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
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