CSO Sensitization Forum on Public Private Partnership in Kenya … · The PPDA regulations provided...
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CSO Sensitization Forum on Public Private Partnership in Kenya By Ogada Tom Nairobi, 26 th June 2018
Transcript of CSO Sensitization Forum on Public Private Partnership in Kenya … · The PPDA regulations provided...
CSO Sensitization Forum on Public Private Partnership in Kenya
By
Ogada Tom
Nairobi, 26th June 2018
Part One
Background
PPP Policy and legislative framework
PPP process
Part Two
Sectors review (Energy, Housing and Water)
Part Three
Way Forward: Entry points for CSO on Public
Participation
STRUCTURE FOR THE DAY
PART ONE
Introduction to PPP framework in Kenya
By
Ogada Tom
CSO Sensitization Forum on Public Private Partnership
26th June 2018
Background
PPP Policies, Legislations and Structure,
Risks
PPP Process
CONTENT
1. 220 markets, poor infrastructure
2. Generated Kshs 40 million per
year
3. Identified 12 markets for
upgrading
4. Would cost around Kshs 500
million to upgrade
5. Annual budget for market
infrastructure 20 million
6. Decided to do a PPP as per the
CIDP
7. Advertised 2014
8. Demonstration against the
project
9. Advertisement cancelled
Case Study 1: PART ONEStakeholders reject market project in Homa Bay county
Identify Four
Mistakes that I
did
An agreement between a public entity and a private party under
which:
The private party undertakes to perform a public function or
provide services on behalf of the public entity
The private party receives a benefit for performing the
function, either by way of
compensation from the public fund
charges or fees collected by the private party from users or
consumers of the services provided
combination of such compensation or such charges or fees
The private party is generally liable for risks arising from the
performance depending on the terms of agreement
1.1. Definition of PPPBackground
1. Development and management of assets:
Main type of PPP
Involves design, construction and long term operation
and maintenance of the assets
2. Significant upgrade and renovation: involves
significant additional investment in an existing
asset
3. Management of existing facility
Involves specific performance levels
Involves transfer of some risks to the private sector
Background1.2. Examples of PPP
1.3. Traditional procurement route
The source of funds for such traditional procurement is the
budget
Build only (B) contract: Design is completed by a
government entity; A contract is tendered to build the
Infrastructure Asset
Design-Build (DB) contracts: in which a single contract is
tendered for both the design and construction of the asset.
Payments for such projects is made from the government
budget against certificates of work done (milestones) as
construction progresses.
Design-Build-Finance: payment done after the completion
of the project.
1.4. Advantages and Disadvantages of traditional
procurement
Most appropriate options for developing infrastructure,
when that the public sector:
Less costly
Known method
Disadvantage
Government must have money in the budget
There is no motivation for the contractor to care about
the quality or resilience of the asset.
However the contractor does have a clear motivation to
increase profits by either reducing costs (quality!) or
claiming extra payments through variations to the scope
of the contract
1.5. Key Features of payment for PPP
Payment done only after the completion of the
construction of the project
Payment done against performance outputs
Private investor can be paid by
Government (Government pays PPP)
Users (User pays PPP)
Both (Viability Gap)
1.6. Basic structure of a PPP contract
Public
Partner
Private
Partner
(SPV)
Government
signs a PPP
contract with
the Private
Sector
Private sector signs contracts
and agreements with equity
investors, Lenders, EPC
contractors , O&M
Contractors and Users
Lenders
O&M
Contractor
EPC
contractor
Equity
Investors
Users
User Charges
Or Government
Shareholding
agreement
Loan
Agreement
O&M
Contract
EPC
Contract
1.7. PPP Risks
Public
PartnerPrivate
Partner
Lenders
O&M
Contractor
EPC
contractor
Equity
Investors
Users
• Demand Risk
• Tariff Risk
•Collection Risk
Shareholding
agreement
Credit Risks
Operating
Risks
Design Risk
Construction
Risk
The Strength of the PPP is
that the Public sector
transfers most of the risks
to the private partner
1.8. Where PPP are Used – Economic PPPs
Transport
Roads, Rails and Bus Park, Parking
Water and waste
Waste water treatment plant
Solid waste management
Waste to energy plants
Energy
Independent Power Producer Plants
Electricity transmission lines
Gas and oil pipelines
Energy efficiency
Agribusiness
Grain storage, Irrigation and Agro processing
1.9. Benefits of PPP re Used – Social PPPs
Hospitals
Students hostels
University facilities
School facilities
Court buildings
Prison facilities
Social housing
Sports centers
Fire stations
Police station
Government offices
1.10. Benefits of PPP
Financial motivation
Efficiency (right projects, procurement methods, cost
management, operational optimization)
Effectiveness (achieving the desired outcome in a time
and cost effective way)
Ensure long term upfront commitment of resources by the
private sector for maintenance and technical reliability
PPP can bring more transparency and assurance because
of the many parties involved in the transaction
(government, advisors, private investors, contractors,
lenders, bid side advisors etc)
1.11. Disadvantages of PPP
PPP are more complex, time consuming and requires
higher level of expertise than traditional procurement
method. Government wanting quick results will be
discouraged from following the PPP route
The PPP route is more visible and politically exposed.
