AFRICAN DEVELOPMENT FUND

PROJECT: JOMO KENYATTA INTERNATIONAL AIRPORT EMERGENCY

INTERIM TERMINAL CONSTRUCTION PROJECT

COUNTRY: KENYA

OITC/EARC DEPARTMENTS

October 2013

1. INTRODUCTION

1.1 Management hereby submits to the Board of Directors for approval a request from the

Government of Kenya (GOK) for the utilisation of projects loan savings of UA 17.82 million of

which UA 14.69 million from the savings of Nairobi – Thika Highway Improvement Project

approved by the Boards in November 2007 and UA 3.13 million from the savings of the

Education III project approved by the Board in December 2003. The GOK request and basic

information of the two loans are attached as Annex 1 and Annex 2 respectively. The

implementations of these projects have been completed as originally conceived. The savings will

be utilised to finance the construction of an interim terminal at the Jomo Kenyatta International

Airport (JKIA) as part of an emergency recovery measures undertaken by the Government of

Kenya following the fire accident at the airport, which took place on 7 August 2013.

1.2 The JKIA was built in 1978 with a design capacity of 2.5 million passengers per year. It is

the largest aviation facility and the busiest airport not only in Kenya but also in the East Africa

region. It is currently handling passenger traffic of more than six million and cargo traffic of about

300,000 tonnes annually. The airport has scheduled flights to destinations in over 50 countries. Air

transport has become increasingly important to Kenya's economy, as it sustains the tourist industry

and facilitates access to the global fresh flower and horticulture markets.

1.3 JKIA has three departure units (Units 1, 2 and 3) and the arrivals building. The arrivals

building processing facilities were completely destroyed and the building is totally abandoned

following the fire accident of 7th August 2013. Also, units 1 and 2 departure areas are only partially

operational. Unit 3, which was formally handling domestic operations, is now temporarily handling

international flights with major logistical and capacity challenges.

1.4 To assist the operations at JKIA, several tents have been set up on the airport ramp to

provide arriving and departing functions. The domestic operations are being handled at the cargo

terminal. The new parking garage is being converted to an arrival facility. This however precludes

the use of the garage as a parking facility further constraining vehicular parking.

1.5 In order to improve the current condition at JKIA including removing the tents from the

ramp and reinstating the garage as a parking facility, the following have been proposed:

construction of arrival facility opposite to the parking garage, remote bussing lounge at Gate 4,

construction of transit and holding lounge on top of Unit 3, and construction of interim terminal.

2. AIR TRANSPORT IN KENYA

Air Transport sub sector

2.1 The goal of the air transport subsector in Kenya is to facilitate seamless connectivity through

provision of efficient and effective airport facilities and services in an environmentally sustainable

manner to exceed stakeholder expectations.

2.2 The air transport sub sector in Kenya is made up of Kenya Airports Authority, who provides

aviation facilities and services, Kenya Civil Aviation Authority, regulating the sub sector and also

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providing air navigation services while the department of Transport in the Ministry of Transport and

Infrastructure is in charge of policy and approval of tariffs.

2.3 The sub sector facilitates trade in fresh produce, general merchandise and dry cargo,

tourism and business passengers, humanitarian and security operations, employment, sports and

global accessibility. The sub sector is therefore a key enabler of the Kenya Vision 2030 in pursuit of

enhanced economic development of Kenya.

2.4 The Kenya Airports Authority (KAA) is a corporate established in 1991 by an Act of

Parliament, the Act gives KAA the mandate to provide and manage aviation infrastructure,

facilities and services. KAA manages JKIA and other nine aerodrome facilities in Kenya.

Specific functions of KAA include, among others, administration, control and management of

aerodromes; provision and maintenance of facilities necessary for efficient operations of

aircrafts; the construction, operation and maintenance of aerodromes and other related activities;

and, provision of other amenities or facilities to passengers and other persons making use of the

services or facilities provided by the authority.

2.5 JKIA is currently handling more than six (6) million passengers annually against design

capacity of 2.5 million. Its runway capacity of 120,000 movements per annum is operating at 83%.

This implies that the upgrading and expansion of terminal as well as airside facilities is an urgent

requirement. There is also a need for second runway which can handle new generation aircrafts.

