Adani Holdings: What to know about Indian firm seeking 30-year JKIA deal

Indian infrastructure company Adani Airport Holdings Limited seeks a $1.85 billion (Ksh.242 billion) investment deal with the Kenyan government to expand the Jomo Kenyatta International Airport (JKIA) in Nairobi.

On Wednesday, the Kenya Airports Authority (KAA) confirmed receiving Adani’s proposal to upgrade Kenya’s main airport over the next 30 years, under the Cabinet-ratified JKIA Medium Term Investment Plan.

The Indian firm’s scheme, which will be carried out in a public-private partnership arrangement, comprises improvements to JKIA’s passenger terminal and building a new one, constructing a second runway, as well as improvements to the taxiway and apron.

KAA acting CEO Henry Ogoye however said the deal requires significant capital investment the government cannot afford due to current fiscal constraints.

And while the deal has already sparked heavy scrutiny from civil society groups and some legislators over fears that the state seeks to ‘sell’ JKIA, Ogoye assured that it will go through rigorous technical, financial, and legal reviews to ensure compliance with the Public-Private Partnerships Act of 2021.

Adani Airport Holdings Limited is a subsidiary of Adani Enterprises Limited, which is owned by the Adani Group, one of India’s largest conglomerates.

Adani Group was founded by Indian billionaire Gautam Adani in 1988 and its headquarters are in Ahmedabad. The group has 10 companies in its fold, with investments across mining, ports, trading, electricity and gas.

Adani Airport Holdings itself was established in 2019 and it describes its goal as transforming airports into world-class travel ecosystems through airport development incorporating technology and sustainability.

Within just five years of its inception, the company now manages seven top airports in the Indian cities of Mumbai, Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram.

Adani Airport Holdings says it accounts for 25 per cent of people arriving and departing India and about 33 per cent of the national air cargo traffic.

But its parent Adani Group has been at the centre of controversy in recent years.

In 2023, the conglomerate was accused of fraud and market manipulation by an American investment research firm, which saw it drop from being India’s largest conglomerate.

It was valued at $206 billion but that figure went down by $104 billion, although it has since risen back to over $200 billion.

India’s market regulator, the Securities and Exchange Board of India (SEBI), later dropped its probe into the Adani Group, saying it was a hard task investigating alleged illegal overseas investments in the conglomerate, according to a Reuters report.

The Adani Group has also been accused of political corruption, tax evasion, environmental damage, and suing journalists.

In addition to that, Mr Adani’s close relationship with Indian Prime Minister Narendra Modi has led to allegations of cronyism as his firms have won many energy and infrastructure contracts in India and abroad since Modi became PM in 2014.

Documents seen by Citizen Digital show that Adani Airport Holdings proposes to give JKIA a facelift in a three-phase project.

The first phase entails putting up a new terminal building, an associated apron and taxiway system and two rapid taxi exitways. This will cost $750 million (Ksh.98 billion) and is set to be complete by 2029.

Phase Two entails improvements to the taxiway network system, construction of two more rapid exits, and more remote aircraft parking stands. This will cost $92 million (Ksh.12 billion) and Adani Airport Holdings says it will complete it by 2035.

For the third phase, the company plans to give JKIA technology and logistics upgrades and implementation of best practices to the tune of $620 million (Ksh.81 billion).

It also proposes a city-side development housing hospitality, business hubs and other amenities for travellers and Nairobi residents.

“The perceived ease not only boosts traffic at the airport but also contributes to the nation's economy by providing additional facilities to the travellers as well as city residents. Major international airport hubs like Frankfurt and Delhi have seen such benefits,” Adani Airport Holdings says in their proposal.

The firm seeks to ink a ‘Build, Operate and Transfer’ (BOT) agreement with the Kenyan government that will see it run JKIA for 30 years as it recoups its investment at a rate they will agree on.

During these 30 years, the Indian firm will determine and collect charges for non-aeronautical and other commercial activities at JKIA without restrictions from the government, until it hands the airport back to the State.

Adani further seeks special friendlier tax policies and exemptions from corporate tax for "certain years" under the agreement.

In its proposal, Adani Airport Holdings indicates that it expects to get 18 per cent of the project’s annual returns over 30 years.

“Assets developed through capital expenditure by the Proponent will be transferred to KAA at the expiry of the Concession term at a value determined and agreed by the parties, which value shall be structured to grant the Proponent an equity IRR of 18%,” the company says.

Further, it projects that the upgrade will see JKIA’s revenue go up from $163 million (Ksh.21.4 billion) in 2025 to $290 million (Ksh.38 billion) in 2030, then $740 million (Ksh.97 billion) in 2045 and $1.2 billion (Ksh.157 billion) in 2054.

In these projected milestones, Adani promises the government profits of $47 million (Ksh.6.1 billion) in 2025, $52 million (Ksh.6.8 billion) in 2030, $70 million (Ksh.9.2 billion) in 2045 and $76 million (Ksh.10 billion) in 2054.

Former Transport Cabinet Secretary Kipchumba Murkomen in November last year alluded to JKIA’s facelift, although he did not give definite figures on how much the project would cost.

Murkomen at the time said the government wanted to upgrade JKIA – the main gateway into Kenya and the busiest airport in East Africa – to be at par with its world’s top counterparts, by fitting it with advanced passenger scanners and training all staff in customer service.

JKIA is the hub of national carrier Kenya Airways, which it serves alongside other such airlines as Emirates, Turkish Airways, British Airways and Ethiopian Airlines.

Adani Holdings: What is the Indian firm offering a Ksh.242 billion, 30-year plan for Kenya’s main airport JKIA? pic.twitter.com/u16VNzFZZq— Citizen TV Kenya (@citizentvkenya) July 29, 2024