9 August 2017

Kenya: RVR Lenders Stare at U.S.$164 Million in Losses

Lenders could be some of the major losers in the termination of the Rift Valley Railways concession as a joint takeover committee formed to oversee the hand back of operations and conceded assets to Kenya Railways begins its work.

Kenya Railways has said it was not party to financing agreements signed between RVR and local and international lenders, meaning the government has no intentions of settling RVR's debts amounting to $164 million.

"RVR's lenders cannot claim from the government because the financing agreements with RVR were private. So far, we have not received any claims and, if they come we will challenge them," said KR managing director Atanas Maina.

He added that while in the past 11 years RVR shareholders have entered into financing agreements with various financial institutions, the deals did not involve concessioned assets.

Among the lenders that RVR owes millions of dollars are the International Finance Corporation ($22 million), Dutch Development Bank ($20 million) and Belgian Investment Company for Developing Countries ($10 million).

Others are German Development Bank ($32 million), Infrastructure Crisis Facility ($20 million), African Development Bank ($40 million) and Equity Bank ($20 million).

RVR chief executive Isaiah Okoth said that while the company is cognisant of the massive liabilities, the termination of the concession leaves the mandate of managing the liabilities to the transition committee.

"The lenders have been aware of every development and now it is the work of the transition committee to look at how to manage the liabilities," he said.

Handover

The joint committee has 30 days to oversee the handover of operations and conceded assets back to KR.

Kenya decided to terminate the 25-year concession after getting increasingly frustrated by RVR's perennial defaulting on three key terms of the concession agreement, namely standard of maintenance of conceded assets, freight volume target and payment of concession fees.

"It is hereby ordered by consent: That the concession agreement dated January 23, 2006 be and is hereby terminated today July 31, 2017," said a High Court ruling that ultimately put to an end a privatisation adventure that turned to a horror story.

Uganda has also embarked on the process of terminating the RVR concession after the government turned down a proposal by the company to "run freight haulage on the Uganda side."

Mr Okoth maintains operations in Uganda are still intact. The company will in early September know its fate.

The Kenyan and Ugandan governments are also set to lose significantly.

To start with, by the time KR decided to pull the plug in January this year, RVR owed the Kenyan government $4.1 million in concession fees and $20 million for life expired assets and life expired wagons.

In specific terms, while RVR took stock of assets comprising a track length of 2,350km (1,920 km in Kenya and 431km in Uganda), 219 locomotives and about 7,500 wagons and three water ferries in 2006, the majority of these assets will be handed back as dead stock.

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