Expansion program at JKIA

2.6 In 2006, KAA embarked on expansion of JKIA facilities comprising: Package1-

Construction of additional aprons for aircraft parking, which was completed in April 2008; Package

2 – Construction of passenger terminal unit 4, expected to be completed by December 2014, and

multi-storey car park, completion expected in March 2014; Package 3 – Renovation and re-

organization of existing terminal units 1, 2 & 3 and arrivals, works expected to commence in

November 2014 for a duration of three years. Package 4a – Construction of an additional 16

parking stands and rehabilitation of existing runway. Parking stands to be complete in November

2013 and runway rehabilitation to commence in March 2014 for 30 months. These packages are

expected to increase passenger capacity from 2.5 to 10 million passengers per annum by 2017. The

Master Plan forecast finalized in February 2011 established that the JKIA annual traffic demand

will be 10 million by 2015 and 35 million by 2030. Best practice for airport capacity provision

recommends that capacity be provided five years ahead of demand to mitigate against congestion

and unforeseen growth. JKIA should have a capacity of 17 million passengers by 2015; however,

capacity will only be 5 million.

3. PROPOSAL TO UTILISE LOAN BALANCES

Objective of the Request

3.1 The primary objective of the request is to assist GOK in restoring the level of services at

JKIA which has dramatically deteriorated following the fire accident. JKIA’s status as a regional

aviation and economic hub of East Africa will be undermined by such situations as passenger

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inconveniences, inefficient operations and congestion. The Bank’s support, in addition to restoring

the service level, will also help to bridge the capacity gap until the expansion projects are completed

in 2017.

Proposed Works

3.2 The works to be financed from the loan savings will be the construction of an interim

terminal. The interim terminal will be a 10,000 Square meters facility on level. This will have a

capacity to handle annual traffic of 2.5 million for international and domestic arriving and

departing passengers. The structure will be of sandwich insulated wall panels and suitable

glazing. The roof will be of durable coated fabric to last for more than ten years. The floor will

preferably be raised technical floor on hard ground without need for concrete floor. The terminal

will be located at the end of the remote stands currently under construction and scheduled to be

completed by November 2013.

3.3 The interim terminal will significantly improve operational efficiency under an environment

of comfort, safety, and security arising from physical separation of arriving and departing

passengers in keeping with international standards.

3.4 The civil works related to the construction of the terminal comprising of earthworks,

selected general fill, pavement works to parking and access road, storm drainage, sewerage, power

supply and other associated services are scheduled to start ahead of the construction of the terminal

and will be in a separate package to be financed by GOK.

3.5 The terminal building project will include: design, supply and construction of the terminal

building; installation of departure and arrival Baggage Handling System (BHS); installation of

airport special systems; inter-phasing of utilities to existing supply; and, testing and

commissioning of the terminal building.

Cost Estimates

3.6 The total cost of constructing the terminal is estimated at UA 18.25 (USD 27.66) million.

The summary of cost estimate and currency requirements is shown in Table 1 below.

Table 1: Summary of Cost Estimates

Component

UA million USD million

Foreign

Exchange

Local

Cost

Total Foreign

Exchange

Local

Cost

Total

Design, supply and erection of the

Terminal 16.93 1.32 18.25 25.66 2.00 27.66

Financing Plan

3.7 The Bank will cover the entire foreign exchange costs of UA16.93 million and 67% (UA

0.89 million) of the local costs, while GOK will finance the remaining local costs amounting to

UA 0.43 million as shown in Table 2 below.

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Table 2: Financing Plan

UA million USD million

Source Foreign

Cost

Local

Cost

Total Cost Foreign

Cost

Local

Cost

Total Cost %

ADF 16.93 0.89 17.82 25.66 1.35 27.01 97.65

GOK 0.00 0.43 0.43 0.00 0.65 0.65 2.35

Total 16.93 1.32 18.25 25.66 2.00 27.66 100

4. IMPLEMENTATION OF THE PROPOSED WORKS

Organisation and Management

4.1 KAA will be the executing agency of the project. KAA has experience working with

bilateral and multilateral donors in execution of projects. The authority is well structured with

adequate number of qualified and experienced technical staff to implement projects of such size and

complexity. KAA is mandated by an Act of Parliament to provide and manage aviation

infrastructure, facilities and services. The executing agency has been assessed and considered

competent enough to conduct procurements, follow up and reporting requirements envisaged under

the project. The CEO of KAA will assign a Project Engineer for the day- to-day management of the

project.

4.2 The proposed terminal construction project to be financed by the Bank will be

implemented as one contract. The civil works component, which is to be financed by GOK, will

be a separate contract. The supervision of the works will be done by the existing Package 2 and 3

Consultant, M/s Netherland Airport Consultants (NACO), through an addendum to existing

consultancy services under a separate financing.

