On Monday, Uganda signed a deal with Turkish firm Yapi Merkezi for the construction of the standard gauge railway (SGR) from Malaba to Kampala, after a 16-year wait.
When completed, the $2.9 billion-dollar electric rail project is expected to reduce transportation costs and increase the efficiency of the rail transport system in Uganda.
As the country celebrated the contract award, Energy Minister Ruth Nankabirwa, who was attending an energy conference in Cape Town, announced another delay to secure financing for the East African Crude Pipeline (Eacop).
Currently, only China’s Eximbank and Sinosure Insurance are willing to bankroll the Eacop project after American, European and Asian banks abandoned it over environmental concerns.
Construction of Uganda’s 273km SGR line, expected to be completed in four years, has started without a lender bankrolling the project, and authorities say it will be commissioned in the first week of November.
The EastAfrican has learnt that in this financial year, the SGR was allocated $40.8 million for compensation of project-affected persons. Canon Perez Wamburu, coordinator of Uganda’s SGR Unit, said the total budget is close to $49 million.
The Finance ministry has identified American lender Citi Bank to syndicate a loan of about $3 billion.
Uganda is under pressure from Tanzania and Kenya, which have SGR systems, to build its section to facilitate a synchronised regional rail network. Kenya is also working on extending its SGR line from Naivasha to Kisumu and on to Malaba.
“The two systems will be connected and will be seamless. We support our Kenyan friends in doing that. And the timelines agreed on with the Kenya brothers will be met,” said Gen Katumba Wamala, Uganda’s Works and Transport minister.
He explained that the two countries agreed that by the time the Malaba-Kampala SGR section reaches Kampala, the Naivasha-Kisumu-Malaba section will also be ready.
Uganda plans to develop 1,700km of SGR network covering Tororo to Gulu and Nimule at the South Sudan border, with a spur from Gulu to Pakwach and Vurra at the Democratic Republic of Congo border.
A western line will run from Kampala to Bihanga and Kasese-Mpondwe at the DR Congo border, with a spur southward from Bihanga to Mirama Hills at the Uganda-Rwanda border and another to Muko, Kabale.
Meanwhile, Eacop owners are betting on a syndicated loan after the project ran into financial crisis following the exhaustion of shareholders’ equity in June.
The delay in attracting a lender has forced owners to inject more equity. The shareholders had planned to fund it with 40 percent equity and 60 percent debt, but the ratio has been tilted, with more equity capital.
Last month, Eacop shareholders were to enter a financial close, which occurs when all the project and financing agreements have been signed, all conditions on those agreements have been met, and the private party to the public-private partnerships can start drawing down the financing to start work on the project.
The shareholders are Uganda National Oil Company, TotalEnergies E&P Uganda, China’s CNOOC, and the Tanzania Petroleum Development Corporation.
