Egyptian firm injects $24m into Rift Valley Railways

Saturday July 12 2014

By Peterson Thiong’o The EastAfrican

Egyptian firm Qalaa Holdings has injected $24 million in fresh capital into Rift Valley Railways (RVR) as it moves to strengthen the company’s balance sheet to support its ongoing projects.

The announcement came days after Qalaa said the subsidiary, which operates the Mombasa-Kampala railway, had exhausted the $164 million credit line extended by a consortium of local and international lenders.

The company took the last $70 million of the credit this week.

“A portion of the proceeds from the drawdown will be used to finance ongoing capex projects including the rehabilitation of the 366 kilometres of the Nairobi-Kampala section of the line, as well as refurbish a further 1,400 wagons in the existing fleet,” said Qalaa Holdings managing director Karim Sadek.

The company also plans to spend part of the cash to buy 35 locomotives, 1,400 wagons, 300 containers and 350 fuel-ferrying tank wagons.

The injection and loan will form part of the capex $100 million that the company plans to spend on upgrading and acquiring new equipment. RVR said it plans to source the balance through internal and shareholder funds.

“RVR has invested $120 million in revitalising the railway, surpassing the investment requirement threefold, only midway through the investment period.  We expect to spend an additional $100 million this year,” said Darlan De David, the RVR chief executive.

While announcing its recent exit from RVR, Kenyan investment group TransCentury had cited delay in accessing the $70 million loan as part of the reason for selling its stake saying it had affected RVR’s capex plans and hence its ability to improve shareholder value.

The Kenyan and Uganda governments have previously voiced their concerns about RVR’s performance but Qalaa says the business performance is better than the targets set by the two countries. The governments argued that the amount of cargo transported through by RVR was below the targeted amount.

The capital injection by Qalaa came in the same week that saw Tanzania and Zambia pledge to pump $80 million into the Tazara railway line, that connects the two countries.

“$9.20 million is to be disbursed immediately to cater for two months of the outstanding employees’ salary arrears and some working capital,” said Tazara in a statement.

In April of this year Africa Railways, the company that Qalaa used to acquire its stake in RVR, acquired an additional 34 per cent stake in RVR from TransCentury Ltd, a Nairobi-listed company, raising its total ownership stake to 85 per cent with the remaining 15 per cent being held by Uganda’s Bomi holdings.