Purpose & Objectives

This pre-feasibility desk study has been developed to provide guidance on key risks and
activities for consequent project preparatory technical assistance (PPTA) preparation to minimize
the risks and prepare the project for investment. Below we provide details on the current state of
Lamu port, the Government of Kenya’s plans for Lamu port development, and recommendations
for private finance structures to promote the project’s development.
Background
Due to congestion at the Port of Mombasa, the Government of Kenya (GoK) determined that
development of a new port at Manda Bay in Lamu County will be necessary in order to
accommodate future growth of cargo and passenger traffic arriving in Kenya. In 2012, the GoK
through Kenya Ports Authority (KPA) invited bids for design and construction of the first three
berths (general cargo, container and bulk each of 400m length and 17.5m draft) and associated
infrastructure including dredging all berths to 18.5 meters below chart datum. The first berth is
now complete and is being commissioned this month (October 2019) while the other two will be
completed in 2020.
Lamu Port Characteristics
The port’s key characteristics are listed below:

• Identification & Built: Early 1970’s, Construction started in 2015 by a Chinese contractor
{CCCC} entirely with GoK funding of US$480 million
• Managed by: Kenya Ports Authority (100% publicly owned)
• Located: 345 Km by road North East of Mombasa
• Average depth surrounding port: 10m (range of 8-13 m)
• Two approach channels: each of 500m width and 17.5m draft
• Two turning basins: each with 800m diameter and 17.5m draft
• 32 Berths (at Full Operating Capability): 400m each (depth of 17.5m)
• Maximum Vessel Size: 100,000 DWT, 350m in length for container ships
• Yard space & storage: ample space and storage but capacity limiting factor is the quay
• Designed Handling Capacity: 38 million tonnes in 2040 excluding zone 2 of the Industrial
Port, and this implies a 65% port capacity utilization factor 1

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Integrated Transport Infrastructure Master Plan for LAPSSET Projects In Lamu County

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 • Shore cranes and other equipment: Currently being installed
• Power and water infrastructure installation: power connection to the national grid and
water network complete at location of the first 3 berths
• Dredging requirements: Low siltation as port location is sheltered from the open ocean
hence no need for constructing a breakwater or dredging a sediment trap
The photos below provide a view of current work in progress. 2

The GoK’s vision for the port of Lamu is to serve as a regional transshipment hub and cater to
the needs of various maritime industries. This requires the port to consider not only growth in
cargo volumes for Kenya, but also potential growth of transit cargo to neighbouring countries,
and the needs of various maritime industries. The site for the Lamu port meets all of these
requirements. Development of the remainder 29 berths (assuming the Naval Base is relocated
from its current reserved location which is taking up 8 berths) is envisaged using the PPP model.
Development of the harbor area presents significant real estate potential that, if well-developed,
can bring significant value to the Government.
Zoning and Port Layout

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Ibid

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Berths and terminals within the Lamu port is such that similar activities and functions have been
grouped in the same area. The port of Lamu is therefore proposed having the following zoning. 3
1. The Industrial Port (north port) – assigned the task of serving the needs of the
neighbouring zone of heavy industrial activity. One zone is envisaged to be developed
within the period 2030-2040 (when industrial development growth would be expected to
pick up pace), and a second zone expected to be developed after 2040, focusing mainly
on user dedicated needs.
2. The Commercial Port (south port) - assigned the task of serving the cleaner non-heavy
industrial activities. Furthermore, the Commercial Port is proposed having a “Clean
Cargo Zone” and a “Dirty Cargo Zone”. The “Dirty Cargo Zone” could in fact develop
into a purpose cargo terminal.
Proposed Lamu Port Offshore Energy Industrial Park
Special Economic Zones (SEZs) are geographical areas that support new and expanding
businesses by providing a first class business infrastructure and compelling incentives. The
Lamu SEZ will measure approximately 10,744 Ha with the area being planned for the
development of heavy, medium and light industries as well as education, training and research.
The Lamu SEZ is ideally positioned to become the region’s offshore energy hub offering both
renewable and traditional energy companies an established industry base and supply chain
together with a skilled workforce, an established distribution infrastructure, a variety of sites to
suit a range of needs, and a network of universities with expertise in a range of energy-related
fields.
The creation of the privately-owned, mixed-use and mixed-income waterfront facility is based on
the vision of further investment in energy projects, the creation of green jobs, together with the
development and enhancement of existing jobs in the energy sector within the region.
The vision for the waterfront facility is to:
• Bring the Lamu waterfront site to market following a programme of preparatory works
• Develop tailored specialist energy related training packages within the SEZ working with
partners and stakeholders
• Develop a Maritime Centre of Excellence working with partners and stakeholders
• Develop a waterfront facility dominated by renewable and traditional energy companies
with an established industry base, and skilled workforce. The skills activity in the region
is therefore required to focus on skills delivery and supply of skilled labour which meets
the needs of local employers.