Public controversy may arise due to public belief that PPP
leads to a rise in charges.
PPP procurement has a higher transaction charges both
to the private and public partners
PPP is more expensive in terms of financing due to the
cost of private financing and risk premiums
As a long term contractual commitment for the public
party, PPP implies rigidity in budget management.
1.12. Key Issues about PPP (Summary).
1. A long term contract between pubic and private parties
2. Construction and long term management of the asset are
bundled together in one contract
3. There is significant risk transferred to the private partner
4. The private partner’s remuneration is linked to and at risk
of performance and /or demand benchmarks and only
when the asset is completed and ready to be used.
5. The private party is usually constituted as an SPV
6. Financing raised by the private party is usually in the form
of project finance. Only the SPV is responsible for
payment of debts and not the shareholders.
7. PPP may be classified as user pays PPP or government
pays PPP.
2.1. Development History
perspective
Vision
2030
launched
PPP
Policy
released
PPDA (PPP)
regulations
approved
1st PPP
Committee and
Secretariat
established
PPP Act
Passed
2007 2009 2010 2011
PPP Act
Amended
National PPP
regulation passed
and County PPP
regulations
drafted
PPP(Project
Facilitation
Fund) regulation
drafted
2013 2014 2015 2016
Policy, Legislations and Structure
2.2. Vision 2030 Policy, Legislations and Structure
Sub-Sector (2012-2030) Cost in USD
billion
Energy 19.8Roads 9.0ICT 7.8Railways 7.2Ports 4.8Water and Sanitation 4.6Lamu Transport Corridor 3.7Housing 2.9Airports 0.9Total Infrastructure Financing
Needs60.7
Estimated Financing available to GoK 25Infrastructure Financing Gap 35.7
Vision 2030
identified priority
infrastructure
projects in order
to realize its
objectives
To implement
these projects,
there is
infrastructure
funding gap of
around US$ 2.1.
billion per year
In 2009, the Public Procurement and Disposal (PPPs)
Regulations (2009) was developed and adopted by the
government to promote PPP. The regulations defined and
outlined the following, amongst others:
What constitutes a PPP;
Types of PPP;
PPP Implementation structure (PPP Steering
Committee and the PPP Secretariat);
PPP process and steps
PPP risks
Minimum obligations of PPP agreement
The PPP Steering Committee and PPP Secretariat were
appointed for the first time in 2010.
2.3. Public Procurement and Disposal Regulations of 2009
The PPDA regulations provided the institutional and
regulatory basis for PPP, but did not provide legal basis for
PPP. As a sign of commitment, the government prepared and
approved a PPP policy in 2011. The policy statements were
formalized by passing the PPP Act in 2013. Both the policy
and the act provided the following, amongst others:
Expanded Scope of PPP
Strengthened Implementation Structure
Refined the PPP process
Defined the procurement process
Defined Risks allocation structure
Defined implementation process for unsolicited proposals
2.4. PPP Policy (2011) and
PPP Act (2013)
Policy, Legislations and Structure
2.5 PPP Structure PPP Structure
2.6. Functions of the
PPP Committee
PPP Structure
ensures that each project agreement is consistent with
the provisions of the PPP Act
formulates policy guidelines on public private
partnerships
ensures that all projects are consistent with national
priorities
approves project lists, proposals and feasibility studies
submitted by contracting authority
formulates and approve standards, guidelines and
procedures for awarding contracts and standardized
bid documents and authorize allocation of facilitation
fund
reviews the legal, institutional and regulatory
framework for PPP
County Government signed “illegal” PPP MoUs in
2013
Homa Bay County Kshs 560 billion project
Nakuru solar project
Kshs 21 billion Dandora solid waste project
Kericho solar projects
2.7. Need for PPP (county government)
Regulations (2014)
In 2014, the government prepared and approved the PPP
(County Governments) regulations 2014 to provide a
framework in which the county government could effectively
use PPP model. The regulations provided the following,
amongst others:
County government PPP institutions
Requirements for county government projects
Procurement of county government PPP projects
PPP projects that do not have contingency liability or
falling below the threshold
2.8. PPP (county government)
Regulations (2014)
Policy, Legislations and Structure
The regulation establishes the project facilitation fund to
provide financial support the following purposes:
support to contracting authorities’ third party costs in the
preparation of public private partnership projects;
support to the activities of the PPP Unit;
provision of viability gap finance to projects;
provision of a source of liquidity to meet any contingent
liabilities arising from a project; and
settlement of transaction advisory costs where the services
are provided by third parties
2.9. PPP (Facilitation Fund) Regulation (2015)
In 2016, the PPP Act 2013, was amended to take care of the
county governments.
