Everstrong Capital and the Thinking Behind the $3.6B Nairobi-Mombasa Expressway

After years of delays and uncertainty, Kenya’s $3.6 billion Nairobi-Mombasa Expressway finally gained momentum in May this year.

A new agreement between Everstrong Capital , a U.S.-based infrastructure investment firm, and the Kenya National Highways Authority (KenHA) set the stage for the 440-km expressway to become a reality.

This transformative project promises to cut travel time between Nairobi and Mombasa from 10 hours to just 4, easing congestion on one of East Africa's most vital trade routes.

The expressway will follow the alignment of the existing A109 Road, a crucial artery in the Northern Corridor linking Mombasa to landlocked neighbors like Uganda and Rwanda.

Beyond improving travel efficiency, the project aims to boost safety, reduce transport costs, and stimulate economic growth through planned special economic zones along the route. Construction is expected to take 3-4 years, though no start date has been announced.

A History of Delays and the New Path Forward

The mega project first gained traction in 2017 when Kenya signed a Sh230 billion deal with U.S.-based engineering firm 柏克德 for the road’s construction. However, the ambitious timeline soon faced roadblocks.

In 2019, construction was suspended after Kenya hit its debt ceiling, halting the project for nearly two years.

The government’s suspension was a result of fiscal constraints and growing concerns over the country’s debt levels, which had reached unsustainable levels. These financial challenges made it difficult to move forward with such a large-scale infrastructure project in a country grappling with mounting debt.

This setback further complicated the situation for Bechtel, which had been pushing for an Engineering, Procurement, and Construction (EPC) model.

However, the Kenyan government preferred a Public-Private Partnership (P3) model, which would allow the private sector to finance and operate the project. The disagreement over financing and the country's ability to take on additional debt led to delays.

Now, with new financial backing and a shift in approach, Everstrong Capital is moving the Nairobi-Mombasa Expressway forward under the P3 model.

As the project takes shape under this new agreement, understanding the difference between the two financing models—EPC and P3—helps explain the path forward.

EPC vs. Toll Model: What’s the Difference?

1. EPC Model (Engineering, Procurement, and Construction)

• Structure: In an EPC model, a single contractor or consortium is responsible for the design, procurement of materials, and construction of the project. The contractor delivers the project for a fixed price and is accountable for ensuring it is completed according to specifications, timeframes, and budgets.
• Payment: The government or client typically pays the contractor upfront or in agreed installments for the entire construction cost. This model doesn’t rely on toll revenue for project financing.
• Risk: The contractor bears the risk of delivering the project on time and within budget.
• Bechtel's Preference: Bechtel argued that the EPC model would provide better value for money because the costs would be paid upfront, and there wouldn't be the added complexity or long-term uncertainty of relying on toll revenue for funding.

2. Toll Model (Public-Private Partnership, or P3)

• Structure: In a toll model, the private sector (typically a contractor or consortium) builds, finances, and operates the project. After completion, the project is often operated as a toll road where users pay to use the infrastructure (e.g., drivers paying toll fees).
• Payment: The contractor or consortium recoups its investment through the toll fees paid by road users over time. This model often involves a revenue-sharing agreement between the public and private sectors.
• Risk: The private partner bears the risk of traffic volumes and revenue generation, as the profitability depends on how many people use the road and how much they pay in tolls.
• Kenya's Approach: The Kenyan government favored this model as a way to mitigate upfront costs and allow the private sector to finance and operate the expressway. Bechtel, however, felt this model would not provide optimal value since the contractor would bear significant financial risk over time.

Lessons from Previous P3 Projects

Kenya has already witnessed the implementation of another P3 project in infrastructure, such as the Thika Superhighway ( Intex Construction Limited , 2012). A second project, the JKIA Terminal 1A (A consortium of Chinese contractors), was also to be funded and operated under similar models, but the deal was cancelled in 2016.

These projects have provided valuable lessons on the challenges and benefits of engaging private sector partners in large-scale developments.

