Biggest RVR investor confirms plans to sell stake as the new railway nears completion

Qalaa Holdings, the biggest investor in Rift Valley Railways is looking for a buyer of its 100 per cent stake as it races to exit the troubled railway before the launch of Kenya’s new railway line.

Qalaa Holdings confirmed Thursday that it was in talks with interested parties to sell 100 per cent of its stake in Rift Valley Railways. According to the statement in Arabic, the Egyptian firm said it will announce the outcome of the negotiations when completed but did not disclose how many investors have shown interest in the company and how much it is willing to sell its stake in the company.

But it is understood that at least four companies among them Armstrong & Duncan, a project management firm, Rubix Energy and Shreeji Enterprise have come together angling to buy the stake estimated to be more than Sh10 billion. Qalaa owns 85 per cent in the concession.

The planned sale comes barely two years after Kenyan equity firm TransCentury sold its stake in the line. Qalaa Holdings, formerly known as Citadel Capital of Egypt, signed an agreement to manage the Kenya – Uganda railway line in 2010.

The firm then started fundraising to rehabilitate the old line, initiatives that saw it pump billions of shillings into the Rift Valley Railway. “With the restructure, came the aggressive capital raising exercise led by lead investors, Qalaa Holdings. RVR was able to close the fund two years later with $287million commitment to finance the first five-year of the turnaround programme,” RVR said in an earlier statement.

The move comes at a time when Kenya is in the homestretch of competing the first phase of the Standard Gauge Railway (SGR), between Mombasa and Nairobi.

Compensate RVR

The SGR, which is expected to be launched in June this year promises to run the old railway line out of business given the speed and the governments support. However, officials of RVR maintain that their business is protected from any hits from SGR, including competition throughout the concession term.

The Government has remained silent on how it will deal with the RVR concession even as June approaches given the concession terms. But it is expected that the Government may be forced to compensate RVR for the remaining term of the concession or guarantee the old line a specific share of the cargo business.

This comes at a time when RVR has been hit by allegations of fraud. A report by the World Bank suggests that top managers of RVR defrauded lenders and the Kenya Revenue Authority (KRA) millions of shillings and left the company in a worse financial position.

The World Bank’s ethics audit report alleges RVR executives could have bribed public officials, manipulated accounts and created convoluted ownership and operational structures with the aim of defrauding lenders, including the International Finance Corporation (IFC).