RVR gets sh434b to repair Kenya Uganda railway

Wednesday, 3rd August, 2011

Nairobi-IFC, a member of the World Bank, and six leading international finance institutions have extended $164m (about sh434b) to Rift Valley Railways (RVR) to rehabilitate the Kenya-Uganda railway.

The railway line is a vital transport network for East Africa, whose rehabilitation will encourage cross-border trade and investment.

The package backs a $287m capital expenditure programme to improve the operating company’s infrastructure and rolling stock.

IFC is the largest financier to Rift Valley Railways, providing $42m (about sh111.3b). This involves a $32m loan, of which $10m is already disbursed, and an additional $10m in equity to be committed.

RVR is a portfolio company of Citadel Capital, an Egyptian private equity firm.

Other shareholders are TransCentury and Bomi, which are Kenyan and Ugandan companies, respectively.

The Kenya-Uganda railway line has a track length of 2,350 kilometres. It uses 219 locomotives and 7,500 railroad cars.

“This financing package is the backbone for an ambitious five-year rehabilitation programme that will see us make a huge leap in operating standards as we address safety issues and complete maintenance to improve reliability and hauling capacity of the line. We will also be able to enhance service to passengers and capture long-term gains through investments in information technology,” said Karim Sadek, the Citadel Capital managing director.

IFC has played a critical role in encouraging private investment in the Kenya-Uganda railway since the inception of the project in 2005.

Following the departure of the project’s initial sponsor, IFC led the restructuring of the shareholder group that resulted in the entry of new sponsors and investors.

“The rehabilitation programme has already delivered impressive results,” said Brown Ondego, the RVR group chief executive officer.

“Net tonne kilometres rose by 9% in the first-half of 2011, compared with the same period last year. Turn-around times - a key measure of asset utilisation - on the strategic Mombasa-Kampala route dropped 27% in the same period. We have also seen a 30% drop in accidents per train kilometre.”

Other institutions funding the project include: the African Development Bank, $40, Germany’s KfW Bankengruppe, $32m, Dutch Development Bank FMO, $20m, Kenya’s Equity Bank, $20m, Cordiant’s Infrastructure Crisis Fund, $20m and the Belgian Investment Company for Developing Countries, $10m.

The balance of the funding for the $287m capital expenditure programme is being contributed by shareholders and generated through operations.

“IFC has dedicated significant resources to encourage the turn-around of the Kenya-Uganda rail project,” said Jean Philippe Prosper, the IFC director for East Africa.

“We are committed to the success of this railway as part of a broader effort to encourage private investment in infrastructure that promotes regional integration and social and economic development in Kenya, Uganda and the surrounding region.”

Transport prices in East Africa are among the highest in the world, largely due to heavy reliance on trucking.

A lack of operating capacity has resulted in rail capturing less than 10% of East Africa’s transport market.

The New Vision Newspaper