Expand the meaning of contracting authority to
include county government or its corporation
Clarifies how the county list is processed before
submission to the PPP Unit
Provides in the Act the procedures for county
government public private partnership projects
The Amendment has provided for exemption of the
PPP projects from the Public Procurement and
Asset Disposal Act 2015
2.10. Draft Amendment
(county government) (2016)
Policy, Legislations and Structure
3. Twelve (12) Steps PPP Process
3
Request for
qualification
Invitation
to Bid
Qualification
of bidders
Bidders
conference
2008 2011 2013 2016
Evaluation
of BidsFinancial
closure
NegotiationAward
Step 6
Steps 6-13: Procurements by the Contracting Authority
Step 7 Step 8 Step 9
Step 10 Step 11 Step 12Step 13
Project
Concept
National
Priority
Lists
Project
Proposal
Feasibility
Study (FS)Approval
of FS
Steps 1-5: Approvals by PPP Unit and PPP Committee
Step 1 Step 2 Step 3 Step 4 Step 5
3.1. Project conceptPPP Process
Conceptualising, identifying and prioritizing potential
projects for PPP is the first PPP step,
CA considers the strategic and operational benefits of
entering into a PPP arrangement compared to the
development of the facility or provision of the services
by the contracting authority
For prioritized projects, a contracting authority (CA),
undertakes a sector diagnostic study and assessment
and prepares project concepts covering the following:
technical issues,
legal, regulatory and technical frameworks,
institutional and capacity status,
3.2. National Priority ListsPPP Process
From the diagnostic study, the contracting authority (CA)
prepares a list of projects that it intends to undertake on a
priority basis and submits the list to the PPP unit for
assessment.
The projects submitted must be in CA’s development plan. If
county governments, or prioritized in County’s CIDPs
The PPP unit assesses the project lists and submit it together
with its recommendations to the PPP committee for approval.
The committee considers the lists and recommendations and
prepares and submit a national priority list to Cabinet for
approval.
If approved, the PPP unit publishes through electronic and
print media the approved national priority list.
3.3. Project ProposalPPP Process
Once the list is published, the contracting authority, appoints
project preparation and appraisal team to prepare project
proposal.
The team determines the technical profile, operations,
service delivery targets and future income and costs of the
project, amongst other factors.
For those PPP that require the collection of user fees directly
from consumers, it is necessary to confirm through such
surveys that the revenues paid by the consumers will be
sufficient to make the project financially viable.
This report is presented to the PPP unit for approval by the
PPP committee. If approved, the contracting authority moves
to feasibility study stage
3.4. Project Feasibility (FS)PPP Process
The contracting authority, in consultation with the PPP Unit,
recruits a transaction advisor, where applicable, to prepare a
full feasibility Report outlining:
Social, economic and environmental impact of the project
Legal and technical requirements
Full investment appraisal that determines the commercial
sustainability of the project
Requirements for land acquisition or other government support
Affordability, value for money and public sector comparator for
the project
Bankability of the project based on optimal risk sharing
Consultation with stakeholders to ensure their interests are
considered
3.5. Submission and
approval of the Feasibility
PPP Process
The contracting authority, upon completion of the feasibility
study, prepares a feasibility report in a prescribed form and
submit it to the PPP unit for review and evaluation.
The PPP Unit submits the report together with its
recommendations to the Debt Management Office (DMO)
for assessment and approval of the fiscal risk and
contingent liabilities of the project.
The PPP unit submits the report together with its
recommendations and the approval of the DMO to the PPP
Committee for approval.
