Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Press Releases: Restructuring of Rift Valley Railways Complete

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Kenya: Press Releases: Restructuring of Rift Valley Railways Complete

Monday, 30 August 2010

Citadel Capital (CCAP.CA on the Egyptian Stock Exchange), the leading private equity firm in Africa and the Middle East with USD8.3bn in investments under control, confirmed today that its shareholding in Rift Valley Railways International (RVRI), the entity that owns 100% of each of the Kenya and Uganda concession companies, has risen to 51% through its subsidiary Ambience Ventures Ltd as it completed the restructuring first announced in March 2010.

The development gives Citadel Capital management control of RVRI, which has a 21-year concession to operate a century-old rail line with some 2,352 kilometres of track linking the Indian Ocean port of Mombasa in Kenya and through Kenya and Uganda, including the capital city of Kampala.

RVRI’s other shareholders include Trans-Century Limited, a Kenya-based investment company (whose shareholding rose to 34% today from 20% pre-transaction), and Bomi Holdings Ltd a Ugandan private investor (holding 15%).

“We look forward to working with our partners to build the reliable, efficient and safe national rail system Kenyans and Ugandans truly deserve,” said Karim Sadek, Managing Director at Citadel Capital. “Citadel Capital and its partners in RVRI are grateful for the support not just of the governments of Kenya and Uganda, but also of the lenders, clients, suppliers and above all its dedicated management and staff.”

Citadel Capital and the other RVRI shareholders are now finalizing a sustainable business and investment plan that includes a USD287m capital expenditure programme to rehabilitate infrastructure and rolling stock. The firm will also work to strengthen RVRI’s management team and is in advanced stages of negotiation with a leading global rail consultant to bring in international best practices.

RVRI will also continue discussions with the governments of Kenya and Uganda on the revitalization of the concession across its core African footprint. Citadel Capital sees transport costs being a major impediment to economic growth: High costs and systemic inefficiency greatly reduce the competitiveness of African businesses, as East African Community reports clearly underline.

Transport prices in East Africa are among the highest in the world, studies find, with transport to Uganda from Kenya presently costing more than USD0.13 per ton/kilometre (the standard industry metric) due in large part to heavy reliance on trucking. A lack of operating capacity has resulted in rail capturing less than 10% of East Africa’s transport market.
An efficient rail network could, in time, bring East African transport costs down by as much as 35% due to the operational and fuel efficiency of shipping by rail. RVRI today hauls just over 1m tons per annum out of an existing market of 16n tons being handled in Mombasa Port. RVRI’s goal is to see that figure grow to 5m tons per year by 2015.

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