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Ibid

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We have identified priority sectors in three broad categories, as having the potential to make a
greater contribution to future growth and employment. These are: advanced manufacturing,
knowledge intensive traded services, and enabling sectors, such as energy and construction. Key
challenges facing the sector over the coming decade are; the need to increase productivity;
meeting increases in demand for energy; and further reducing the environmental impact of
energy production.
Energy and advanced engineering/high value manufacturing are areas where there is the potential
to drive real productivity gains and boost economic competitiveness. There is projected to be a
substantial shift in employment from less skilled to more skilled occupations. The development
of high level skills to support these industries will be critical.
The Lamu port offshore energy industrial park (herein referred to as the project) seeks to address
major market entry barriers in the industry in this region including:
1. Supply side economies of scale (production at a larger volume thus benefit from lower
cost per unit)
2. High capital requirements (major equipment investments are needed in order to enter the
industry)
3. Skilled workforce (education and training to build an adequate knowhow base and
organization)
The aim of the project is to establish and sustain a number of deep-water businesses clustered
together so that they benefit from each other’s presence. This will draw new economic activities
to both the (future) Lamu resort city and the greater port area.
WIO Marine Limited seeks to construct, own, operate and eventually decommission a 1600
meters long multi-use, ultra-deep water quayside (24m or greater) together with port and port-
side land and landward infrastructure to support the education, training, research, manufacturing,
construction, operation and maintenance of offshore energy projects in the Western Indian Ocean
(WIO) region.
The port infrastructure will be used by multiple industries, including oil and gas, and passenger
transport, in addition to servicing the requirements of the offshore renewable energy industry.
This multi-use capability greatly enhances the justification for the large expenditures required for
port infrastructure. This multi-use allows cost sharing and reduces the risks associated with
uncertainties in the developing offshore energy market.
The envisaged waterside/waterfront facility will be located in the northern zone two (2) of the
Industrial Zone of the Lamu Port which has been reserved for user dedicated berths (see the
figures below showing port area for future development).

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The project would be developed in phases, with the contract being a turnkey design and
construction contract while WIO Marine Limited will assume operation and maintenance of the
constructed facilities. WIO Marine Limited envisages the investment plan and financing terms
for the project being both long term debt and equity financing with a repayment period of 5 + 20
(first 5 years, payments on interest only, then annual installments on principal & interest over 20
years).

Based on the results of the market research, the design and build or EPC contractor will be a
consortium of POSCO Engineering & Construction and the Shimizu Corporation, NorthWest
Engineering Service, Inc. will be the commissioning agent while O'Connor Construction
Management, Inc. will be the independent cost estimator, Sound & Sea Technology, Inc. (SST)
will lead the research team for the ocean testing facilities aspect of the feasibility study. The
Kenyan Architectural/Engineering (A/E) firms will identified in due course.
Phase I will encompass development of (including supporting infrastructure):-
1. A 1600m heavy load ultra-deep water (24m or greater) quay
2. One turning basin having 800m diameter and 17.5m draft
3. Road and dyke network
4. Two (2) offshore wind turbine blade factories – most likely OEM-built
5. Two (2) staging and assembly lay down storage areas to support the pre-assembly, final
assembly and quayside load-out (very close to wharf) for offshore renewable energy
components for two project developers and two OEMs simultaneously.
6. Wind service training centre
7. An Engineering, Procurement, Construction, and Installation (EPCI) hub with a
throughput capacity in excess of 60,000 metric tons per year at peak production.
8. Welding technology and training centre
9. Data centre park
10. Fuel farm
11. Warehouses
12. Hangars for fixed-wing and rotor crafts
13. Drainage system
14. Power and natural gas supply system
15. Potable water supply network
16. Wastewater treatment plant
17. Telecommunication system including subsea fiber optic cable
18. Administrative buildings
19. Housing/accommodation buildings
20. Large scale food services buildings
21. Diving and salvage training centre
22. Marine academy training centre

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 23. Ship building and repair training facility
24. Ship construction yard
25. Ship maintenance yard
26. Ship dismantling/recycling yard
27. Ship layberth facility
28. Marine diesel generators, gas engine parts service, repair and installation factory
29. Sea survival training centre
30. Athletic and recreational facilities
31. Healthcare facilities
32. Cyber security management centre
33. Security facilities
Projections
Taking into consideration the current role of larger transshipment hubs in the Middle East, port
expansion and modernization projects taking place at the ports of Djibouti, Eritrea, Somalia and
in Mombasa, as well as the potential development of similar port facilities in Tanzania,
Mozambique and South Africa, a market and competition analysis will be required.
The following industries will require a detailed analysis:-
1. Maritime education and training
2. Steel
3. Construction
4. Advanced manufacturing
5. Offshore energy
6. Marine fishing
7. Ship building and repairing
Risks, Opportunities and Required Activities for PPTA Phase
Key risk or opportunity Required PPTA Activities to minimize risk
or harness opportunity
Geotechnical conditions of site and quay wall Extensive geotechnical investigation of the
foundation, suitability of construction entire development site, both on land and
method, and cost estimates across the channel as there is virtually no
geotechnical data available for any of the
proposed site. These investigations should be
aimed at determining the foundation materials
beneath the surface for staging and loading
pavement design, hardness of the channel to
ascertain the excavation parameters for quay