Financial management and disbursement arrangements

4.3 The Financial Management System of the executing agency, KAA was assessed by the

Financial Management Expert of the Bank and found to be satisfactory. The project risk is

considered to be low for the following reasons: (i) qualified and experienced financial

management personnel, (ii) The existence of an Audit Committee enforcing compliance and

supporting the Governance functions, (iii) SAP accounting system installed in April 2013 to

support the accounting function, (iv) both statutory and special audits are conducted in

accordance with International Standards on Auditing, (v) quarterly and annual financial

statements are prepared in formats acceptable to the Bank and in accordance with international

financial reporting standards which are also acceptable to the Bank, and (vi) Adequate financial

procedures manual which are pertinent for maintaining books of accounts are in place. The

strengths of the entity’s financial management unit will be adopted for the implementation of the

Bank project.

4.4 External Audit: KAA undertakes both statutory and special audits for its projects as

required by the project funders. These are conducted annually by the Kenya National Audit

Office (KENAO). The audit engagement is confirmed through a letter of understanding sent to

KAA and prescribes International Standards on Auditing as a basis for conducting the audits.

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KENAO expressed a qualified opinion for the statutory audit for the year ended June 2012 due to

incorrect lease accounting. However, the special accounts received a clean opinion. The financial

reporting period for the Bank project will be aligned to KAA’s June financial year end.

4.5 Bank accepted audit Terms of Reference defining the scope of the audit, types of reports,

submission timelines will be agreed with KAA to strengthen the scope of the engagement with

the KENAO and ensure acceptability of the audit report by the Bank.

4.6 Disbursement: KAA will have the option of using the disbursement methods prescribed

in Bank’s disbursement handbook. For purposes of assistance for immediate action, direct

payment method is considered to be a preferred option.

Procurement arrangement

4.7 All procurement of goods, works and acquisition of consulting services financed by the

Bank will be in accordance with the Bank’s Rules and Procedures: “Rules and Procedures for

Procurement of Goods and Works”, dated May 2008 revised July 2012, using the relevant Bank

Standard Bidding Documents.

4.8 Civil Works: Procurement of civil works valued at UA 18.25 million for construction of

an interim passenger terminal building will be carried out under International Competitive

Bidding (ICB) procedures, using the Bank’s Standard Bidding Documents (SBDs). In order to

expedite timely implementation of this emergency intervention, Advance Contracting have been

requested for by the Government for procurement of works and with a reduced bidding period of

28 days due to the urgency of the project to expedite availability of the contractor on site. The

Bank reviewed the request and gave no objection.

4.9 Procurement Capacity: KAA will be responsible for all procurement under the project.

A review of the procurement workload on existing projects was carried out and it was noted that

projects (including acquisition of works and capital goods) carry the bulk of procurement

activities, with a budget of about KES 21.6 billion (USD 248 million) for the 2013-2014

financial year; therefore the additional workload envisaged under this project (USD 28 million)

may not pose a challenge to the team. KAA is also currently handling other donor-financed

projects in addition to the procurement workload from the proposed project and staffs are

familiar with Bank Rules and Procedures for procurement. The resources, capacity, and

experience of KAA as the Executing Agency are considered adequate to carry out the

procurement under the project.

4.10 General Procurement Notice: The text of a General Procurement Notice (GPN) was

agreed with KAA and it will be issued for publication in UNDB online and in the Bank’s Internet

Website, upon approval by the Board of Directors of the Financing Proposal.

4.11 Procurement Plan: The Borrower has developed a Procurement Plan for project

implementation which was discussed and approved by the Bank. The Borrower shall implement

the Procurement Plan in the manner in which it has been agreed with the Bank.

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4.12 Review Procedures: all procurement of works shall be done under prior review. The

following documents are subject to review and approval by the Bank before promulgation:

Procurement Notices; Bidding Document; Bid Evaluation Report including recommendations for

contract award; Draft contract, if these have been amended from the draft contract included in

the Tender Document.

Implementation schedule

4.13 The proposed works are scheduled to take five (5) months including the design and

construction activities. The implementation schedule is attached as Annex 3. The key milestone

dates of the proposed implementation schedules are indicated in Table 3 below.

