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NEWS & CURRENT AFFAIRS

The Nairobian

TransCentury gets bloody nose over RVR share deal

Business

By -Jackson Okoth | Apr 17, 2014

By Jackson Okoth

TransCentury through its wholly owned subsidiary, Safari Rail Company Ltd, disposed of its entire shareholding in RVR to Citadel Capital of Egypt on March 31 this year.

The final push out of the Rift Valley Railways (RVR) boardroom of TransCentury Limited by its partner Citadel— has left a hole in the former’s pockets.

While TransCentury made $43.7 million (Sh3.8 billion) from sale of its 34 per cent in the consortium established to manage the parastatal railways of Kenya and Uganda, the firm says sale proceeds from this deal were below the historical fair value of the investment.

In a notice to the Capital Markets Authority and Nairobi Securities Exchange the TransCentury board of directors warns that its profits for this year may be more than 25 per cent lower than 2013.

“This is owing to a fair value loss realised from the sale of the company’s 34 per cent stake in Rift Valley Railways,” said the statement. TransCentury has already reflected impact of this transaction as a post-balance sheet event in the Groups audited results of 2013.

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TransCentury through its wholly owned subsidiary, Safari Rail Company Limited, disposed of its entire 34 per cent shareholding in RVR to Egyptian Citadel Capital on March 31, 2014. The decision was made owing to the delayed turnaround of RVR, which meant that this investment failed to meet return targets set by TransCentury.

TransCentury plans to deploy this cash for higher investment returns opportunities to improve its profitability and financial position.

Overall earnings

While its power and engineering divisions will remain profitable, earnings for 2014 will hit TransCentury’s overall earnings at it smarts from losses in the RVR deal.

The profit warning follows a trading result when the investment firm reported a 30 per cent drop in its pretax profit for 2013 to Sh856.6 million ($9.9 million).

The company blamed a slowdown in Kenya due to a presidential election in March, last year, after the previous poll in 2007 was marred by violence. The March election passed off peacefully.

It has been a rollercoaster of frequent boardroom jostling and shoving which begun when TransCentury bought into RVR and begun plotting to kick Sheltam-the original concessionaire. Sheltam responded to the threat by selling off its 49 per cent stake in Citadel Capital.

Other shareholders

Trans-Century and other shareholders countered with a lawsuit to Citadel’s entry into the consortium. In a deal in London in 2010, brokered by the IFC, Citadel was to take 51 per cent, TransCentury expanding to 34 per cent from 20 cent and a Ugandan investor 15 per cent. However, it has been an uneasy relationship on the RVR board since then.

Matters have been worsened by plans by Kenya and Uganda to construct a Standard Gauge Railway from Mombasa to Rwanda’s border with Democratic Republic of Congo. With TransCentury out of the way, it remains to be seen how Citadel will perform as lead investor in the century old railway line.

RVR saga in kenya
• The exit of TransCentury from the rail concession brings Citadel’s total ownership of RVR to 85per cent, up from 51 per cent..
• Citadel Capital first acquired a minority stake in RVR in 2010, eventually becoming lead shareholder
• For the last three years, both Citadel Capital and TransCentury have pumped in new cash into RVR to replace hundreds of kilometres of dilapidated trucks and wagons.