If approved, the committee inform the contracting authority
in writing Its approvals and recommendation to proceed to
tendering stage
3.6.1. Procurement processPPP Process
1. Consistence with the PPP Act: PPP projects shall be
procured through a competitive bidding process. The
process shall be guided by the principles of transparency,
free and fair competition and equal opportunities
2. Request for Qualification: Contracting Authority (CA), upon
approval of the PPP Committee, invites request for
qualification by notice in at least 2 newspapers of national
circulations and in electronic media. The notice must specify
eligibility criteria of the bidders.
3. Prequalification of bidders: The Contracting Authority
constitutes a prequalification committee, to review the
requests for qualification submitted by the bidders and
prequalifies those that meet the set criteria.
3.6.2 Procurement processPPP Process
4. Preliminary bidders meeting:
The Contracting Authority organises a preliminary
bidders meeting for the shortlisted bidders to deliberate
on issues related to the project specifications and
respond to any enquiry made by the bidders in relation
to the project.
Such enquires and responses are communicated to all
shortlisted bidders.
The CA may alter the specifications of the project based
on the deliberations of the preliminary bidders meeting
5. Invitation to bid: The CA, in consultation with the PPP Unit,
prepares an invitation to bid and tender documents and give
the prequalified bidders. The bidders complete and submit
technical and financial bid.
3.6.3 Procurement processPPP Process
6. Evaluation of the Bids:
The Contracting Authority constitutes a proposal
evaluation team for the purpose of evaluating the bids
submitted.
The evaluation team, upon evaluating the bids and
before declaring the first ranked bidder, prepare an
evaluation report specifying the evaluation criteria, the
manner in which the first rank bidder satisfied the
requirements specified in the tender documents in
comparison with the other bidders.
The Contracting Authority submits the report to the PPP
committee for approval.
3.6.4 Procurement process PPP Process
7. Negotiation:
A CA may, with the approval of the PPP committee, enter
into negotiation with the successful bidder.
The purpose of negotiation is to get the best value for
money from the project.
The CA establishes a negotiation committee to negotiate
with the first ranked bidder on technical and financial
terms of the project agreement.
A report of the negotiated terms is presented to the CA for
review and submission to the PPP Unit.
3.6.5 Procurement process
8. Award:
The PPP unit reviews the report and, submits the report to
the Debt Management Office for confirmation of its initial
approval at feasibility stage based on the final contract and
preferred bidder submission.
The PPP Unit then presents a report to the committee,
which in turn prepares a report and recommendations to
cabinet for approval.
9. Establishment Project Company:
The successful bidder establishes a project company in
accordance with the Companies Act for the purpose of
undertaking the project as per the agreement.
Such company may include a public body as a minority
share holder, and shall provide performance security and
fulfil all conditions be specified in the project agreement.
1. Consultations organized
by a CSO
2. Political incitement
3. Propaganda and lies
4. Several meeting
organized
5. Project abandoned
Case Study 1: PART TWOStakeholders reject market project in Homa Bay county
PART TWO
Review of selected Sectors for the PPP framework in Kenya
By
Ogada Tom
CSO Sensitization Forum on Public Private Partnership
26th June 2018
1. Background
2. Energy Sector:
Uniqueness of the energy sector in terms of PPP
Experience in the sector
Some examples
3. Housing:
Case Study: Kenyatta University Hostel Project
4. Water:
Case Study: Nairobi County Municipal Solid
Waste Project
5. Common challenges
Content
1. The work was commissioned by Kenya Private Sector
Alliance in collaboration with the African Development
Bank
2. The purpose was to identify challenges facing the
participation of the private sector in PPP in the energy,
housing, water and road sector
3. Specific objectives were: Review the existing PPP policies, legislations and
regulations
Review the sector based policies, legislations and
regulations
Mapped the existing and pipeline PPP projects in the
sectors
Analyses status and gaps
4. Four consultants were involved, one for each sector
5. Projects undertaken from October to December 2017.
1. Background
1. Policy and regulatory framework
2. Concept of Power Purchase Agreement
3. Feed-In-Tariff
4. Long experience in PPP
2. Energy Sector
2.1. Uniqueness of PPP Approach
3
Unique PPP Feature2.1: Energy Sector policy and
Regulatory Framework
The reforms in the power sector, which started in 1996 and
led to the enactment of the electric power Act of 1997, were
motivated by the following challenges:
Inadequate power generation capacity and unreliable
power supply
Overdependence on hydro power providing 55 % of the
total installed capacity.
Perennial drought led to reduction in the generation of
electricity from hydro power, leading to power rationing. In
1999 the hydro capacity dropped by 78 %.