Table 3: key milestones of implementation schedule

Item

no Activity Responsible body Target date

1 Submission of bidding document KAA 09 September 2013

2 Request for advance contracting KAA 16 September 2013

3 No Objection to Advance Contracting Bank 20 September 2013

4 No Objection to bidding document Bank 23 September 2013

5 Invitation of tender KAA 24 September 2013

6 Opening of tender KAA 25 October 2013

7 Submission of evaluation report KAA 05 November 2013

8 No Objection to evaluation report Bank 19 November 2013

9 Submission of draft contract KAA 25 November 2013

10 No Objection to the draft contract Bank 28 November 2013

11 Signing of contract KAA/Contractor 09 December 2013

12 Commencement of work Contractor 16 December 2013

13 Completion of work Contractor 15 May 2014

5. FEASIBILITY OF THE INTERIM TERMINAL AT JKIA

5.1 JKIA has a passenger design capacity of 2.5 million passengers per annum against actual

passenger throughput of more than 6 million. Following the fire incident in August 2013, the

passenger handling capacity deteriorated consequently undermining the level of service

experienced by travellers. Prior to the fire incident, the airport’s level of service was rated at C,

and has since been negatively impacted on by reduced perception of safety, security and

efficiency of operations. In order to restore handling capacity awaiting the completion of on-

going capacity enhancement projects, interim terminal facility is of essence given the strategic

role of the JKIA in the region.

5.2 The construction of the proposed interim terminal is therefore, critical to the

improvement of the quality of service at JKIA and will forestall any perceived diversion in air

traffic away from the facility. From the standpoint of anticipated impact of this intervention, the

proposed interim terminal, estimated to cost about USD 28 million will effectively bridge the

capacity gap in the intervening period before the commissioning of Unit 4 (2.5 million

passengers per year) currently under construction, and further additional capacity expected by

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2017 when the planned Greenfield terminal becomes operational. The Bank’s intervention aims

to inject additional 2.5 million passengers per annum capacity to JKIA with improved

operational efficiency under environment of comfort, safety, and security arising from physical

separation of arriving and departing passengers in keeping with international standards.

5.3 Bank’s intervention is therefore underpinned by the fact that JKIA being a strategic

aviation transport facility in the East African region, the resumption of full operations after the

fire incident and the need to provide additional capacity to cater for the increasing travel needs

requires urgent intervention. Sustaining efficient transport links through JKIA, as East Africa’s

leading transport hub, is essential not only for the people and businesses of Kenya, but for

economic activity across the region. Further, the proposed location of the facility at the JKIA is

expected to assure improved operations by limiting bussing of passenger from the aircraft to the

terminal buildings. This project together with other interventions is poised to consolidate the

position of JKIA as an aviation hub thereby supporting continued economic growth of Kenya.

6. ENVIRONMENT AND CLIMATE CHANGE

Environmental Analysis

6.1 According to the Bank’s Environmental and Social Assessment Procedures (ESAP),

Emergency Projects of this nature require the design of an Environmental and Social

Management Plan (ESMP). The ESAP recommends that actions shall be taken to minimize as

much as possible environmental and social disturbances caused by such projects.

6.2 The Bank has established that the Executing Agency, KAA has recently concluded an

update of the Environmental and Social Impact Assessment (ESIA) for the Rehabilitation and

Upgrading of Runway and Taxiway Pavements at JKIA (Package 4) in January 2013. The ESIA

Report has been approved by the National Environment Management Authority (NEMA). The

ESIA study was undertaken within the proposed location of the interim terminal building, and

various aspects of the study have been found relevant for use in the ESMP for the Emergency

Works. The only missing feature in the ESIA Report is the impacts related to the installation of

the interim terminal building, which does not present significant environmental impacts. The

Design Consultant and Contractor for the building will be required to develop a Health and

Safety Plan for the management of Occupational Health and Safety Impacts of installation.

6.3 In addition to the ESIA Report, KAA has developed the following environmental and

safety safeguards documents: (i) an Environmental Policy Statement; (ii) Corporate / Aviation

Sector Environmental Impact Assessment and Audit Guidelines; (iii) JKIA Expansion Project

Construction Environmental Management Plan Guidance; (iv) JKIA Noise Mapping and

Management Plan; (v) JKIA Waste Management Plan; (vi) a Safety Policy Statement; (vii) KAA

Construction Safety Plan; (viii) Corporate Safety Management System Manual and (ix) JKIA

Airport Emergency Plan. These policies, procedures and guidelines from KAA, including the

ESIA Report have been used in the preparation of the ESMP for the Interim Terminal.

