RVR owners fail to strike deal in Kampala

Citadel Capital on Tuesday stalled the planned signing of a new shareholder agreement for the Kenya-Uganda railway concession with fresh demand for access to rail lines leading to Ugandan oil fields.

The Egyptian private equity firm, which owns 51 per cent of RVR, is said to have sought amendment of the revised shareholder agreement to include rail lines running to Kasese district that the Ugandan government rejected.
The 200 kilometre Kampala-Kasese line is the main gateway to Uganda’s copper mines and the recently discovered oil deposits.

The line was not part of the November 2006 concession agreement, but Citadel wanted it included in the amended agreement in the hope of reaping out-sized returns that will come from transporting commodities from the mineral rich Kasese region.

The new demand is said to have led to the collapse of a meeting in Kampala—between the shareholders and representatives from the Kenyan and Ugandan government—to approve a revised concession agreement, which was meant to pave way for cash injection to RVR to rescue it from collapse.

“Citadel wants the branch lines to be included but the Government of Uganda wants to keep the lines to its oil fields. We were all set to go to Kampala and sign the deeds of amendment before that last minute communication,” said a Kenyan senior government official who was meant to attend the meeting.

He added Uganda officials said they had to consult President Museveni over the issue— making the timing of the crucial meeting uncertain. The disagreement between Uganda and Citadel is threatening the turnaround of Rift Valley Railways, which since being granted the concession three years ago, has failed to live up to the expectation of Kenya and Uganda governments.

RVR won a 25-year concession to run the 1,200 kilometre Kenya-Uganda Railway in 2006.
The meetings come after the shareholders agreed to resolve a dispute pitting Kenya’s TransCentury and Cidatel Capital for a position of anchor shareholder in the rail firm after the Egyptian firm acquired a 17.5 per cent stake in November when it bought 49 per cent of Sheltam, the operator’s lead investor.

Under the revised shareholder agreement, Cidatel capital is the lead investor with 51 per cent stake while TransCentury has the board’s chair and a 34 per cent stake with the remaining 15 per cent being held by Ugandan investors.

Other shareholders left the firm, including listed investment company Centum Ltd, which had 10 per cent holding, Tanzania’s Mirambo Holdings (15 per cent), Prime Fuels of Kenya (15 per cent) and Babcock Investments Holdings of Australia (10 per cent).
Under the amended concession agreement which the two governments have drafted, the investors will now be subjected to stricter standards of proof in terms of demonstrating that they have indeed pumped in money in the concession.

The Kampala meeting was set to pave way for injection of about $40 million (Sh3.2 billion) by the end of year by the shareholders. The money is part of a $250 million (Sh20 billion) five-year cash injection plan.