Environmental & Social Review Summary
Project Number
24766
Company Name
RVR INVESTMENTS (PTY) LIMITED
Date ESRS Disclosed
Jul 12, 2006
Country
Kenya
Region
Africa
Last Updated Date
Jun 11, 2022
Environmental Category
B - Limited
Status
Active
Previous Events
Approved : Oct 12, 2006
Signed : Dec 12, 2006
Invested : Dec 18, 2006
Sector
Rail Transportation
Industry
Infrastructure
Department
Gbl Infrastructure & Natural Resources
Project Description
The project is an IFC corporate loan to RVRC to support its first five year investment program for the rehabilitation, operation and maintenance of the railways currently run by KRC and URC. RVRC is led by Sheltam Rail Company (Pty) Limited, a South African rail and marine services firm. The investment program will include rehabilitation of track to allow safe passage of trains at an average of 30 km/hour; upgrading and modernization of the locomotive fleet; wheel and brake replacement and other rehabilitation of the wagon fleet; rehabilitation of passenger coaches; purchase of new locomotives and wagons; renovations of buildings, workshops, depots and machinery; and installation of new information technology (IT) systems. In addition to IFC, RVRC is also seeking a parallel loan from KfW, the German bilateral development finance institution.
RVRC’s system will comprise a total track length of 2350 km (1920 km in Kenya and 431 km in Uganda), with 219 locomotives (175 in Kenya and 44 in Uganda) and approximately 7500 wagons and three water ferries (approx. 6000 wagons and one ferry in Kenya and 1433 wagons and two ferries in Uganda). All water ferries are freight-only. The concessioned system will include about 87% and 35% of KRC’s and URC’s railway networks respectively.
The total Project cost for the first five years is estimated at $111 million, of which $47 million would be contributed by the sponsors in the form of direct equity and internal cash generations. The balance of $64 million would be funded in equal amounts in the form of an A loan of $32 million from IFC and a $32 million loan from KfW.
RVRC’s system will comprise a total track length of 2350 km (1920 km in Kenya and 431 km in Uganda), with 219 locomotives (175 in Kenya and 44 in Uganda) and approximately 7500 wagons and three water ferries (approx. 6000 wagons and one ferry in Kenya and 1433 wagons and two ferries in Uganda). All water ferries are freight-only. The concessioned system will include about 87% and 35% of KRC’s and URC’s railway networks respectively.
The total Project cost for the first five years is estimated at $111 million, of which $47 million would be contributed by the sponsors in the form of direct equity and internal cash generations. The balance of $64 million would be funded in equal amounts in the form of an A loan of $32 million from IFC and a $32 million loan from KfW.
Overview of IFC's Scope of Review
Rehabilitation, operation and maintenance of the rail networks currently run by Kenya Railways Corporation (KRC) and the Uganda Railways Corporation (URC) has been awarded to two special purpose concession companies (each a Concessionaire) set up by the Rift Valley Railways Consortium (RVRC) after an international competitive tender process. RVRC is a holding company with 100% ownership of the two concessionaires, Rift Valley Railways Kenya Ltd. (RVRK) and Rift Valley Railways Uganda Ltd. (RVRU).
The objective of the Concessions is to improve the management, operation and financial performance of the two rail networks in a coordinated manner by granting exclusive rights to the Concessionaires for the provision of freight services in both Kenya and Uganda for the duration of the concession. In Kenya, the Concessionaire will also be obliged to operate the passenger services as designated in the concession agreement for a minimum period of five years. There is no existing passenger service in Uganda. Though legally separate, the objective of the joint concession process is to seamlessly operate the two concessions as one railway system. This is particularly important for Uganda, a landlocked country, which depends upon the Kenyan port of Mombasa for sea access. The concessions were awarded on October 14, 2005 and formal handover of the operations of KRC and URC to RVRC is expected to take place on or after July 31, 2006.