Wide spread power rationing led to huge business losses,
particular for commerce and industry
2.1.1. Electric Power Act (1997)
Energy Sector plans, Policy, Legislations and Structure
The Electric Power Act (1997) spelt out the initial reforms in
the energy sector, which included to the following:
Establishment of an independent regulator (Energy
Regulatory Board, Later Energy Regulatory Commission)
Unbundling and separation of the roles of generation
(KenGen) and that of transmission and distribution (KPLC)
Liberalization of the energy sector to allow private sector
participation
2.1.2. Electric Power Act (1997)
Energy Sector plans, Policy, Legislations and Structure
The policy had the following action plans for the period (2004-
2007):
Facilitate the development of a competitive market structure
for the generation, supply and distribution of electricity.
Establish Geothermal Development Corporation (GDC)
Partially privatize KenGen through an IPO of 30 % of its
equity, to raise investment money require to expand the
generation capacity.
Establishment of Energy Regulatory Authority (ERC).
Incorporated the Kenya Electricity Transmission Company
(KETRACO) to build new electricity transmission networks.
2.1.3 The Energy Policy (2004) and Energy Act
(2006)
POWER
PURCHASE
AGREEMENT
KENGEN
Independent
Power
Producers
Geothermal
Development
Corporation
Feed-In Tariff
CONSUMERS
2. The concept of Power
Purchase Agreement
3. Feed-In Tariff Implementation Procedures
4. The Geothermal Development Corporation
Route (shorten PPP route)
Risks and Costs in the Geothermal Development Process
Point of entry by
the private sector
5. Energy sector most experienced in PPP
Company Type Location MW YEAR PER
1 Iberafrica Thermal Nairobi 109 2005 27
2 Rabai Power Thermal Mombasa 90 2007 15
3 Thika Power Thermal Mangu 87 2012 20
4 Triumph Thermal Athi River 83 2011 20
5 Gulf Power Thermal Athi River 80 2011 20
6 Tsavo Kipevu Thermal Mombasa 75 2000 20
7 Turkana Wind Wind Marsabit 300 2010 20
8 Kinangop Wind Kinangop 61 2012 20
9 Orpower 4 Geothermal Olkaria 3 150 2000 25
10 GPEA Geothermal Nakuru 35 2014 25
11 Sosian Geothermal Nakuru 35 2014 25
12 Orpower22 Geothermal Nakuru 35 2014 25
13 Oserian Co. Geothermal Naivasha 3.7 2005 15
14 James Finlay Hydro/therml Kericho 6.7 2005 15
15 KPRL Thermal Mombasa 8.5 2011 20
16 Unilever Tea Hydro/Therml Kericho 3.8 2008 15
17 Sotik Tea Co. Thermal Arroket 1.5 2005
5. Energy sector most experienced in PPP
18 Sotik H Thermal Sotik 1.1 2005 15
19 Mumias Co. Biomass Mumias 26 2008 25
20 Bidco Biomass Thika 2.125 2011 20
21 Cummins Biomass Marigat 8.4 2014 20
22 Centech Ltd Coal W. Pokot 30 2015 30
23 Imenti Tea Co. Hydro Imenti 0.92 2010 25
24 Powerhive Solar PV Kisii 3 2015 25
25 Kleen Energy Hydro Embu 6 2015 25
26 Pan paper Biomass Webuye 9 2004 15
27 Regen Terem Hydro Mt. Elgon 5.2 2014 20
28 Tindinyo Hydro Nandi 1.5 2014 25
TOTAL 1,195
1999 PPA signed
48 MW capacity, Geothermal
Cost 165 US$
100 % owned by Ormat, USA
Competitive International Tender
BOO for 20 years for phase one (13 MW) in 2000 and phase
two (35 MW) in 2008 (tariff negotiated and reduced)
In 2011 entered into a second Amended and Restated PPA
for another 62 MW:
13 MW in 200035 MW in 2008 36 MW in 201426 MW in 2016
6. Case Study: Ormat Geothermal Power Plant
7.1. Pipeline Projects as at September, 2017
Pipeline projects September 2017 Remarks
1 980 MW coal Power Plant Lamu Procurement stage
2 800 MW power plant Dongo Kundu Past procurement stage
3 40 MW Solar project Kisumu Project proposal
4 560 MW Geothermal Olkario V1 Feasibility study stage
5 400 MW Wind Project in Meru Feasibility study stage
6 460 MW Menengai Phase 1 Past procurement stage,
7 800 MW Menengai Phase 2 Pre-feasibility stage
8 800 MW Silali Geothermal Phase 1 Pre-feasibility stage
9 300 MW Geothermal Suswa Pre-feasibility stage
10 960 MW Kitui Coal Pre-feasibility stage
11 300 MW Lake Turkana Wind Project Privately initiated
12 60 MW Kinangop Wind Project Privately initiated
13 Kipeto Wind Project Privately initiated
7.2. Number and level of investment in PPP
(1994-2014)
Country No of
Projects
Capacity Total Investment
in million US$
1 Kenya 11 1070 2328
2 Nigeria 4 1520 1702
3 South Africa 67 4310 14435
4 Tanzania 4 430 598
5 Uganda 11 450 1274
7.3 Procurement Methods for the energy
PPP projects (1994-2014)
Country No of
Projects
Direct
Negotiation
International
