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REPUBLIC OF KENYA | REPUBLIC OF UGANDA

THE KENYA-UGANDA RAILWAYS JOINT CONCESSION

The joint concessioning process of the Kenya-Uganda Railways entered its final stage on Friday September 30 at the Treasury in Nairobi with the opening of bids presented by investors interested in running the railways.

Two consortia presented their bids which were opened at a public function graced by among others; Hon. David Mwiraria, Minister for Finance of Kenya, the Hon Prof Peter Kasenene, Minister of State for Finance in Charge of Privatisation of Uganda, key officials of the Governments of Kenya and Uganda, members of the Boards of Directors of Kenya and Uganda Railway Corporations, the transaction advisors International Finance Corporation (IFC) and CANARAIL Consultants, representatives of the bidding consortia, interested members of the public and the media.

The first bid was received from a consortium led by Sheltam Close Corporation of South Africa. The Sheltam consortium is referred to as the Rift Valley Railways Consortium and comprises the following partners:

• Sheltam Rail Company (Pty) Limited, South Africa (61%)
• Comazar (Pty) Limited, South Africa (10%)
• Primefuels ( Kenya) Limited, Kenya (15%)
• Mirambo Holdings Ltd, Tanzania (10%) and
• CDIO Institute for Africa Development Trust, South Africa (4%).

The second bid was from a consortium led by Rites Limited of India. The RITES Consortium comprises:

• Rites Limited, India, (70%) and;
• Magadi Soda Company Limited of Kenya (30%).

During the function, Hon. Mwiraria, said that the joint concessioning exercise was the first of many possible joint infrastructural projects between the two countries. Hon Prof. Kasenene, reiterated the commitment by the governments of the two countries to finalise the concessioning process and facilitate handover of the Railway operations to the winning bidder by March 31 st 2006.

Kenya ’s Investment Secretary, Mrs Esther Koimett, stated the Joint Steering Committee’s delight at having received bids from such strong bidders and credited this to the transparent procurement process that engendered confidence. She pointed out that aggressive and ambitious targets had been set for the winning bidder. These targets included:

• The obligation to grow traffic by at least 75% over the first five years, which would require substantial investments.
• A minimum investment requirement of $6 million a year
• Commitment to pay the Governments at least 5% of gross revenues every year – compared to the current situation, where the Government is required to provide financial support to the railway.

Other benefits expected from concessioning the railways include a shift of traffic from road to rail leading to reduced accidents, reduced road maintenance costs, reduced pollution, and increased competitiveness of the two countries through reduced transport costs. Furthermore it is expected that the bidders will support a strong programme to develop linkages with domestic small and medium scale enterprises.

Mr. Gerrishon Ikiara, Permanent Secretary in the Ministry of Transport of Kenya, pointed out that the two bidders comprised very strong consortia, from which competitive bids were expected.

“Some of the companies that came together to form these consortia had been pre-qualified in their individual capacities but subsequently decided to join forces to form more formidable bidding blocks”.

Mr Ikiara said further that the winning bidder would be required to offer 40% shareholding to Kenyan and Ugandan investors by the end of the 5 th year of operations.

On the way forward, Mr. Grace James Itazi, Director of Transport and Communications for the Government of Uganda explained that a joint evaluation team from Kenya and Uganda is to begin work immediately to assess the bid documents. Upon completion of evaluation of the Technical Proposals, all bids that are found to meet the required standardwill qualify to have their financial proposals opened. The opening of the financial proposals is scheduled to take place in mid-October at which point the concession will be awarded to the bidder with the highest value.

The two Governments will then finalise and sign the Concession Agreements with the winning bidder in November and handover of operations to the concessionaire by end March 2006.

05 Oct 2005