The Kenya-Uganda railway operator has secured asset financing deal with Standard Bank of South Africa and CFC Stanbic Bank to finance the acquisition of 20 locomotives
Africa Railways, a core subsidiary of Egypt-based Qalaa Holdings (CCAP.CA), announced that its regional railway operator, Rift Valley Railways (RVR) secured a $20 million (KES 1.8 billion) asset financing deal with Standard Bank of South Africa and CFC Stanbic Bank towards the acquisition of the 20 locomotives from the USA. The new locomotives will allow RVR to significantly ramp up freight volumes, it said.
Standard Bank will cover 80 percent of the cost of the locomotives. According to the Bank, rail asset deals of this scale remain relatively rare in East Africa.
“Asset backed financing is premised on projected cash flows of the asset being financed. Our due diligence on RVR gave us confidence that this investment proposal will indeed generate the revenue streams required to service the loan,” said Kwame Parker, Head of Power and Infrastructure East Africa for Standard Bank.
“We view RVR as an ongoing success story,” said Qalaa Holdings Managing Director, Karim Sadek. “Securing a commercial financing deal of this nature is a vote of confidence in the turnaround that we have been implementing alongside the RVR management and our local partners for the past two years.”
“Insufficient locomotive power is the single biggest obstacle preventing a step change in the amount of volumes we transport,” said RVR CEO, Carlos Andrade. “This new financing not only alleviates the bottleneck but is also a vote of confidence by a major international lender in our operations.”
The first three of the 20 locomotives that RVR has acquired arrived in Mombasa in early September with full delivery expected by May of next year. When combined with the locomotives that are being rehabilitated in the rail operator’s Nairobi workshop the trains will double RVR’s mainline locomotive fleet, substantially increasing its freight haulage capacity in Kenya and Uganda.
Ongoing wagon rehabilitation in Nairobi and Kampala is expected to bring RVR’s total number of wagons to 2,400.
In April 2014 Africa Railways acquired an additional 34 per cent stake in RVR from Transcentury Limited, a Nairobi-listed infrastructure company, raising its total ownership stake to 85 per cent with the remaining 15 per cent being held by Bomi Holdings.