competitive
bidding
1 Kenya 11 5 6
2 Nigeria 4 4 0
3 South Africa 67 4 63
4 Tanzania 4 2 2
5 Uganda 11 9 2
1. Total investment in to the economy
Since 1997, some US$ 2.039 billion has been invested
in the economy by the 12 power plant projects that
have been installed
2. Quantity of energy in MW added to the national grid
Once the Lake Turkana Wind Power Plant and the
Kinangop Wind Power plant are brought to operation, the
total installed capacity of by IPP will be 1160 MW. The
current installed capacity is around 3000 MW. The IPP
are already contributing almost 40 %. This energy goes tosustaining the economic activities of the country.
7.4. Economic Potential and Impact of existing projects
3. Employment opportunity
Lake Turkana Wind Power Plant would provide
employment opportunities to 630 locals including 150 local
engineers
The 400 MW Menengai Phase 1 Geothermal project is
expected will generated employment opportunities of 912
skilled and about 300 unskilled jobs
7.5. Economic Potential and Impact of existing projects
4. Connection of households and businesses with power
The 400 MW Menengai Phase 1 Geothermal project will
enable supply to up to 523150 households and 333737
businesses. Out of the households targeted, 12 % will be in
the rural areas
1. Annual demand 132,000 Units
2. Annual production of 50,000 Units
3. Annual deficit of 82,000 units
4. Backlog by 2015: 1.85 million units
8. Housing Sector
1. 70,000 students, only 10,000 accommodated
2. PPP conceptualized in 2011. Project approved in 2013
3. Four consortium expressed interest, 2 shortlisted
4. PPP signed in 2015 with the successful bidder for 30 years
5. PPP features:
Project cost US$ 52,5 million, 70 % debt and 30 % equity
KU to collect rent and charge 0.5 % administration fees
Private company guarantees availability of the room 100 %
KU guarantees 100 % room occupancy
Company expected to reach financial closure within 24 months
6. The lending bank proposed amendment to the contract,
which is still being negotiated by KU and the company
8.1. Case Study 2: Kenya University
1. 5 universities are currently in PPP pipelines
2. Need to agree on the deadline for financial closure
3. Need for the lender to be involved at all stages from
procurement and implementation
4. Home housing projects have been less attractive to the
private sector
8.2. Lessons learned
1. Water supply
2. Waste water treatment and disposal
3. Solid waste treatment and disposal
9. Water Sector
9.1. PPP projects on the National Priority Lists
Project Stage
1 Nairobi Solid Waste Management Project proposal
2 Mombasa Solid Waste
Management
Project proposal
3 Nakuru Solid Waste Management Feasibility
4 Nairobi Bulk Water Supply Project proposal
5 Turkwel Irrigation Feasibility study
6 Greater Kibwezi Irrigation Feasibility study
7 Tana Delta irrigation Feasibility study8 Tana Delta Sugar Project proposal
9 Nandi Forest Multipurpose Dam Project proposal
10 Magwagwa Multipurpose Dam Project proposal
1. Several projects on the list were initially earmarked to be
implemented through donors support, therefore they may
not meet the PPP requirement
2. There have been cases of political interferences
3. Preparing feasibility studies that meet PPP requirements
has been a challenge
4. For three projects, the Transaction Advisors have not been
approved by the PPP review committee
5. The CA have been slow in some projects leading to delays
9.2. Status of PPP in the Water sector
9.3. CASE STUDY 3
Energy From Waste Project By Nairobi City County
Project first conceived in 2013
Nairobi county signed an MoU with a Germany company to
turn wastes into energy and produce 70-140 MW (Sondu
Miriu is 60 MW)
The project was to cost around Kshs 28 billion
Handle 1000 tons of wastes per day
The plant would use the existing wastes in Dandora
(decommissioning strategy) as well as new waste
The waste to energy project facility was to be build in
Dandora dumpsite
Had support of the German Government
9.4. CASE STUDY 3
Energy From Waste Project By Nairobi City County
The project could not kick off
The site had no title deed
No feasibility study had been done
The PPP process was not followed
The German investor withdrew in 2016 due to lack of the
title for the 30 acre waste yard
The investor sued City Hall for breach of contract and
sought compensation of up to Kshs 600 million for project
