A Rift Valley Railways engine. The firm needs cash to revamp the Kenya-Uganda dilapidated track, repair wagons and locomotives. FILE
What you need to know:
The rail firm needs the cash to revamp the Kenya-Uganda dilapidated track, repair wagons and locomotives after last month’s completion of a new 73 km line between Mombasa and Nairobi at a cost of Sh1.7 billion.
This move comes as Transport Secretary Michael Kamau put RVR on notice, saying the performance of the rail business had failed to live up to expectations of the Kenya and Uganda governments seven years since the operator won the concession.
Analysts said that rehabilitation of the rail network is critical to expanding trade across the East Africa.
Rift Valley Railways (RVR) is seeking Sh1.78 billion ($20.5 million) from its shareholders within six months as it races to strengthen relationships with the government, which has threatened to review its concession agreement.
The rail firm needs the cash to revamp the Kenya-Uganda dilapidated track, repair wagons and locomotives after last month’s completion of a new 73 km line between Mombasa and Nairobi at a cost of Sh1.7 billion.
The firm shareholders have since 2010 raised Sh5.3 billion ($61.5 million) and the owners include Egypt’s PE Citadel Capital (51 per cent), TransCentury (34 per cent) and Uganda’s Bomi Holdings that has a 15 per cent stake.
This move comes as Transport Secretary Michael Kamau put RVR on notice, saying the performance of the rail business had failed to live up to expectations of the Kenya and Uganda governments seven years since the operator won the concession.
RVR won a 25-year contract to run the 2,352km Kenya-Uganda railway in November 2006 on the cargo business and a five-year contract for the passenger unit whose tenure was extended by months in 2008.
“Shareholders have so far injected Sh5.29 billion ($61.5 million) as part of the capital for infrastructure upgrade,” said Hassan Massoud, the vice president of Cidatel.
“The balance Sh1.78 billion ($20.5 million) should be provided over the next six months,” he added.
The shareholder injection of Sh7.1 billion ($82 million) was part of Sh24.7 billion ($287 million) upgrade plan, which was to cover five years from 2010, and included Sh3.5 billion ($41 million) generated from operations and Sh14.1 billion ($164 million) syndicated loan.
The overhaul has been slow due late disbursements of loans by financiers, including the International Finance Corporation, the African Development Bank and Equity Bank.
The delay is partly behind the push by the government for a review of the concession agreement.
Analysts said that rehabilitation of the rail network is critical to expanding trade across the East Africa.
Official statistics show that the total distance covered by the operator dropped from 389 million kilometres in 2009 to 283 million in 2011 and 221 million last year.
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