Brazilians inject new life into Kenya-Uganda railway

The coming of Brazil’s main construction firm, America Latina Logistica, presents Rift Valley Railways with the most practical solution, so far, in its efforts to rebuild the Kenya-Uganda railway line.

America Latina Logistica (ALL) has signed an agreement with Rift Valley Railways Investment (Pty) – the consortium in charge of the railway line - to offer technical support by bringing on board staff with a track record of undertaking even bigger assignments.

In signing up ALL, RVR has revived hopes of a possible return of train services to the country’s oil wells in the western region.

The rail lines from Kampala- Kasese and Kampala to Northern Uganda that had been removed from the concession have since been reinstated with the discovery of oil in those areas.

Brown Odengo, the Executive Chairman of RVR, said that in ALL, they have partnered with the best. “I can think of no better partner with whom to embark on this important and ambitious programme than ALL,” he said in a company statement.

ALL are not strangers in the region. The Brazilians earlier helped draw up a five-year investment plan for RVR, although that plan has now been largely changed.

ALL will be responsible for ensuring the efficiency and safety of the railway line by applying its technical knowhow as the largest independent provider of logistics services in South America, and managers of railway services in Brazil and Argentina.

The deal is expected to boost the private sector’s confidence in RVR. Constrained by limited operational funds, the future of RVR was the subject of intense criticism from Uganda and Kenya when the company failed to take off after close to five years since winning the bid.

However, with the coming on board of Citadel Capital, a private equity firm listed on the Egyptian Stock Exchange, RVR underwent a complete overhaul.

At first, Sheltam, the South African company that won the 21-year concession to manage the railway line, was forced to sell some of its stake to Citadel early this year before completely exiting the consortium a few months later.

With Citadel now controlling 51% of RVR, Citadel is working on a $287 million expenditure programme for the railway line.

RVR appeared to have covered any risks that would have come out of the partnership with ALL, by pegging any compensation that the Brazilians might ask for to their work on the rails. According to the statement, “the agreement is structured so that ALL’s compensation is directly linked to specific operational and financial goals at RVRI.”

According to plans, RVR is expected to execute its strategy in a three-prong approach. First, RVR will replace the worn out rails on the 2,352 kilometre track. RVR is said to be finalizing its purchase orders of the rails.

After that, RVR will shift to refurbishing the locomotives. And third, the company will integrate an information technology network to ease the operation and cut down on costs.

Jim Mugunga, the spokesman of the Privatisation Unit, the body in charge of divesting government entities, said RVR’s strategy to turn around the railway line is satisfactory.

The company recently announced that after the completion of the railway line, transport costs in East Africa, presumed to be one of the highest in the world, could fall by about 35%. According to Citadel, transport to Uganda from Kenya presently costs more than $0.13 per ton/kilometre due, in large part, to heavy reliance on roads.

source: Observer

Brazil offers to lend $11.8 bln for high-speed train

* State bank BNDES to fund 60 pct of total investment
* Winner of bid could pay 7 pct annually for loan
* Bullet train to link Sao Paulo and Rio de Janeiro

Brazil's national development bank offered on Mondayto lend up to 19.98 billion reais ($11.8 billion) to build a high-speed passenger railway linking the country's two biggest cities, underscoring the need for massive government guarantees for the project.

The 30-year loan will pay interest of 6 percent plus another percentage point in fees related to credit risk, state lender BNDES said in a statement. Borrowers will only start paying the loan six months after the expected start of the train service between Sao Paulo and Rio de Janeiro by 2016.

The BNDES funding is equivalent to 60 percent of the estimated 33 billion reais cost of the project. The consortium that will build the railway will be picked in an auction scheduled for Dec. 16, the statement added.

By increasing loan guarantees and money available for bidders, the government is seeking to lower underlying risks and speed up execution and completion of the project, which it hopes will be ready for the Rio Olympic Games in 2016.

Some economists have said that the government is forcing the BNDES to shoulder too many risks to accelerate growth in Latin America's largest economy.

The package is the latest in a series of efforts by the BNDES to provide financing for more than $1 trillion in public works that President Luiz Inacio Lula da Silva, who stands down in December after eight years in office, wants the next administration to undertake.

Such projects, including the "bullet" train, are key to avert bottlenecks that could slow Brazil's economic growth in coming years by adding to costs for exporters and discouraging investment.

The sleek, streamlined bullet train thundering its way between the cities at 280 kilometers per hour (174 miles per hour) is the image of a modern and thriving Brazil that Lula and his successor, President-elect Dilma Rousseff, want to project.

The bank said that the train will transport 32 million passengers a year and generate revenues of up to 2 billion reais a year.

Consumers will pay up to 199 reais ($117) for a one-way trip. Currently, the cost of a one-way plane ticket could be as much as three times the expected cost of a bullet-train pass.

source: Reuters