development, basic design and feasibility studies
The title deed was acquired end of 2017
9.4. CASE STUDY 3
Energy From Waste Project By Nairobi City County
Observations
The recent PPP unit release indicates that the
project is at project proposal stage
The ADB/KEPSA PPP study December 2017,
indicated that the project was at proposal stage
The advertisement talks of Build Operate and
Transfer
It is not clear if feasibility study had been
undertaken
It is also not clear if Transaction advisors were
appointed
10. Common Challenges
Duration of the PPP
Land
Community Engagement
Managing stakeholder expectations
Local participation in PPP
10.1. Duration of the PPP and PPA Route
Duration too long
Process to complex
Capacity building required for CA
Hand holding required for private sector
Need to simply PPA
10.2a. Land is a motive issue
Some energy projects requires large tracked of land, e.g.
Lake Turkana wind project 40,000 acres??
Delayed or Killed several projects e.g. Kinangop, Lake
Turkana
Speculations biggest challenge for the private sector
Compensation misused
Reallocation mismanaged
Interference with politicians
10.2b. Land is a motive issue
The issue of land should be the responsibility of investor
and the government
The government should come up with clear guidelines on
how valuation of land should be done. After valuation the
issue should be frozen. Such guidelines should
spell out the responsibility of each key stakeholders
Consequences and penalty of non compliance
Rights of powers of the land owners to wlk out of the
project
Right of the land owners not be represented
10.1c. Land is a motive issue
Vision 2030 has recommended creation of land banks for
infrastructure projects
Policy being worked out to cover land banking
The policy will specify indicative prices based on the
valuation undertaken by government
Compensation will only be done for existing at the date of
valuation
10.3a. Community Engagement
A major challenge
Should be done as early as possible. Whereas some
developers would like to start this after the feasibility
study in order not to raise unnecessary expectations,
there is penalty of starting late
There is need to have an institutional mechanisms to act
between the developer, landowners and the community
Such unit should keep the institutional memories on PPP
projects, which by nature are long term projects.
Most communities respect their leaders and identify them
as spokespersons. However, some leaders push
personal agenda interest
Investors must not depend on the leaders to reach the
community
10.4. Local Participation in PPP
Participation of local project developers is low
Financiers prefer project developed by foreigners
Most transaction advisors are foreigners, making
transaction costs very higher
There are also briefcase developers who acquires the
rights to develop but lacks the skills and to ensure that
the project can be developed to bankability stage
Local developers also claim that government prefers
dealing with foreign companies, making capacity
building difficult
The participation of women and youth limited
Government urged to come up with policy to improve on
this.
10.4. Local content regulations
Energy (local content) regulations, 2015
Give Kenyan citizens the first consideration for
employment
Give first consideration to services provided and
goods manufactured within Kenya
Allows at least 5 % equity participation of indigenous
Kenyan Company
A non-Kenya company which intends to provide
goods, works or services to a PPP contractor shaall
incorporate a joint venture with a local company wit
participation of at least 10 % of equity or contract
value
10.5a. CASE STUDY FOUR: Lake Turkana Wind Power
310 MW Capacity (6 times Sondu Miriu Power Plant)
Kshs 72 billion
Cover 40,000 acres, Marsabit County
Single largest private investment in Kenya
Largest wind project in Africa
365 Wind Turbines
428 transmission line to deliver the wind power to the
national grid, at a cost of Kshs 15.6 million
20 year power purchase agreement (2017-2037)
Project was completed in 2017
Project endorsed by UNDP in 2007
10.5b. Lake Turkana Wind Power
Project was conceptualize in 2006.
Feasibility study undertaken in 2007 and had positive
results
The company was initially expected to start operation in
June 2011 but had problem raising the required finance
The project has been delayed further by court cases.
