AFRICAN DEVELOPMENT FUND
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1 AFRICAN DEVELOPMENT FUND PROJECT: JOMO KENYATTA INTERNATIONAL AIRPORT EMERGENCY INTERIM TERMINAL CONSTRUCTION PROJECT COUNTRY: KENYA OITC/EARC DEPARTMENTS October 2013
2 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 million of which UA 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 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 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 7 th August 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
3 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 reorganization 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 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 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 2
4 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 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 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 (USD 27.66) million. The summary of cost estimate and currency requirements is shown in Table 1 below. Component Design, supply and erection of the Terminal Table 1: Summary of Cost Estimates Foreign Exchange UA million Local Cost Total Foreign Exchange USD million Local Cost Total 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. 3
5 Source Foreign Cost UA million Local Cost Table 2: Financing Plan Total Cost 4 Foreign Cost USD million Local Cost Total Cost ADF GOK Total 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. %
6 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 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 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 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 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. 5
7 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 Request for advance contracting KAA 16 September No Objection to Advance Contracting Bank 20 September No Objection to bidding document Bank 23 September Invitation of tender KAA 24 September Opening of tender KAA 25 October Submission of evaluation report KAA 05 November No Objection to evaluation report Bank 19 November Submission of draft contract KAA 25 November No Objection to the draft contract Bank 28 November Signing of contract KAA/Contractor 09 December Commencement of work Contractor 16 December Completion of work Contractor 15 May 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 ongoing 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 6
8 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 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. 7
9 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 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 shortterm 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 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 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 8
10 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 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 million to the Republic of Kenya for the purposes of financing Jomo Kenyatta International Airport Emergency Interim Terminal construction project. 9
11 ANNEX 1
12 - 2 -
13 ANNEX 2 EXISTING LOANS BASIC DATA Description Nairobi Thika Road Project Education III Project Borrower Republic of Kenya Republic of Kenya Loan number SAP number P-KE-DB0-016 P-KE-IZA-001 Board approval date 21 November December 2003 Loan amount (UA million) Current closing date 31 December June 2013 Disbursement ratio (%) Available balance (UA million)
14 ANNEX 3 CONSTRUCTION OF TERMINAL AT JKIA IMPLEMENTATION SCHEDULE Activities Selection of contractor Contract signing Commencement of work Contract execution Completion of works Testing and Commissioning Sep Oct Nov Dec Jan Feb Mar Apr May Jun
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