* Extension lacked funding, took more than six years to

kick off

* Kenya using securitisation of revenue, joint projects

with Chinese firms

* Railway line has been viewed as a symbol of Beijing's

'Africa debt trap'

* China's CRBC is the main contractor for rail extension

(Updates throughout with launch ceremony, president quotes,

second analyst)

By Duncan Miriri

NAIROBI, March 19 (Reuters) - Kenya on Thursday

restarted a multibillion-dollar railway extension after a

six-year hiatus, reviving a project that stalled when funding

from China dried up and delayed plans to link the line to

neighbouring Uganda.

The new phase will be financed through revenue

securitisation and will be built by a Chinese contractor,

marking a shift in how Kenya and Beijing are funding large

infrastructure projects.

The railway's first section, linking the port of Mombasa to

Nairobi, was completed in 2017. But after China slashed funding

for large African infrastructure projects under its Belt and

Road Initiative, the project stalled in the Rift Valley, more

than 350 km short of the Ugandan border, holding up a planned

cross-border link to boost regional connectivity and commerce.

"It was the naysayers who said it is a railway to nowhere.

We are just confirming to them that we had a plan. It was never

a road to nowhere," Kenya's President William Ruto told a crowd

at a launch ceremony in the Rift Valley town of Narok, before

fastening a bolt to fix a rail part to a sleeper to signify the

start of construction.

Critics have said the stalled project had become a symbol of

China's "debt trap diplomacy", with Beijing extending large,

often opaque loans to poorer countries for infrastructure

projects - a claim rejected by the Chinese government.

Last year, Kenya and China renegotiated terms of the loans

for the first two phases to cut Nairobi's annual repayments.

"Chinese creditors are motivated by profit, so they don't

like to throw good money after bad if they can avoid it. Kenya

is no exception," said Brad Parks, executive director at William

& Mary's AidData research lab in the U.S.

NEW FINANCING MODEL

Kenya is now using a railway development levy charged on

cargo carried on the existing line, estimated to raise about 35

billion shillings ($270 million) annually, as seed money for the

construction of new phases. Neither the government nor state

rail operator Kenya Railways disclosed the total cost of the

extension or details of the financing structure.

China remains involved in the project. China Road and Bridge

Corporation (CRBC) is the main contractor for the new phase.

"Beijing ... is experimenting with new ways of bankrolling

big-ticket infrastructure projects that involve more

risk-sharing between Chinese companies and African governments,"

Parks said.

The deal was enabled by a 2024 shift by China to focus on

investments rather than debt, said Peter Kagwanja, a

Nairobi-based international relations expert.

"Following the heavy propaganda in regard to the debt

burden, particularly from the West, China and Africa discussed a

new model based on investments to sustain the level of building

infrastructure," Kagwanja said.

OUT OF ROOM TO BORROW

After pumping billions of dollars into African

infrastructure projects, China began slashing lending to the

continent in 2019 amid concerns over debt sustainability.

In 2024, Beijing sought to reposition itself by pledging $50

billion in credit and investments to Africa over three years.

Kenya and two Chinese firms are already building a $1.5 billion

highway expansion under the new financing model.

Ruto's administration has turned to securitisation of

revenue streams to generate cash for infrastructure, since debt

repayments consume a huge share of annual revenue. An attempt to

raise taxes in 2024 sparked deadly protests.

With his Ugandan counterpart Yoweri Museveni, Ruto will on

Saturday launch the construction of the final rail line leg,

linking Kisumu with the border town of Malaba.