Project has been in and out of court several times,
Marsabit residents said they were not involved in the land
acquisition
There was no public consultation
No reservation recorded from the residents
No compensation or alternative settlement was offered
10.5c. Lake Turkana Wind Power
The company carried out self-serving environmental and
social impact assessment of the project without involving
the residents
Through the acquisition of the land, the camel corridor
used to access Lake Turkana was disrupted The cultural
activities of the Rendille people was interrupted
Divisional Land Board never heard and recorded
representations of the people concerned
High Court stopped the construction in November 2016
The company appealed
The Court of Appeal upheld the decision of the high court
in March 2017
PART THREE
Stakeholders Participation
Way Forward
By
Ogada Tom
CSO Sensitization Forum on Public Private Partnership
26th June 2018
PPP ACT 2013 should be reviewed to provide for
the following
Access to information
Information provisions in the PPP
implementation
Consideration from the PPP committee, Unit
and CA
Negotiation committee
Public participation: The ACT has no provision on
public participation
1. Issues raised by TISA
Public participation required to educate the
public on:
CA/government contribution to the PPP venture
Brief on value for money
Agreement between the government and the
private sector
Arrangement for revenue share between
national and county government and the private
entity
Ensure predictability of the fees
1. Issues raised by TISA
PPP ACT 2013 should be reviewed to provide for
the following
Section 3.4. (ii) on project Preparation and
Appraisal – the feasibility study should include
consultations with the stakeholders to ensure their
interests are considered
Section 3.14: Stakeholder Participation:
Stakeholder participation builds trust amongst the
participants and leads to the creation of long term
collaborative relationships. In this respect, public
entities will be required to consult the stakeholders
throughout the project cycle to ensure that the
PPP project addresses their needs.
2. The PPP Policy 2011
The Communication Strategy
Section 3.15: Communication Strategy: The success
of the PPP program requires widespread public
support.
A PPP communication strategy and awareness strategy
will be developed and implemented, directed to key
stakeholders including the public.
A communication strategy shall be developed for each PPP
project by the unit in conjunction with the CA. It will include
economic and social benefits to be realized from the
project, scope, content, timing of the bidding process, likely
bidders and other stakeholders involved, implementing
private party and financing structure (once known) as well
as length and construction period.
2. The PPP Policy 2011
3. Thirteen (13) Steps PPP
Process
Entry point for CSOs
3
Request for
qualification
Invitation
to Bid
Qualification
of bidders
Bidders
conference
2008 2011 2013 2016
Evaluation
of BidsFinancial
closure
NegotiationAward
Step 6
Steps 6-13: Procurements by the Contracting Authority
Step 7 Step 8 Step 9
Step 10 Step 11 Step 12Step 13
Project
Concept
National
Priority
Lists
Project
Proposal
Feasibility
Study (FS)Approval
of FS
Steps 1-5: Approvals by PPP Unit and PPP Committee
Step 1 Step 2 Step 3 Step 4 Step 5
3.1. Project concept
Conceptualising, identifying and prioritizing potential
projects for PPP is the first PPP step.
This takes place during the development of the strategic
plans for the national government agencies or CIDP for
country government. This is the first entry point for CSO!
This stage may be difficulty for CSO entry
Entry point for CSOs
3.2. National Priority Lists
The PPPP Committee will develop and publicise a
criteria for approval of projects for inclusion in the
national priority list of projects
This is another window for CSOs
Entry point for CSOs
3.3. Project Proposal
No entry point for SCO
Entry point for CSOs
3.4. Project Feasibility (FS)
Undertaking feasibility: (Consultation with
stakeholders to ensure their interests are
considered .This is a key entry point to the CSO
Submission and approval of the feasibility: Public
should be notified of the approval
Entry point for CSOs
Entry point for CSOs
6. Request for Qualification: Contracting Authority (CA), upon
approval of the PPP Committee, invites request for
qualification by notice in at least 2 newspapers of national
circulations and in electronic media. The notice must specify
eligibility criteria of the bidders. (CSO can monitor this)
7. Prequalification of bidders: The Contracting Authority
constitutes a prequalification committee, to review the
requests for qualification submitted by the bidders and
prequalifies those that meet the set criteria. (Public should be
informed of the prequalified bidders)
3.6. Procurement process
8. Preliminary bidders meeting: (?N/A)
9. Invitation to bid: (?N/A)
10. Evaluation of the Bid (?N/A)
11. Negotiation: Communication of the outcome to
the public may be required (?N/A)
12. Award: Communication to be public may be
required
13. Formation of the Special Purpose vehicle
(Communication may be required)
Entry point for CSOs
