Public Private Partnerships

What is PPP - Definition

• PPP is a contractual arrangements between public and private
sector entities where private sector participates in multiple
elements of public infrastructure projects

• PPPs combine private sector capital with public sector

commitments (and sometimes, capital) to procure facilities,
improve public services and/or improve the management of
public sector assets
 Benefits of PPPs

1. Transfer of appropriate project risks to private partner

2. Greater price and schedule certainty
3. More innovative design and construction techniques
4. “Freeing up” public funds for other purposes
5. Quicker access to financing for projects
6. Higher level of maintenance
7. Keep project debt off government’s books through
8. Providing off-balance sheet transactions.
 Scope of PPP’s programme
It include the provision of new infrastructure, and the expansion and
refurbishment of existing ones such as:
• Power generation plants and transmission/ distribution networks;
• Roads and bridges;
• Transport (ports, airports, railways);
• Inland container depots and logistics hubs;
• Petroleum infrastructure, such as storage depots and distribution
pipelines etc.;
• Information technology systems;
• Water supply, treatment and distribution systems;
• Solid waste management; and
• Social infrastructure for housing, health care, prisons, and teaching
facilities.
PPP successful infrastructure projects In Kenya

• Port of Mombasa Grain Terminal that was built in

1998;
• The Malindi Water Utility which was built in 1999 on
a 5-year management contract;
• The Jomo Kenyatta International Airport Cargo
Terminal (JKIA Cargo) which was built in 1998;
• The Kenya-Uganda Railway Concession in 2006,
among other
 Ongoing and planned PPP projects

• KU hostel project;
• The construction of a Second Terminal at the Jomo
Kenyatta International Airport;
• The establishment of a 980 Megawatt Coal Plant in
Lamu (Sh210 billion);
• A two-phase Geothermal Development Project to
generate a total of 1,200 megawatts;
• Establishment of a four-tier National Data Centre in
Konza, among many other projects
Upcoming projects
 Models of PPP projects
PPPs can be either concessions or greenfield projects
1. Concessions
• Concessions occurs when a private entity takes over the
management of a state-owned asset for a given period during
which it also assumes significant investment risk
• Concessions include:
a) Rehabilitate-Operate-Transfer (ROT)
b) Rehabilitate-Lease-Transfer (RLT) or Rehabilitate-Rent-
Transfer (RRT)
c) Build-Rehabilitate-Operate-Transfer (BROT).
 2. Greenfield projects

• They require a private entity or a public-private joint venture

to build and operate a new project for the period specified in
the contract
• The project usually returns to the public sector at the end of
the concession period
• Greenfield projects may include but not limited to:
a. Design, Build, Finance, Operate and Maintain (DBFOM)
b. Build-Operate-Transfer (BOT) or Build-Own-Operate-
Transfer (BOOT)
c. Build-Own-Operate (BOO)
 The main players in PPP

1. Contracting Authorities
2. The PPP Committee
3. The PPP Unit
4. Private Parties
5. Transaction Advisors
 1. Contracting Authorities

• Is a state department, agency, state corporation or county

government implementing PPP
• Their main responsibilities with respect to PPPs are to
identify, develop, implement and monitor projects.

• Conduct feasibility studies, prepare bidding documents,

procure PPP projects, monitor implementation and evaluate
perfomance of PPP projects as well as seeking all the
necessary approvals

• Establish a PPP Node staffed with officers with the ability to

carry out day-to-day management of the project.
 PPP Node
• Established by a contracting authority that intends to enter
into PPP
• Is headed by the accounting officer of the contracting
authority and consists of financial, technical, procurement
and legal personnel as appropriate
Functions of a node
• To identify, screen and prioritize projects
• To prepare and appraise each project agreement to ensure
viability;
• To undertake the tendering process
• To oversee the management of a project
 PPP Committee

• The PPP Committee is mandated by the PPP Act to

serve as the PPP projects’ clearing house.

• It approves project proposals and interfaces with

higher levels of Government, including the Cabinet.
• It issues guidelines, and related matters touching on
the efficient and sustainable implementation of PPPs
in Kenya.
Composition of PPP Committee
 Functions of PPP Committee
• Ensure that each project agreement is consistent with the
provisions of the PPP Act 2013
• Formulate policy guidelines on PPPs;
• Ensure that all projects are consistent with the national
priorities
• Approve project proposals submitted to it by a contracting
authority;
• Examine and approve the feasibility study conducted by a
contracting authority;
• Oversee the monitoring and evaluation by contracting
authorities, of a PPP from the commencement to the post
completion stage;
 PPP Unit

• A specialized unit within the National Treasury of

Kenya mandated by the PPP Act to serve as the
centre of expertise and champion the PPP agenda in
the country.
• Also serves as a secretariat and technical arm of the
PPP Committee
• The unit is equipped with experts on legal, technical,
financial and communication matters to guide
contracting authorities keen to undertake PPP
projects.
 Mandate of PPPU
According to the PPP Act of 2013, the PPPU is mandated to
among others:
• Conduct education and promote awareness on PPPs in the
country.
• Build capacity in contracting authorities in planning,
coordinating, undertaking and monitoring PPP projects.
• Establish and maintain a database of PPP projects in Kenya.
• Conduct research and gap analyses on PPP matters.
.
 Mandate of PPPU cont..

• Collate, analyze and disseminate information on

PPP’s.
• Monitor liabilities and accounting/budgetary issues
related to PPP projects.
• Support the PPP Committee in its statutory mandate.
• Promote compliance of the PPP Act by all PPP
participants
 3. Private Parties

• They channel private investments into public service

and function delivery.
• Come in different shades – some bring on board
engineering, construction and procurement services.
Others bring design and financing services. Still
others bring operation and management services.
• There are those that offer supply chain management
services.
 4. Transaction Advisor

• Appointed by a contracting authority to assist and

advise the contracting authority on matters related
to a PPP, including preparation, accession and
conclusion of a project agreement and the
development of a project to achieve successful
financial close.
• Under the PPP Act, the appointment of a transaction
advisor must be based on the principles of disclosure
 PPP Process

1. Project Identification, prioritisation &

conceptualization
2. Feasibility Study
3. Tendering/Procurement
4. Negotiations, Approval by cabinet
5. Award and contract signing
6. Financial close and project development
7. Monitoring & Evaluation
Challenges faced in application of PPP in
Kenya
• Greater high risks involved in carrying out some projects
• Difficulty in accessing commercial lending that is only DFI
funding available for such projects
• Credit risk of off taker that is due to poor collections from
ultimate consumers and inability to pass through various costs
to consumers
• Mitigations available which are not being pursued
aggressively
• Lack of human resources to effectively apply Private Public
Partnership
• Inadequate competent local service providers in the country