Country | Kenya / Uganda |
Sector | Transport |
Signing Date | August 2nd, 2011 |
Total Project Cost | $389M |
ICF Debt Pool Exposure | $20M |
IFI Exposure | $164M |
Rift Valley Railways (RVR) is the Kenya-Uganda concessionaire operating freight and passenger rail services in Kenya and Uganda on an exclusive basis. The company was founded in 2006 and has been granted a 25-year mandate to operate railway services on more than 2,000 kilometers of track linking the Indian Ocean port of Mombasa in Kenya with the interiors of both Kenya and Uganda, including Kampala.
The Project is to finance Rift Valley Railway’s investment plan. The Project expects to execute its strategy in a three-prong approach. Firstly, it will tackle the problem of derailments by replacing worn out rails on the 2,352 km track. Secondly, it will shift to refurbishing the locomotives. And thirdly, it will integrate an information technology network to ease the operation and cut down costs. It will also address maintenance of locomotives to improve reliability and enhance hauling capacity.
Total loan amount was $164M. Senior lenders included IFC ($22M), KfW ($32M), AfDB ($40M), FMO ($20M), Equity Bank ($20M), BIO ($10M) and ICF Debt Pool at $20M.
Proceeds will be used to fund part of a USD287 M five-year capital expenditure program to rehabilitate infrastructure and rolling stock. The RVR railway comprises 2,352 km of track and 7,300 items of rolling stock.
Transport prices in East Africa are among the highest in the world, studies find, with transport to Uganda from Kenya sometimes costing more than US$ 0.13 per ton/kilometer (the standard industry metric) due in large part to heavy reliance on trucking.
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.
A lack of operating capacity has resulted in rail capturing less than 10% of East Africa’s transport market. Increasing the efficiency of rail transportation networks is expected to have a direct impact on national productivity and thus GDP growth. The project requires a fraction of the investment it would cost to build a new railway. It is therefore a key developmental priority for the government and the IFIs.
There was limited commercial bank and capital market capacity for this transaction considering the long tenor and the mixed track record of past railway privatizations in Sub-Saharan Africa.
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