CAIRO: Africa Railways, a platform capital of Cairo-based private equity firm Citadel Capital, announced today that its portfolio company Rift Valley Railway (RVR) of Kenya and Uganda acquired $164 million in financing.
Six global development finance institutions and a Kenyan bank agreed to finance the company with a five-year capital expenditure package to “rehabilitate infrastructure and rolling stock,” Africa Railways announced in a statement.
The funds will back a $287 million capex program that will help accelerate the pace at which RVR rehabilitates its infrastructure.
“This financing package is the backbone of an ambitious five-year, multi-point rehabilitation program that will see RVR make a quantum leap in operating standards as it addresses safety issues, completes back-due maintenance to improve reliability and hauling capacity, simultaneously improves service to passengers and corporations, and captures long-term gains through substantial investments in information technology,” said Karim Sadek, managing director at Citadel Capital.
Moreover, the project’s shareholders will inject another $82 million in equity to back up the program “with the balance of the funding being contributed by free cash flow,” the company stated.
As part of the package, the African Development Bank (AfDB) provided $40 million for the railway, along with the International Finance Corporation with $22 million, and KfW Entwicklungsbank, a German Development Bank, which provided $32 million.
Donald Kaberuka, president of AfDB said that the project, which fits the bank’s visions, would also enhance future business for the region.
“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,” he noted.
“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.”
Furthermore, the Dutch development bank, FMO provided $20 million from the bulk amount, Kenya’s Equity Bank financed with $20 million, the ICF Debt Pool provided $20 million, while the Belgian Investment Company for Developing Countries brought forth $10 million.
According to the company, the announcement of the package came just one week after RVR reported its first monthly earnings before interest, taxes, depreciation and amortization (EBITDA) in June 2011, which were $0.7 million, making it the largest monthly EBITDA figure since the company was founded.
“Our rehabilitation program, which we kick started in November 2010, has already delivered impressive early results,” said Brown Ondego, Group CEO of RVR in a statement.
“Net ton kilometers were up 9 percent in the first half of 2011 compared with the same period last year, while turnaround times — a key measure of asset utilization — on the strategic Mombasa-Kampala route dropped 27 percent in the same period; year-on-year, we have also seen a 30 percent drop in accidents per train kilometer.”
Quicker turnaround times have also allowed RVR boost the volume of their cargo by eight percent over the past two quarters as well as increase passenger services and better synchronize passenger and freight schedules.
The railway has also introduced the new route from Nairobi CBD to Athi River, which also stops at Kitengela.
According to the company statement, both Kenya and Uganda’s ministers welcome the results of RVR, adding that the railway “has shown commitment in meetings its obligations and improving rail services in the two countries.”
RVR currently has a 25-year concession to operate a century-old rail line with about 2,352 kilometers of tracks that link the interiors of Kenya and Uganda to the Indian Ocean port of Mombasa in Kenya, as well as the capital city of Kampala.
Africa Railways pointed out that studies show transport prices in East Africa are some of the highest in the world. An effective rail network, according to the company, could bring East African transport costs down by as much as 35 percent “due to the operational and fuel efficiency of shipping by rail.”
Citadel Capital SAE, which is an Egyptian company, is currently Africa’s largest private equity firm. The company has $8.7 billion in investments in about 15 various industries in 14 countries.
Citadel recently announced their plans to increase investments in East Africa after their “successful” ventures in Kenya and Uganda.
The firm’s investments will be in Kenya, Tanzania, Uganda, and Sudan.
