Egyptquotes Citadel to buy 35% of east African railway
Egypt - Corporate - 03-09-2010

Egyptquotes Citadel Capital has a conditional go-ahead to acquire all of South African company Sheltam Closequotes 35% stake in an east African railway concession, a director said on 8 March 2010. Citadel has already acquired a 17.5% stake in Rift Valley Railways, which won a 25 year concession to run the Kenyan and Ugandan railways jointly, after buying a 49% stake in Sheltam, the operatorquotes lead investor. The two have now agreed on Citadel taking 51% of Sheltam to give it Sheltamquotes full 35% stake in RVR, once the deal has the greenlight from lenders to RVR including the International Finance Corporation, said Karim Sadek, a managing director at Citadel Capital. quoteIt is done, we are not going to renegotiate, (it is) signed, sealed, finished. The only reason we are not there yet is that we are waiting for that consent,quote he said. Another shareholder in RVR, TransCentury, has complained about the deal and says it will seek legal redress. Other partners in the consortium are Mirambo Holdings and Primefuels Ltd, Centum Investment Ltd and Babcock & Brown of Australia. quoteWe are always looking for an additional stake, even now. If any of the shareholders want to drop out we are more than happy to cover them.quote

The shareholders in RVR completed a USD 10m cash call at the end of January, Sadek said. A second USD 10m will be raised by the end of March 2010. The money raised in January will mostly go towards paying overdue concession fees but the second tranche of cash will partly be used to invest in track renovation work and new engines, he said. The USD 20m is part of the USD 50m the company needs to raise in a restructuring process to get trains moving. Kenya demanded in 2009 that the concession deal be renegotiated to change the shareholding and leadership structure in order to inject fresh capital into the linequotes operations. Sadek said most of the shareholders were agreed on a new structure whereby RVR is the lead investor in a yet to be formed Kenya Uganda Railway Holdings that will own the concession. Once the restructuring deal is signed the shareholders will be required to raise USD 50m within 15 months. They would have USD 20m of it by the end March, Sadek said. According to Citadel Capitalquotes estimates, the line needs only USD 150m of investment to have an efficient and reliable service. quoteThey donquotet have to go spending loads on marketing, they do not need to cut prices because there is so much cargo in Mombasa that even operating on (modern) standards will not be able to carry,quote he said. quoteWe are not talking about bns.quote

Some USD 54m is already available in a facility that has not been drawn on. IFC and Germanyquotes state banking group KfW made the loan available at the start of the concession but required some USD 50m of equity from RVR. Sadek said his company hopes that by Q1 of 2011 the service between Mombasa and Nairobi will be fully recovered and that by end of 2011 the entire route to Kampala will be back in full operation. Businesses are frustrated that while rail transport is cheaper than road, most cargo has to be trucked overland through Kenya, where corruption and poor roads delay deliveries. quoteIt is a shame what has happened to this company,quote Sadek said. quoteThis is a railway that does not have to fight to get a market share. All it needs to do is to run a train without derailing. Not too much to ask. So I understand completely the frustrations especially Ugandaquotes, which is landlocked.quote Plans by Kenya to build a new standard gauge railway will not pose much competition as it would cost a USD 4bn compared with the USD 150m RVR needs to get its operations off the ground, Sadek said.


Source: Reuters