Uganda: branch lines included in Citadel RVR deal

[John Ashworth]

UGANDA SIGNS BRANCHLINES INTO DEAL

Posted on 30 August 2010 by Railways Africa Editor

On 25 August, Ugandan finance minister Syda Bbumba signed a revised agreement on the Kenya-Uganda railway concession, the Daily Monitor reports:

“The agreement ends a bitter continental fight over the network, which pitted Ugandan and Kenyan businessmen jostling with Egyptian investors to replace the South African firm that originally won the 25-year concession over the
railway line. ‘This has been a prolonged process and any delays have been caused by the need to have a consultative process within government as well as with our counterparts in the Kenyan government,’ Jim Mugunga, spokesman for the privatisation unit in the finance ministry told Daily Monitor yesterday [25 August].

“Kenyan transport minister Amos Kimunya signed on behalf of the Kenyan government to bring closure to the process. The signing of the concession amendment agreement is set to unlock more than Shs300 billion ($US150million) in planned investment into the railway network which is badly in need of new investment and repairs.

“The signing also officially recognises Citadel Capital, the Egyptian private equity firm as 51% owner of Rift Valley Railways (RVR), the company that owns the concession over the railway. The other shareholders are Kenya’s TransCentury private equity firm with 34% while businessman Charles Mbiire owns a 15% stake set aside for Ugandan investors.

“Citadel had earlier pulled out of signing the agreement after the Tororo-Packwach and Busoga loop had been kept out of the railway concession but sources told this newspaper that the two segments of the railway, which are seen as key components of future growth for the rail network, were included in the final concession agreement.

“The revised agreement also introduces a more stringent agreement to monitor the concession and eliminate delays and also mandates the shareholders of RVR to bring in a company with technical expertise to help run the railway
network. Sources familiar with the deal say a South American railway operator has already been identified as the technical partner, pending due-diligence by the two governments.”

Years of political upheaval, economic decline and the ending of copper mining led to a fall-off in the rail business and the two branchlines soon fell into disrepair. They have been out of use for years.

RVR will now control 2,352km, nearly double the original network of 1,200km in the initial November 2006 contract. The two main international financial institutions supporting the concession, the International Financial Corporation (IFC) of the World Bank and KfW of Germany, have thrown their weight behind the new agreement, in terms of which Citadel Capital will steer RVR over the next 21 years.

Details of the agreement remain scanty but it is understood that Uganda has allowed the private operators to rehabilitate the sections of the network for a period of two years, with possibility for extension if certain conditions are met.

Plans are also under way to extend the line some 200km between Kasese and the Hoima district, where Uganda plans to build a 50,000 tonnes capacity refinery to process its new oil finds.

Uganda struck commercial hydrocarbon deposits in western Uganda in 2006 and reserves are estimated at 2 billion barrels. Analysts say the country will have to construct a pipeline or use rail to ship the petroleum from the remote region.