after KAA said it had opened fresh talks with other financiers to get more ‘comfortable credit terms’ for funding of the proposed new airport terminal.

“The funding was not limited to the only two companies. We are talking to other financiers,” the JKIA expansion project manager Francis Ngige said during a recent media tour at the airport.

The airports authority needs billions of shillings to finance its different expansion projects that are running concurrently.

Most critical is the Sh55 billion Greenfield terminal, which was awarded to a Chinese firm, Anhui Construction.

Anhui had submitted to the authority two financing partners — China Development Bank and China Exim Bank — as part of the tender requirement.

The project, which was mired in controversy at the tendering stage, has the critical backing of the Cabinet meaning that it is only funding and stakeholder involvement that is standing between it and its completion.

Construction of the new airport, which will handle about 20 million passengers a year, is expected to begin in November next year and will be completed in 2017.

The authority disclosed that it will be repaying the loan from revenue generated by levies on use of the airport.

KAA doubled the airport tax to $40 (Sh3,400) from $20 (Sh1,700) recently as part of its efforts to generate internal revenues in order to enable it repay the loan.

KAA needs the government as a guarantor for the loan, making it critical that it first gets Cabinet approval.

The airport authority is under pressure to expand in order to ease the current congestion.

JKIA is at the moment handling 6.5 million passengers per year, yet the current structure was built to handle about 2.5 million.

Demand at JKIA is high with projected passenger traffic growth of 12 per cent yearly.

Ease congestion

The other project that is expected to ease congestion at the airport is the Terminal 4 building scheduled to be completed by the end of next year and will have a capacity of handling 2.5 million passengers per year.

However, the project team is raising fears that the terminal may not be operational until early 2014 on grounds that procurement of the furnishing material is already behind schedule.

JKIA is also handling 300 million kilogrammes of cargo per year, with an average annual growth rate of 10 per cent.