Kenya: Investors inject Sh63bn to save RVR deal

[John Ashworth]

Investors inject Sh63bn to save RVR deal

By Jaindi Kisero
Posted Sunday, February 7 2010 at 21:00
Daily Nation

[NB: KES 63 billion = approx USD 0.8 billion]

In Summary

* Sh156m paid to Kenya and Sh78m to Uganda in late concession fees

Shareholders of the troubled Rift Valley Railways – the company running the Kenya-Uganda rail line – have injected about Sh63 billion into the firm.

Details of the capital injection are still scanty, but the Nation has confirmed that all the shareholders took part in a rights issue approved by the company’s board last October. Only Babcock Brown of Australia was yet to comply.

The Nation also learnt that RVR had by last Friday paid the governments of Kenya and Uganda Sh156 million ($2 million) and Sh78 million ($1 million) in outstanding concession fees.

The payment was the latest sign of the shareholders’ determination to save the now wobbly 25-year concession.

Under the rights issue, the shareholders must put in another $10 million (Sh750 million) by March 10.

According to the board’s plan, proceeds from this second capital call will be spent in maintenance of the company’s locomotives.

There were fears that plans by shareholders to inject capital would not succeed after one of the investors, the influential TransCentury group, filed an injunction in the High Court of Mauritius seeking ex parte orders to block the rights issue.

But, the court declined to grant TransCentury the injunction, instead ordering inter-party hearings that are scheduled to start this week.

With fears that it risked its shares being diluted, TransCentury last week moved quickly and put in money to pay for their rights.

It now remains to be seen how the $10 million capital injection will mean to the battle for control of RVR – pitting TransCentury and wealthy Egyptian equity fund, Citadel Capital Ltd.

The fight by the Egyptians to gain a foothold into the boardroom of RVR has precipitated an explosive tussle that has divided shareholders of the company.

Face stern action

On paper, the single largest of last week’s capital injection – about $3.2 million – was by Sheltam Rail Company of South Africa, the biggest shareholder with a 35 per cent stake in RVR.

However, it is an open secret that the money came from the Egyptians who recently purchased 49 per cent of Sheltam Rail from South African Roy Puffet in a deal whose legality has been challenged by the government of Kenya but which has been endorsed by Kampala.

The controversy is expected to move to a decisive stage on Monday during a meeting of the Joint Railway Commission, the inter- ministerial committee of representatives of Uganda and Kenya, which has been dealing with the troubled concession.

Last month, the joint commission issued an ultimatum to the wrangling shareholders to sign an agreement and move their interests into a new outfit, the Kenya Uganda Railways Holdings Ltd, within 14 days or face stern action.

Pundits predicted that a subsequent joint commission meeting in Kampala would terminate the concession.

But as it turned out, the Kampala meeting did not cancel the concession. After hours of deliberations, the commission put out a lengthy statement giving the shareholders more time to consider either migrating their interests into KURH or any other options.

Monday’s meeting of the joint commission will take place under different circumstances because RVR has paid up the concession fees.

As long as the RVR shareholders were in default of paying concession fees, the two governments had the powers to give ultimatums and threats of cancellation.

But having paid the financial defaults under the concession agreement, the two governments cannot do much short of renationalising the railways.

Meanwhile, influential Uganda corporate executive Charles Mbire, is set to take up a 15 per cent stake in the company.

According to documents seen by the Nation, Mr Mbire has been invited by the shareholders of Rift Valley Railways to buy the shares.

Apparently, the concession agreement was amended to allow the participation of Uganda into shareholding of RVR.

Investor appetite for RVR is soaring following the realisation that the railway line will be the main transport corridor for crude oil exports from Uganda’s nascent oil industry.

The entry of the Ugandan will have major implications for the battle between TransCentury and Citadel because contrary to the position taken by Kenya, Kampala has embraced the Egyptians.

[John Ashworth]

Plan to put rail firm on track under review

By JEFF OTIENO
Daily Nation
Posted Monday, February 8 2010 at 20:00

In Summary

* Kenya and Uganda to assess proposals by shareholders on running of RVR

A team of experts from Kenya and Uganda is reviewing various proposals on revamping the troubled Rift Valley Railways.

The company has been given a 25-year concession to run the Kenya-Uganda railway but has been experiencing boardroom wrangles and a financial crisis.

The proposals being reviewed have been presented to both countries by shareholders of RVR, the Joint Railway Commission said on Monday.

After examining the documents, the experts are expected compile a final report in the next two weeks.

Speaking on behalf of the commission, at Transport Permanent Secretary, Cyrus Njiru, said the governments of Kenya and Uganda will also hold consultations with the shareholders on various issues affecting the company.

“The shareholders presented several proposals on how to manage the company which we will be reviewing before coming up with a final decision,” said Mr Njiru, who is also the co-chair of the joint commission.

However, the joint commission was tight-lipped on the proposals the shareholders had presented.

Mr Njiru who was accompanied by Uganda’s deputy secretary in the Ministry of Finance, Keith Muhakanizi, said both governments have neither accepted nor rejected the entry of Citadel into the concession.

Citadel Capital – the Cairo-based private equity firm – is interested in the control of the 900-kilometre railway line between Mombasa and Kampala.

The wealthy Egyptians have a 49 per cent majority shareholding in Sheltam Rail Company of South Africa which controls 35 per cent of RVR.

Mr Muhakanizi also denied reports that Uganda was planning to exit the concession.

Rift Valley Railways has been running on losses since its launch in 2006. Last year, the company announced it had lost $17.5 million, blaming it on stiff competition from road and air transport.