IFC leads successful turnaround effort for Kenya Uganda Rail
East Africa’s transportation network is taking a turn for
the better, following the August 2 signing ceremony for a $164 financing
package to rehabilitate the Kenya Uganda Railway, a vital trade link from the
coast of Kenya into Uganda.
IFC, along with six leading international finance
institutions, extended the financing to Rift Valley Railways International
(RVRI) to back a $287 million capital expenditure program to improve the
operating company’s infrastructure and rolling stock. IFC becomes the largest
financier to Rift Valley Railways, providing $42 million – a loan of $32
million loan, of which $10 million is already disbursed, and an additional $10
million in equity to be committed.
Other institutions that participated in the package
include: African Development Bank ($40 million); Germany’s KfW Bankengruppe
($32 million); Dutch Development Bank FMO ($20 million); Kenya’s Equity Bank
($20 million); Cordiant’s Infrastructure Crisis Fund ($20 million); and the
Belgian Investment Company for Developing Countries ($10 million). The balance
of the funding for the $287 million capital expenditure program was contributed
by shareholders and generated through operations.
RVRI is a portfolio companyof Citadel Capital, an
Egypt-based private equity firm with $8.7 billion in investments across 14
countries in Africa. The Kenya-Uganda railway line has a track length of 2,350
kilometers, and employs 219 locomotives and 7,500 railroad cars. Other key
shareholders are TransCentury and Bomi, which are Kenyan and Ugandan companies,
key regional transportation network
The Kenya-Uganda railway line is a key transportation
network for East Africa, with a track length of 2,350 kilometers, 219
locomotives and 7,500 railroad cars. The rehabilitation of the railway will
support regional integration within the region and encourage cross-border trade
and investment by reducing the cost of doing business in East Africa.
IFC has demonstrated a long-term commitment to the
project, from its inception through difficult times. Following the departure of
the project’s initial sponsor in 2009, IFC led the restructuring of the Rift
Valley Railways shareholder group to attract new shareholders and investors for
the rehabilitation of the project.
Commenting on the on-going rehabilitation effort, Brown
Ondego, Group Executive Chief Officer of RVRI said, “Our rehabilitation program
has already delivered impressive early results, and year on year, we’ve seen a
30 percent drop in accidents per train kilometer.”
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 percent of East Africa’s
transport market. An efficient rail network has the capacity to reduce East
African transport costs by as much as a third due to the operational and fuel
efficiency of rail shipment.