RIFT Valley Railways is confident it will retain its share market even with the launch of the standard gauge railway.
The company won a contract in 2006 for a 25-year concession, and is currently operating the 2,541.44-kilometre track, which runs from the shores of the Indian Ocean to Lake Victoria.
But the construction of the new railway, which will be completed in 2017, will not scare RVR according to a senior official.
The official said the new railway will spur competition.
He said RVR has made significant investments and is confident that it will have a very compelling customer proposition when the competition arrives.
The standard gauge railway line will be built according to Chinese railway design standards.
Transport Secretary Michael Kamau has said after the standard gauge is built, RVR will still be in business and will continue controlling the metre gauge.
"Many countries including Australia, Japan, New Zealand and South Africa operate both narrow and standard gauge systems simultaneously. The RVR will also be ready to operate on both," the official who asked not to be named said.
He said RVR is also expanding its fleet through ongoing wagon rehabilitation at the rate of 40 wagons per month.
The official said the company recently purchased 20 General Electric locomotives for Sh2.4 billion to build extra cargo-carrying capacity.
In the new railway deal, the Chinese contractor agreed to help facilitate a government-to-government arrangement, supported by concessional loans from China Exim Bank.
The Chinese bank agreed to fund 85 per cent of the Sh1.2 trillion rail project. A fuel levy of 1.5 percent on cost of all imports in expected to raise Sh15 billion in 2013-14. The construction, from Mombasa to Kigali, will be completed in five years.
The contractor, China Road and Bridge Construction, will also supply and commission some 56 locomotives, 1,620 wagons and 40 passenger coaches; conduct training and capacity on new employees;supply and install facilities such as signaling, communication for trains' control; and supply electricity and water to each station.
The contractor will also construct stations, workshops and freight exchange depots. Most stations and depots are dilapidated.
The RVR is a portfolio company of Citadel Capital, the leading investment company in Africa and the Middle East. Its lenders include the African Development Bank, the International Finance Corporation, KfW Entwicklungsbank (The German Development Bank, KfW), FMO (the Dutch Development Bank), Kenya's Equity Bank, the ICF Debt Pool, and the Belgian Investment Company for Developing Countries.
The government has defended the new railway deal.
It has said the existing metre gauge railway will not help the country achieve Vision 2030.
The tender for the construction of the 609-kilometre standard gauge railway from Mombasa to Malaba was launched by President Uhuru Kenyatta in November amid concerns that the deal was not transparent, competitive and cost-effective.