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Certainty of landownership and lease
arrangements which eliminate access and
timing challenges for the project
Uncertainty of the cost estimates
Risk of attracting suitably qualified
contractors to undertake the work while
providing opportunity to the local private
sector.
Uncertainty of environmental social
conditions and understanding of mitigation
measures during design, construction and
operation
wall construction and to confirm that quay
wall loads can be adequately supported.
These investigations should also include
deeper investigations to determine the
parameters of the underlying channel
material.
A cadastral survey should be undertaken to
accurately define the land ownership parcels
within the project site limits, and at its
periphery. Once the land ownership parcels
have been defined, the land proposed to
encompass the project site land, or the
boundary of the project site limits, can be
defined.
Estimating construction costs for large
unusual port development projects in remote
locations such as Lamu is difficult, since
similar comparable projects rarely exist for
comparative purposes. To assist with project
budgeting, it is recommended that the
preferred design for any new port
development be assessed by an international
civil engineering contractor with experience
in port development in the region.
Consideration of appropriate procurement
methods should be built into the PPTA,
including potential for Design and Construct
(D&C) contract, led by a suitably experienced
international maritime contractor to bring
innovation to the design solution and transfer
design evolution risk to the contractor.
Opportunities should also be explored during
PPTA for local private sector participants to
undertake elements of the work.
The project could endanger the cultural
heritage of the Lamu Old Town (a UNECSO
World heritage Site), the culture of the
indigenous community in Lamu Island and
the ecosystem services they depend on. Key
PPTA environmental safeguards activities
should include: public consultation;
visual/photographic transects of the channel;
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Uncertainty of social conditions and potential
mitigation measures during design,
construction and operation
Lack of operations and maintenance
capabilities within WIO Marine Limited will
prematurely undermine the efficiencies
gained by new port infrastructure
Climate change risk and adaptation
opportunities
detailed survey of water quality and all
contaminant input sources to the marine
environment in the project area; detailed
survey of active coastal erosion sites in the
project area; detailed typology of the channel
flat materials and coastal sediments that will
require blasting/dredging.
Key PPTA social safeguards activities should
include: public consultation; due
diligence/social compliance audit (including
an action plan to address any outstanding
issues); review of land leases and outstanding
issues.
Some key areas for investigation include:
joint venture operations, financial
management (collection of port fees and dues,
and the associated accurate accounting); asset
management (routine maintenance,
management of stores and spares, availability
of skilled maintenance personnel); and other
critical management tasks, to ensure that the
new facility delivers the improved outcomes
envisaged in this Study.
A detailed climate risk and vulnerability
assessment should be undertaken, which will
include: impact assessment, identification of
possible adaptation options; and incorporation
of the adaptation measures into the economic
analysis. The detailed investigation should
include an assessment of the incremental
elements of the design attributable to climate
change adaptation to inform potential climate
change funding opportunities.

Preliminary Conclusions

• Developing a new commercial waterfront industrial park in Lamu port is compatible with
the GoK’s development strategy (Vision 2030);
• Developing one dual-use facility for the offshore energy industry requirements would be
more efficient than developing two separate port facilities. This will likely result in greater
cost savings and economies of scale than development of two separate ports;

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• Locating the new industrial park in Kenya’s only natural deep water location will allow
larger vessels and would most likely significantly reduce the cost of capital and
maintenance dredging to maintain the entrance channel and turning basin at the required
depth, lowering overall maintenance costs;
• Choosing a natural deep water site at the Lamu port would provide more space for
expansion, critical for meeting future traffic needs over the next 100 years. Most vessels
which serve the offshore energy industry will not be “lightloaded”, or less than fully loaded
with cargo, to navigate the channel with sufficient under‐keel clearance. Light‐loading
increases the cost of transportation and, in turn, the cost of the shipped products because
more trips must be made to carry the same volume of cargo;
• The project would be financed primarily using private finance, but will require some
government funds to finance the development of basic infrastructure. This is the case for
the majorly of the greenfield port projects around the world;
• There are proven oil and gas reserves in the region and the potential for growth in the
offshore wind sector which will dictate the characteristics of the port including the land
required for development, total capacity, required depth and related dredging, among
others;
• Certainty of land ownership and lease arrangements eliminates access and timing
challenges for the project;
• Developing a green field port at a site without land limitations for future expansion is an
important condition for attracting quality port operators and industrial real estate
developers;
• More important than the cost to construct the new port facilities is the 40-year present value
of operating a port at a suboptimal location. Building a suboptimal facility would not only
reduce potential revenue generation, but would also generate additional congestion,
environmental and social costs, and higher operating and logistics costs.
• Though a clear demand for the project has been identified and environmental and land
access constraints may be overcome, the high costs of the project development indicate
that only a large, long term resources project would justify the development of the project.

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