RVR blocks termination of concession agreement

By Evelyn Kwamboka

Rift Valley Railways Ltd (RVR) has won the first step in its efforts to stop the Government from terminating its concession.

Justice Joseph Nyamu stopped Kenya Railways Corporation’s Managing Director and the Government from taking any action against RVR (K) in connection with any breach of the concession agreement, as a result of post-election violence, for a period of 30 days.

RVR (K) was also allowed by the court to file a Judicial Review application to quash KRC MD’s October 16, last year decision to terminate the concession agreement. The case will be mentioned in court on February 16 for further orders. The court issued the orders stopping the cancellation that was slated for today, following a successful application that was filed by RVR (K) through its advocate Njoroge Regeru.

Termination

Mr Regeru told the court that if the Government terminates the agreement, his client would be required to return to KRC all the conceded assets under the concession agreement and RVR (K) would have no further rights of the concession.

RVR (K) is a limited liability company, which is the concessionaire, providing railway freight and passenger services in the country, under the concession agreement that was entered into between it, the Government and KRC on January 23, 2006.

"The termination of the concession agreement would be highly prejudicial to the applicant whose obligations and performance under the agreement have been largely frustrated and hampered by factors beyond its control," Regeru said.

In an affidavit sworn by RVR (K) Executive Chairman Brown Ondego, the company was expected to pay concession fees to KRC within 30 days of each quarter of a year based on the quarter’s revenue.

He said as a result of the destruction of the railway line early last year, its services along the Kenya-Uganda railway, were disrupted, a development that led to the company not to meet its obligation to pay the concession for the first quarter for 2008.

Losses

Ondego estimated the losses incurred during post-election violence at Sh400 million ($4,991,017.55).

He said the lead investor, Sheltam, has been unwilling, to inject more capital into Rift valley Railway Investment (RVRI) to give the company the much needed, impetus in the harsh economic period experienced last year.

Under the concession structure, the 35 per cent shareholding of Sheltam is not capable of being reduced or diluted, through three shareholdare willing to inject $50 million.