The Adani-JKIA Deal: A deep dive into Kenya’s most controversial aviation project

For months now, a national row has been simmering over what is believed to be an improper transaction involving the management of the country’s largest airport the Jomo Kenyatta International Airport (JKIA).

The row erupted into a full-blown aviation crisis on Thursday when airport staff went on strike over what is turning out to be a deal of the mighty in government with an Indian Conglomerate under the Adani Enterprises.

Citizen TV has been piecing together different threads of a complex web around the plan that could lead to leasing of the nation’s most important aviation asset for at least three decades to entities linked to individuals in India, the Middle East and of course, Kenya.

On July 28, 2024, President William Ruto addressing a town hall meeting in Mombasa confronted the JKIA controversy for the first time in public, seeking to put out embers of suspicion.

"I have seen people saying, William Ruto wants to sell the airport. Am I a madman? How do you sell a strategic national asset? You have to be insane?" the head of state posed then.

But the political intrigues around the Jomo Kenyatta International Airport date back to December 2013, when President Uhuru Kenyatta and then Deputy President William Ruto, oversaw the groundbreaking of what was known as Greenfield terminal.

The Ksh.56 billion investment intended to enhance JKIA’s passenger capacity to 20 million a year while also building a second runway which experts say will be a necessity at least by 2035.

"This is not about politics; it's about the future of this country and the prosperity of Kenya," former President Uhuru Kenyatta said then.

"It is a critical moment for us to come together and build this country in the best interest of all Kenyans," Ruto, the then Deputy President, added.

While the works had been cleared to start, the same government mysteriously cancelled the contract in March 2016.

It would later emerge that top figures in government and private businessmen differed and the airport deal was cancelled as a move in settling political scores.

Talk of a new or refurbished JKIA went silent from then on; and in 2022 William Ruto became President.

Sources told Citizen TV that in the early months of the regime, conversations began about reviving some of the mega projects that had stalled or collapsed under the previous administration.

Part of the conversation revisited the Greenfield terminal project that was now a dispute under arbitration.

It emerges that a decision was taken to withdraw the case and have the Airport project pursued under a public-private initiative, on argument that the government had no money to spend on JKIA.

The collapsed Greenfield terminal project saw the loss of Ksh.4.5 billion that had already been paid to Chinese contractors for the project. An additional Ksh.600 million was paid to settle the matter by arbitration.

Around the same time, the new administration was also introducing a contentious so-called ‘government-to-government’ oil importation deal entered ostensibly to save the country from foreign exchange crisis.

The oil deal was hurriedly closed in ten days from when bids were invited on March 1, 2023 and March 10, 2023, when master framework agreements were signed with three international oil companies.

The three IOCs were Aramco Trading Fujairah FZE, Abu Dhabi National Oil Company and the Emirates National Oil Company. The oil deal was to last to December 2023 but was extended for a further 12 months to December 2024.

The three companies are based in the United Arab Emirates, including Aramco Trading, which is a subsidiary of Saudi Aramco of Saudi Arabia, based in Fujairah in the UAE.

Then comes the link between the oil deal and the JKIA controversy; it emerges that conversations about the airport project were initiated at the time with the same individuals affiliated to the government to government oil deal.

The government however never made any formal statements until June 2023 when the then Transport CS Kipchumba Murkomen announced that the government will be inviting bids for the construction of a new terminal at the JKIA.

"In the next couple of weeks, at most 2 months, we should have put public an Expression of Interest (EOI) for investors to come and build a new terminal," Murkomen said then.

There is however no evidence that the expressions of interest ever went out. Then in December 2023, Murkomen was back with another statement.

"We have started the process of advertising for construction of a GFT that will be done under PPP and that ad will be out by Mid Jan 2024, and by 2027 we will have a new terminal…and sort out the mess of infrastructure," said the former Transport CS.

No advertisement was made, and instead, this invitation for bids for an agency to advise the government was published by the Kenya Airports Authority (KAA) in May 2024, months after the Adani deal had commenced.

The invitation read, “A Request For Expression of Interest For Provision of Consultancy Services For PPP Project Of Construction Of New Terminal Building & Associated Works At JKIA.”

In March 2024, Adani Airports Holding Limited submitted a privately initiated proposal to KAA proposing to develop and expand JKIA through the Build, Operate and Transfer (BOT) model of Public Private Partnership.

The sequence of events however raises questions.

First, the Adani proposal was received in March 2024. The cabinet of Kenya approved the national aviation policy and the JKIA medium-term investment plan on June 11 2024.

The two documents essentially spell out the future intentions of KAA. By this time, however, Adani had already submitted their well-informed proposal.

It turns out that in February 2024, ALG, a global transport and infrastructure consulting firm contracted by KAA to advise on the prospects of putting up a new passenger terminal building at the JKIA, had submitted their findings.

In those findings, ALG concluded that KAA invest in a new facility by getting into an airport concession that would last up to 30 years. ALG however recommended that even though a public-private partnership was a logical proposition, it would be best to use open tendering system.

ALG’s report stated that an open tender process is the best international practice and that it was the default procurement method in the Kenyan PPP regulations.

Adani on the other hand in its proposal, opposed an open tender process as it would lead to time wastage.

