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RVR secures Sh14.7bn upgrade debt

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The debt will be used to revamp locomotives, wagons and the rail track. File

The debt will be used to revamp locomotives, wagons and the rail track. File 

By MOSES MICHIRA AND MARK OKUTAH

Posted  Tuesday, August 2  2011 at  00:00

The cost of transporting goods across Kenya into Uganda could reduce significantly in the next five years following the injection of $164 million (Sh14.7 billion) to Rift Valley Railways (RVR) by consortium of lenders including Equity Bank.

The funds, to be disbursed in the next five years, will be spent on modernising the Kenya Uganda railway with its owners including Egypt’s Citadel Capital and TransCentury set to inject an additional $82 million (Sh7.3 billion).

The money will be used to revamp 100 locomotives, 3,500 wagons and the rail track that stretches from Mombasa to Kampala as the rail firm races to meet its obligations that were bogged down by shareholder spats pitting TransCentury and Sheltam Railways—which held a 49 per cent stake before it sold to Citadel Capital.

Details of the restructuring efforts will be unveiled this morning before senior government officials including Transport minister Amos Kimunya, Uganda’s Finance and Transport ministers Maria Kiwanuka and Abraham Byandala.

“The target is to get the railway back on track. The initial phase is getting these assets back in place,” TransCentury’s CEO Gachao Kiuna told the Business Daily. Key banks financing the RVR project include World Bank’s private lending arm IFC, African Development Bank, the German development bank Kfw and Dutch Development Bank (FMO).

Equity Bank is the only local lender participating in the syndicated loans as it seeks a piece of the big ticket project finance market.

The revamp will not only transform the rail network but also signals the end of the persistent boardroom and shareholder wars that remained a hurdle to the turnaround of RVR and made lenders shy from putting their money in the railway network.

Five years since the granting of the concession, RVR’s performance has failed to live up to the expectation of both Kenya and Uganda governments on what is attributed to the lack of financial and technical muscle on the side of the lead investor—Mr Roy Puffet of Sheltam. While cargo volume at the port of Mombasa has shot up to over 19 million tonnes as at the end of last year from seven million tonnes in the 1980s, volumes transported by RVR have declined from 4.8 million tonnes to 1.5 million tonnes in the same period of time. RVR had won a 25-year concession to run the 2,352km Kenya-Uganda railway.

Its initial shareholders including Centum Ltd, Sheltam and TransCentury were locked in a tussle over leadership at the firm.

Then, came the battle over the control of the rail firm between TransCentury and Citadel Capital after Mr Puffet sold his shares to the Egyptian private equity fund before the twin governments stepped in.

Citadel owns 51 per cent of RVR while Bomi Holdings Limited, a Ugandan investment company and TransCentury holds 15 per cent and 34 per cent stakes respectively.

RVRI posted a $674,000 (Sh60 million) in net profits for the year ending June 30, after years of heavy losses.

mmichira@ke.nationmedia.com