Rift Valley Railways to Agree $164 Million Loan to Raise Capacity 4-Fold

Rift Valley Railways Ltd., operator of the Kenya-Uganda railway, will sign a loan accord to finance an upgrade that may boost capacity by almost four-fold, according to its biggest shareholder, Citadel Capital SAE.

The agreement, to be signed today in the Kenyan capital, Nairobi, will form part of the $287 million that is expected to be invested in RVR over the next five years, Citadel Chairman Ahmed Heikal said yesterday in an interview. The loan is for $164 million, the International Finance Corp. said yesterday.

“This investment will not only greatly improve the efficiency of the railway, but that of the port of Mombasa as well,” Heikal said in Nairobi. The line links Mombasa, East Africa’s biggest port, to Kampala, the Ugandan capital.

Citadel, an Egyptian private-equity company with $8.7 billion in assets under management, owns 51 percent of RVR, which is mandated to manage about 2,000 kilometers (1,243 miles) of railway lines in Kenya and Uganda. Last week, RVR said freight volumes in the year to June increased to 1.61 million metric tons from 1.53 million tons a year earlier.

“The goal is to see that figure grow to 5 million tons per year by 2015,” Heikal said. “An efficient rail network could, in time, bring East African transport costs down by as much as 35 percent due to the operational and fuel efficiency of shipping by rail.”

Investment in the railway will include refurbishing the track, buying new wagons and locomotives and replacing information technology, Karim Sadek, Citadel’s managing director for east, central and southern Africa, said in the interview. The balance will be financed from new equity, existing shareholders and internally generated profits, Sadek said.

Capital Expenditure

“We are looking at a business plan that has roughly $287 million of capital expenditure,” Sadek said. In addition to the $164 million loan, “the balance comes from shareholders and internally generated profits,” he said.

The loan was provided by six development-finance institutions and Equity Bank Ltd. (EQBNK), Kenya’s biggest lender by market value. The African Development Bank is providing $40 million and KfW Bankengruppe $32 million. Other contributors include the International Finance Corp., Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV, Cordiant’s Infrastructure Crisis Fund, and the Belgian Investment Company for Developing Countries.

“IFC is the largest financier with a loan of $32 million, $10 million already disbursed,” the company said yesterday in an e-mailed response to questions. “An additional equity investment of $10 million is planned, making the total $42 million.”

TransCentury Ltd., based in Nairobi holds 34 percent and Bomi Holdings of Uganda 15 percent.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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