Adani said, “Compared to competitive bidding, which is a lengthy and time-consuming process, PIP offers fast track and time-bound procurement, PIP allows terms beyond financial aspects, ensuring citizen welfare.”

Adani in its initial documents proposed to broadly build and operate airport facilities for a period of 30 years. 

Specifically, Adani’s proposal is about operation, maintenance and management of the airport. Adani proposes to upgrade and expand the airport in a phased manner as may be required under the Master Plan of KAA.

The Adani plan also proposes to develop, operate and maintain the city side. In practical terms, Adani proposes to take over nearly all functions currently performed by the Kenya Airports Authority.

In April 2024, the KAA upon review of the Adani proposal found it untenable, saying, “The feasibility study report submitted by Adani has not fully satisfied criteria of project feasibility and affordability.”

At the time, KAA found that Adani had proposed to first refurbish existing facilities at the JKIA before moving to build a new terminal. KAA however wanted a new terminal built first, to be followed by refurbishments.

As the government of Kenya was busy assuring Kenyans that everything was under control, details emerged of a scheme to roll out the Adani project.

On August 7, 2024, a new company named Global Airports Operator L.L.C, was registered in Abu Dhabi in the UAE.

On the same day, Adani Enterprises reported to Indian authorities that the new company had been incorporated with specific objects of “investment or acquisition for construction, operation and maintenance of airports outside India.”

Three weeks later, on August 30, the Adani Enterprises Limited filed another notification with the Indian authorities including the National Stock Exchange of India that a new company had been incorporated in Kenya under the name, Airports Infrastructure PLC, as a step-down subsidiary company.

The Kenyan company is to owned wholly by the Abu Dhabi based company, which in turn is owned by the Adani Airports Holdings limited which in itself is owned by the Adani Group.

The location of the holding company in Abu Dhabi, tallies with narratives that the real investors eyeing the Nairobi Airport are based in the UAE. It is reported that already, the Arabs have put in some USD 2 billion into the company, perhaps to fund the Nairobi project.

Terms of the Adani deal have been shrouded in secrecy but snippets leaking out of various sources are eye-brow raising. 

In the initial proposal, Adani demanded protection by the government of Kenya from competition and that no other airport would be built within a radius of 150 kilometres.

In a draft contract dated June 2024, that figure was reduced to a radius of 100 kilometres, with reports indicating that may have changed back to 150 km.

Adani stated that the construction of a new airport to provide commercial passenger services within a 100-kilometre radius of the airport site would be an action of material adverse by the government of Kenya.

The draft stated that were that to occur, the Adani Company would be entitled to, “compensation for additional costs incurred and/or loss of revenues suffered as a result.”

The draft stated that, “to the extent Adani is prevented from performing any of its obligations under the Agreement as a result of such Material Adverse Government Action, (it would be entitled to) be relieved from the performance of such obligations for as long as the Material Adverse Government Action persists."

Now, an aerial radius of 100 kilometres from the JKIA would stretch to Magadi in Kajiado to the south, Nyeri and neighboring Mt. Kenya counties to the North, Nakuru county to the west and Machakos county to the east.

An aerial radius of 150 kilometers stretches to the Kenyan border with Tanzania in Namanga,  Laikipia County to the north , Kitui to the east, and the Maasai Mara reserve in Narok County to the west.

According to ALG that advised the KAA on the Adani proposal, Adani’s financial proposals would be bad for the country.

First, Adani projected a 52 per cent spike in fees in the first year of concession, to be transferred to airport users. KAA in its evaluation noted that the spike would not be related to any improvements of the JKIA.

The authority feared that that would be burdening airport users, making JKIA unattractive as a regional hub.

Adani also proposed an 18 percent return on debt and a 21 percent return on equity. KAA found the rates of return to be too high since airport concession should ordinarily range between 8 percent and 15 percent of return.

"We will negotiate on the return of equity we are going to allow them abd the debt-equity ration because ordinarily, equity is expensive," said Transport CS Davis Chirchir on Thursday.

ALG the external airport PPP advisor recommended that the concessionaire’s return should vary depending on the performance of the business and that charges be adjusted only based on consumer pricing index.

On the implementation of the project, ALG noted that the proposed investment plan supplied by Adani failed to include essential infrastructure requirements including the second runway and the necessary number of contact stands for the new terminal.

This would lead to, “uncertainty on the development plan, with a considerable level of risk to the transaction and leaves open the possibility of future disputes.”

Incase of unresolved disputes, Adani proposed that such would be resolved by "arbitration administered by Singapore International Arbitration Centre (SIAC). That the seat of the arbitration shall be mutually agreed either for Singapore, UAE or London.”

Reports indicate that despite the desire by various government institutions to conduct due diligence including the Kenya Airports Authority, certain senior government advisors have been piling pressure on some of those institutions, to speed up their side of due diligence, with calls to close the deal as soon as possible.

It has also emerged that the airport deal has been the subject of varied deliberations during foreign tours made by senior government officials.

In some of those instances, influential businessmen have offered free air travel to and from Nairobi, with significant progress recorded after such engagements.

Given the heavy influence from powerful individuals in business and in government, some of key stakeholders are said to have taken a back seat so as not to appear as if sabotaging an important government project.

"It will include taking the concessional agreements to Parliament and I want to assure you that Cabinet is here to protect the interests of Kenyans," said Chirchir.