For instance, the Thika Superhighway was funded through a toll system, offering a blueprint for how public-private collaborations can work to reduce government burden while still achieving ambitious infrastructure goals.

In essence, the choice between EPC and Toll models reflects broader trade-offs between upfront investment and long-term financial risk.

The EPC model offers a straightforward, fixed-price approach with guaranteed upfront payment, ensuring the project stays on schedule and within budget.

The toll model, on the other hand, hinges on long-term financial sustainability, with the private sector taking on the risk of generating revenue through toll fees.

The Future of the Nairobi-Mombasa Expressway

This decision will ultimately shape the success and legacy of the expressway.

By opting for the P3 model, Kenya hopes to mitigate initial costs while securing private sector involvement for long-term operations.

The outcome of this financing approach will not only impact the expressway itself but could set the stage for future infrastructure projects across Africa, where similar challenges of financing and risk management persist.

Why Everstrong Capital Took the Risk Where Bechtel Hesitated

One key question remains: Why is Everstrong Capital willing to take on this high-risk venture when Bechtel, a global giant in infrastructure, chose to walk away?

Everstrong’s decision to invest in the Nairobi-Mombasa Expressway reflects its distinct focus on late-stage infrastructure development opportunities in Africa.

The firm has a clear vision for the region, with a stated commitment to supporting development across key sectors.

In fact, they have strategically positioned themselves to benefit from projects like this one, which align with their mission of driving growth in Africa’s infrastructure landscape.

While Bechtel, with its global reach and robust financial backing, preferred the more predictable EPC model, Everstrong recognizes the long-term potential of the toll model.

For them, this project isn’t just about construction—it’s about fostering sustainable economic development in East Africa. The expressway offers a chance to contribute to the region’s infrastructure and connect vital trade hubs, which could have a ripple effect on Africa’s economic growth.

It also provides an opportunity to build on their other investments such as electric vehicles and renewable energy infrastructure, positioning them as key players in the region's future growth.

A Bold Vision for Africa’s Infrastructure Future

This willingness to embrace higher financial risk stems from Everstrong’s deep commitment to Africa’s future.

Their focus on late-stage infrastructure opportunities allows them to take a longer-term view, understanding that large-scale projects, especially in developing markets, come with their own set of challenges and risks.

But with these risks come the potential for high rewards, especially if they are positioned as key players in the future of Africa’s infrastructure.

Bechtel, on the other hand, was hesitant to commit to a toll-based model due to the unpredictability of revenue generation over time.

By relying on traffic volumes and toll fees, Bechtel would have faced a greater degree of uncertainty.

This concern over long-term financial risks, particularly in an emerging market like Kenya, led them to prefer the more controlled EPC model, where costs are paid upfront.

In contrast, Everstrong’s approach is rooted in the belief that infrastructure is not just about building roads, but about enabling economic growth and development.

With their established presence in Kenya and South Africa, Everstrong has the regional experience and the patience to see projects like the Nairobi-Mombasa Expressway through, even if it means navigating the uncertainties of toll revenue.

Ultimately, their willingness to take on the project highlights a bold and strategic vision for the future of African infrastructure, one that aligns with both the risks and rewards inherent in large-scale investments.

Final Thoughts

The Nairobi-Mombasa Expressway is a strategic cornerstone for Kenya’s economic transformation.

Everstrong Capital’s willingness to embrace the toll model and take on long-term financial risk reflects a bold vision for the future of African infrastructure.

While Bechtel’s preference for the EPC model highlighted concerns about upfront costs and risk management, Everstrong’s decision underscores a different approach—one rooted in fostering sustainable growth and unlocking the region’s economic potential.

This project showcases the importance of innovative financing models in enabling large-scale infrastructure development, especially in emerging markets.

By aligning their investment with Africa’s broader developmental goals, Everstrong Capital isn’t just building a highway—they’re paving the way for a connected, thriving future for East Africa.

As Kenya moves forward with this transformative project, the Nairobi-Mombasa Expressway could set a new benchmark for how public and private sectors can collaborate to deliver infrastructure that serves both immediate needs and long-term aspirations.

P.S.

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