African Infrastructure Investment Managers (AIIM) said Tuesday it has struck the third transaction from its new fund and the seventh deal overall since January, committing to invest $34 million into Kenya’s Road Annuity Programme.
Africa’s largest dedicated infrastructure private equity manager said its new pan-African AIIF4 Fund has picked up a 74% stake in Lots 15 and 18 of Kenya’s road programme from Mota-Engil.
This is AIIF4’s fourth investment, and it will add to a portfolio that comprises co-controlling interests in Eastcastle infrastructure, a build-to-suit telecommunications towers platform that it backed last year besides two portfolio companies it added earlier this year. These two companies include The Logistics Group, an integrated ports operator and logistics service provider in Southern Africa, and cold chain logistics platform Commercial Cold Holdings.
In addition, AIIM has invested in four companies via its IDEAS Fund with the latest transaction coming last month.
AIIM said the latest deal will help to fund road improvements to reduce travel times, bypass densely populated areas, lower vehicle operating costs, increase fuel efficiency and improve Kenya’s flood resilience.
As most of the transport activity in Kenya occurs on a network of gravel and earth roads, the government of Kenya is aiming to modernise its road network by paving around 10,000 kilometres of road across the country. To fund improvements, the government has embraced public-private partnership programmes to boost investment into its Road Annuity Programme by dividing Kenya’s road network into investable lots.
Lot 15 and Lot 18 were tendered by the Kenya Urban Roads Authority (KURA) and awarded to the Mota-Engil and Lee Construction consortium in 2015 under an international public procurement process, achieving financial close in February 2022.
AIIM, which has a track record extending to five toll and annuity road investments dating back to the early 2000s, said the Lot 15 and 18 projects, currently under construction, will upgrade roads from gravel to asphalt standards and cover approximately 44.9 kilometres and 35.1 kilometres of roads in central and western Kenya, respectively.
These projects are financed with a 75:25 debt-to-equity ratio, with Stanbic Bank providing the required loans in Kenyan shillings. Mota-Engil and Lee Construction will act as the EPC and O&M contractors for the roads.
The Multilateral Investment Guarantee Agency has issued guarantees of $212 million covering equity by Mota-Engil Africa of Portugal and a company acquired by AIIM, through AIIF4, as well as loans from Stanbic Bank Kenya to support Lots 15 and 18.
AIIF4 is AIIM’s fourth pan-African infrastructure fund, a thematic investor focusing on the digital infrastructure, energy transition, and mobility and logistics sectors across Africa.