RVR to get Sh6.6 capital injection

September 12, 2011
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, NAIROBI, Kenya, Sep 12 – Rift Valley Railways (RVR) is set to benefit from a capital increase amounting to Sh6.6 billion ($70 million) made to Africa Railways Limited, which is a subsidiary of its major shareholder Citadel Capital.

Following the capital increase, Africa Railways, Citadel’s platform for investments in the African rail transportation sector now has a total paid-in capital of $110 million.

“Africa Railways will use the proceeds from the capital raising to fund portfolio company Rift Valley Railways (RVR), which has a 25-year concession to operate a century-old rail line,” commented the company in a statement on Monday.

The funds were sourced from the International Finance Corporation (IFC) African, Latin American and Caribbean Fund, which contributed $20.2 million; Dutch development bank FMO gave out $15 million while German development finance institution DEG contributed $14 million.

Others were FISEA, a vehicle dedicated to investment in Sub-Saharan Africa owned by France’s Agence Française de Développement and the International Finance Corporation which contributed $10.7 million and U$ 10.1 million respectively.

The entire Sh6.6 billion will be injected into RVR where Citadel holds a 51 percent stake.

Investment firm TransCentury has a 34 percent shareholding while the remainder is held by Uganda’s Bomi Holdings.

It is expected that with this investment, RVR management will be able to turnaround the 2,352 kilometres of rail service through improvements of passenger and cargo services.

“The proceeds from this capital increase will fuel Africa Railways’ ability as lead shareholder to fund RVR as the latter executes a five-year, multi-point rehabilitation program that will see RVR make a quantum leap in operating standards,” enthused Citadel Capital Managing Director Karim Sadek.

In August this year, the concessionaire received a loan of $164 million from six international financial institutions and Equity Bank to fund a five-year capital expenditure program that includes purchase of new locomotives, refurbishing the track, and installing new information technology systems.

Citadel Capital Chairman and Founder Ahmed Heikal believes that their success at attracting repeat investments stems from a proven track record ‘structuring compelling investment opportunities in very promising sectors of the African economy.’

From some of their equity investors such as FMO, RVR can also anticipate to benefit from their technical assistance.

“We are extremely happy to contribute to the completion of this important railway project. In addition, FMO will make available capacity development funds to train RVR staff in occupational health and safety management, environmental management and quality management,” disclosed FMO’s Director Private Equity Yvonne Bakkum.

Through this training program, she said they would assist RVR to become a sustainable company ‘working in accordance with international best practices.’

Some of the other partners such as PROPARCO and the International Financial Corporation observed that with such substantial finances going to RVR, Uganda and Kenya can begin to see and fell tangible results.

In addition, the two countries can look forward to lower transportation costs and other added benefits such as increased revenues as well as stimulation of commercial exchanges.

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