Nairobi/Kampala, 02 August 2011 --- Following today’s signature of loan agreements worth USD164m with a consortium of lenders, Rift Valley Railways has announced plans to deliver a targeted USD287m capital expenditure programme to increase volumes and revenues significantly over the next five years and transform the Kenya-Uganda rail concession into a functioning, reliable service for the benefit of the East African people.
Group CEO, Brown Ondego, confirmed the five-year turnaround plan during the signing ceremony, saying it was structured as a series of loan agreements extended to the concessionaire by a consortium of lenders including International Finance Corporation (IFC) (USD22m), African Development Bank (AfDB) (USD40m), Germany’s KfW Bankengruppe (USD32m), Dutch development bank FMO (USD20m), the ICF Debt Pool (USD20m), the Belgian Investment Company for Developing Countries (BIO) (USD10m) and leading Kenyan financier Equity Bank (USD20m).
Welcoming them on board, he commented: “The commitment of each of our lenders – both to East Africa and to RVR - is deeply appreciated. They are true partners and we look forward to a strong long-term working relationship with each of them as we implement the turnaround programme. As a management team, we have set ourselves clear objectives to execute the capital expenditure programme on schedule, with an unwavering focus on delivering tangible results for our customers.”
In his capacity as the President of the African Development Bank, Donald Kaberuka said: “The Rift Valley Railways project fits well with the African Development Bank’s overarching focus on infrastructure development, especially with private participation efforts to facilitate regional integration and access to land-locked countries. Improving the Kenya-Uganda railway network will give a strong boost to regional trade, which is one of the key priority areas in the bank’s regional integration strategy.”
Beyond the USD164m loan package, the USD287m capex program will be completed through equity injections totaling USD82m from the three shareholders, Citadel Capital, TransCentury and Bomi Holdings, as well as free cash flow. Additionally, the plan envisages reinvestment of all profits generated in the first five years into further capacity enhancement.
The plan is to invest a major proportion in increasing the availability of locomotives by refurbishing existing assets, implementing a loco fleet reliability program, procuring loco and wagon tools for the workshop and investing in fuel points and maintenance. Capital will also be invested to increase wagon capacity and reliability, both through the refurbishment of existing assets, including a specific wagon tyres programme, and through new purchases.
A key pillar of the capex programme is the improvement of the track in order to be able to meet market demand through investment in new loops, infrastructure and increased reliability on the permanent way.
Ondego added that the company will also invest in ICT projects designed to reduce risks and accidents, to enable the detection of operational gaps and to improve planning by integrating operations through the implementation of an Enterprise Resource Planning (ERP) system. The company will also implement a GPS-based operations control system to bring RVR operating technology platforms into line with international standards. Finally, a series of strategic turnaround projects have been included as part of the capex programme, designed to focus on specific areas to drive growth and manage costs more effectively.
Hailing the strategic role of rail in driving regional development, Ondego noted: “By moving goods and people across countries and beyond borders by rail, we can free up our congested roads, offer more cost-effective transport solutions, protect the environment from pollution and save our Governments hundreds of millions of shillings in continuously repairing roads eroded by overloaded trucks and increase port capacity. With the right shareholders in place, strong support from government, a talented management team, an experienced technical partner in America Latina Logistica (ALL), a refreshed business strategy and now enabled by adequate capital, RVR will focus on improving its services for the benefit of customers across East Africa, focusing on driving efficiency and reliability whilst aggressively increasing volumes three-fold over the next five years. I should point out that this is a marathon, not a sprint - but East Africans are world famous for breaking records over long distances and at RVR we are confident that we are now in a position to deliver the change our customers want and need.”
In a joint statement, the Ministers from Kenya and Uganda commented: “The two governments are happy to report that RVR has shown commitment in meeting its obligations and improving rail services in the two countries. RVR has presented several investment plans for track maintenance, rehabilitation of locomotives and wagons for consideration by the Governments of Kenya and Uganda. It is expected that following the signing of the loan agreements between RVR and the lenders, finances will be released expeditiously for the implementation of these plans.”
The financing package announcement comes days after RVR posted its first positive EBITDA since the shareholding was re-structured in 2009, following full year reports demonstrating improved operational performance. Volumes in Kenya and Uganda on both the freight and passenger sides were up significantly from the previous year and accidents and turnaround times for the trains on the Mombasa-Embakasi-Mombasa route have dropped significantly.
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