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6.4 The Interim Terminal will be located at the end of the remote stands currently under

construction and scheduled to be completed by November 2013. The civil and building works,

therefore, are not expected to impart significant negative impacts to the environment and will

largely be localised. For instance, noise and vibrations will be localised at the remote stands

construction area, earth moving and associated dust is expected to be confined within the work

areas, the works related waste generation will be confined within the work locations and within

the airport grounds while health and safety effects are confined to the construction workers as

opposed to the neighbouring communities. Limited external impacts are likely to be associated

with materials sourcing and haulage and low safety risks related to aircraft operations (landings

and take-offs). The building structure shall be designed off-site and finished materials supplied to

site for installation.

6.5 The positive impacts of the Interim Terminal are (i) construction is adjacent to the

existing terminal facilities and there are no social or resettlement impacts; (ii) the terminal will

bridge the capacity gap before the Greenfield terminal can be completed (iii) the project will

support in consolidating JKIA’s position as a regional aviation hub; (iv) the terminal facilities

will improve the level of service and customer experience through JKIA and, (v) provide short-

term employment to the construction workforce. After the completion of the Greenfield terminal,

the other advantage of the interim terminal building is that it can be put to several uses: (i) used

as terminal building for low cost carrier for regional operations; (ii) used as a fully domestic

terminal; (iii) transferred to other airports in the country as a terminal building. The building

shall be in compliance with International Civil Aviation Organisation (ICAO) requirements and

the design shall incorporate Green or Sustainable building principles that make it adaptable to

any location.

Climate Change

6.6 According to the National Climate Change Action Plan (NCCAP), Kenya’s GHG

emissions are expected to rise, consistent with a growing population and expanding economy,

with emissions increasing from 59 million tonnes of carbon dioxide equivalent (MtCO2e) in

2010 to 102 MtCO2e in 2030. The largest absolute growth in emissions is expected in energy

(electricity) and transport sectors, with energy emissions increasing from 10 MtCO2e in 2010 to

33 MtCO2e in 2030. The NCCAP recommends that to transition to a low carbon climate resilient

pathway, the aviation sector’s low carbon actions include making refurbished airports as energy

efficient as possible. Other actions in the NCCAP relevant to the project are improved water and

waste management in all sectors of the economy.

6.7 To support the NCCAP, it is recommended that the interim terminal building design

considers efficient management of resource use by selecting the most appropriate energy

efficiency and water conservation measures. This requires that the building design concepts

consider providing the following; (i) Optimized building envelope components, high

performance heating, ventilation and air conditioning (HVAC) systems, and buildings

automation and control systems to contribute to a reduction in KAA’s energy costs (ii) consider

installation of photovoltaic system in order to generate part of the project’s own energy

requirements since the terminal structure is likely to be relocated to Kenya’s remote locations

once the permanent structures are made available (iii) Water efficient plumbing fixtures, storm

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water harvesting and reuse to reduce KAA’s water use (iv) implement KAA’s Waste

Management Plan for Construction and Airport Operations (v) take into account Sustainable or

Green Building considerations during the design of the terminal building, similar to LEED

(Leadership in Energy and Environmental Design) Guidelines for New Construction.

7. CONCLUSIONS AND RECOMMENDATIONS

7.1 Construction of the temporary terminal will considerably assist the Government of

Kenya’s effort of improving the service standard of JKIA which has been seriously affected by

the fire accident in August 2013. The terminal is urgently needed to mitigate the negative impact

of the accident on the Country’s economy.

7.2 The request by Government of Kenya is found to be acceptable and complies with the

Bank Group Policy Guidelines.

7.3 As per the Bank’s current Delegation of Authority Matrices, October 2012, utilization of

savings involving change in project objectives has to be approved by the Board. Therefore,

Management recommends that the Board of Directors approves the proposed utilization of loans

savings from the Nairobi – Thika Road Improvement Project Loan and from Education III

Projects Loan totalling UA 17.82 million to the Republic of Kenya for the purposes of financing

Jomo Kenyatta International Airport Emergency Interim Terminal construction project.

ANNEX 1

- 2 -

ANNEX 2

EXISTING LOANS BASIC DATA

Description Nairobi – Thika Road

Project Education III Project

Borrower Republic of Kenya Republic of Kenya

Loan number 2100150015544 2100150007214

SAP number P-KE-DB0-016 P-KE-IZA-001

Board approval date 21 November2007 17 December 2003

Loan amount (UA million) 117.85 24.26

Current closing date 31 December 2012 30 June 2013

Disbursement ratio (%) 87.53 80.68

Available balance (UA million) 14.69 3.13

ANNEX 3

CONSTRUCTION OF TERMINAL AT JKIA

IMPLEMENTATION SCHEDULE

Activities 2013 2014

Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Selection of contractor Contract signing Commencement of work Contract execution Completion of works Testing and

Commissioning