Rift Valley Railways (RVR) has lost a prospective buyer amid a controversial plan to prematurely terminate its 25-year concession contract to run the country’s railway service.
Emerging Capital Partners (EPC), a pan-African private equity firm, announced yesterday it had pulled out of negotiations to acquire the railway operations currently held by Egypt’s Qalaa Holdings.
ECP had emerged as a front runner in the acquisition, suggesting that the withdrawal could have huge ramifications for the troubled firm.
The investment firm, which also has stakes in Wananchi Holdings and Java Coffee House, said it was not presently in any negotiations, implying it may have been in talks previously.
“ECP confirms that it is not currently in discussions with Rift Valley Railways or its principle stakeholders about an investment in RVR,” said the firm in a statement.
It added that it would continue exploring opportunities to invest capital in East Africa’s infrastructure sector.
While it might be difficult to link the withdrawal from the recent fallout between RVR and the Kenya Railways Corporation (KRC), the timing of the statement speaks volumes.
Transport on the century-old line has proved to be tough and loss-making for RVR, raising fresh questions whether any investor would want to put in their money.
Matters were further complicated when the State ruled out any compensation for the owners of RVR, saying the standard gauge railway (SGR) was not in direct competition with the older line.
“Mombasa Port had more cargo to be evacuated than either track could handle,” said former Transport Permanent Secretary Irungu Nyakera. RVR managers held that they enjoyed protection of loss of business to a government-funded competitor - in this case the SGR, scheduled for commissioning in June.
Apart from potential termination of the concession agreement that expires in 2031, there is the threat that the newly completed SGR presents to the cargo hauling business. Earlier this month, KRC gave RVR tough conditions to meet if the concession agreement was to remain, including the clearance of a Sh2.76 billion debt by June 30. It was also directed to rehabilitate the track and significantly raise the uptake of freight from Mombasa in 90 days.