IFC’s review of this project focused on the social, labor, and environmental components of the project that will be the responsibility of the private operator from the date the Concessions are formally handed over. The Concessions, in conjunction with a Direct Agreement (yet to be signed at the time of this note), provide that all pre-existing environmental and social liabilities will remain the responsibility of the conceding authorities. The World Bank supported the concession process as part of the East Africa Trade and Transport Facilitation Project and other initiatives. More specifically, the World Bank’s engagement in this process includes:
- funding the labor retrenchment process in Kenya where around 5500 current employees of KRC are expected to be retrenched, and
- funding the relocation of illegal encroachers (people and businesses) on KRC’s right-of-way in Kibera and Mukura in the outskirts of Nairobi.
IFC is relying on support by the World Bank to ensure that its Safeguard Policies are met related to retrenchment and other social mitigation of railway staff in Kenya, as well as the relocation of people and businesses that have encroached on the rights-of-way in both Kenya and Uganda as required to provide a safe corridor for railway traffic. As the respective governments are responsible for remediation of environmental contamination, IFC’s review also considered the capacity of the private operator to support the governments in these matters and to achieve environmental compliance in a reasonable timetable.
Key documentation examined by IFC as part of its review included the following:
- Kenya Railways Corporation, Environmental Due Diligence, Technical and Financial Audit Report, prepared by COWI A/S, May 2005;
- Uganda Railways Corporation Ltd., Major Facilities, Environmental Audit Report, prepared by SMEC International, July 2004;
- Relocation Action Plan for Improving the Safety along Kenya Railway Line, October 29, 2005,
- Abbreviated Resettlement Action Plan for Uganda Railway Concessioning, June 2005, and
- Management process documents prepared by Rift Valley Railways – Kenya Ltd (quality, railway safety, occupational health and safety, environmental, human resources, corporation, and equity and community), May 28, 2006.
The objective of the Concessions is to improve the management, operation and financial performance of the two rail networks in a coordinated manner by granting exclusive rights to the Concessionaires for the provision of freight services in both Kenya and Uganda for the duration of the concession. In Kenya, the Concessionaire will also be obliged to operate the passenger services as designated in the concession agreement for a minimum period of five years. There is no existing passenger service in Uganda. Though legally separate, the objective of the joint concession process is to seamlessly operate the two concessions as one railway system. This is particularly important for Uganda, a landlocked country, which depends upon the Kenyan port of Mombasa for sea access. The concessions were awarded on October 14, 2005 and formal handover of the operations of KRC and URC to RVRC is expected to take place on or after July 31, 2006.
IFC’s review of this project focused on the social, labor, and environmental components of the project that will be the responsibility of the private operator from the date the Concessions are formally handed over. The Concessions, in conjunction with a Direct Agreement (yet to be signed at the time of this note), provide that all pre-existing environmental and social liabilities will remain the responsibility of the conceding authorities. The World Bank supported the concession process as part of the East Africa Trade and Transport Facilitation Project and other initiatives. More specifically, the World Bank’s engagement in this process includes:
- funding the labor retrenchment process in Kenya where around 5500 current employees of KRC are expected to be retrenched, and
- funding the relocation of illegal encroachers (people and businesses) on KRC’s right-of-way in Kibera and Mukura in the outskirts of Nairobi.
IFC is relying on support by the World Bank to ensure that its Safeguard Policies are met related to retrenchment and other social mitigation of railway staff in Kenya, as well as the relocation of people and businesses that have encroached on the rights-of-way in both Kenya and Uganda as required to provide a safe corridor for railway traffic. As the respective governments are responsible for remediation of environmental contamination, IFC’s review also considered the capacity of the private operator to support the governments in these matters and to achieve environmental compliance in a reasonable timetable.
Key documentation examined by IFC as part of its review included the following:
- Kenya Railways Corporation, Environmental Due Diligence, Technical and Financial Audit Report, prepared by COWI A/S, May 2005;
- Uganda Railways Corporation Ltd., Major Facilities, Environmental Audit Report, prepared by SMEC International, July 2004;
- Relocation Action Plan for Improving the Safety along Kenya Railway Line, October 29, 2005,
- Abbreviated Resettlement Action Plan for Uganda Railway Concessioning, June 2005, and
- Management process documents prepared by Rift Valley Railways – Kenya Ltd (quality, railway safety, occupational health and safety, environmental, human resources, corporation, and equity and community), May 28, 2006.
E & S Project Categorization and Applicable Standard
Environmental and Social Mitigation Measures
Stakeholder Engagement
Related SII
