(Bloomberg) -- Yapi Merkezi Holdings AS signed a €2.7 billion ($2.95 billion) deal to build a railway line in Uganda, reviving a project that struggled to find financing after China withdrew its support.
The 272-kilometer (169-miles) track will link Uganda’s capital, Kampala, to the border with neighboring Kenya. The initial concept envisioned a line all the way to the Indian Ocean coast to help the landlocked nation reach the port in Mombasa.
Uganda named Citibank lead arranger for syndicated debt and officials said construction should be complete within four years.
“This the first phase of a plan of more than 1,700 kilometers standard gauge railway that the country targets,” said Perez Wamburu, the project’s coordinator.
Uganda decided to award the contract to Yapi Merkezi after China Harbour Engineering Co. failed to construct the line that had been expected to cost $2.3 billion. The Turkish firm initially responded with a 3.4 billion-euro bid when Uganda put out a request for proposals, but the amount was negotiated downward.
Transport Costs
Another rail line that should have linked Uganda to Kenya’s port failed to reach their shared border after China scrapped funding for the rest of the project once it built 730 kilometers of the railroad. That left Uganda relying mainly on trucking for access to the port. It has an existing colonial-era meter-gauge railway to the border town of Malaba that it’s been rehabilitating.
“This standard gauge railway will enable us to cut the cargo transport costs by half,” Ramathan Ggoobi, permanent secretary in the finance ministry, said during the signing ceremony in Kampala.
In its budget for the current fiscal year, Uganda planned to raise 2.2 trillion shillings ($600 million) in external loans for the project in the 12 months through June.
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