[miningmx.com] – TRANSNET planned to rail 77 million tonnes (mt) of coal exports to Richards Bay in its current 2016 financial year notwithstanding the slide in the price of internationally traded fuel.
This follows a 12% increase in coal exports in the 2015 financial year to 76.3mt which Transnet put down to improved product availability from its key customers while the company’s own efficiency ratios also improved.
Transnet recorded an almost perfect score in on-time departures of its trains although there was a 27% deterioration in on-time arrivals at Richards Bay averaging at some 170 minutes late, partly related to power disruptions caused by sister parastatal, Eskom.
Asked if weakness in the coal price would hurt revenue from coal exports in the current year, acting CEO, Siyabonga Gama, said Transnet would be protected by take-or-pay agreements. “We have very good take-or-pay agreements. If the coal doesn’t become available then we will be compensated,” he said.
In terms of take-or-pay agreements, coal exporters guarantee payment for 95% of the tariff regardless of whether the material is railed or not.
Transnet defends this system by arguing that it losses for non-compliance cannot be recouped whilst coal exporters have the luxury of eventually earning the revenue even if railing coal at a later stage.
Said Gama: “What we would like to see is the economic outlook for coal to improve and that we would be able to do more (tonnage),” he said. “The high cost producers are being hurt and we would like to see the cost of coal going upwards,” he said, adding that improving coal exports from the Waterberg coalfields “must be done”.
The price of coal fell from $180/t real FOB ex-RBCT in 2010 to just below $60/t earlier this year. The bull run in coal started around 2005 from a price of $30/t real FOB.
Iron ore exports increased 10% in Transnet’s 2015 financial year to 59.7mt with Gama believing exports could jump to 63mt in the current year. He noted, however, the poor price of iron ore and Kumba Iron Ore’s recent announcement that it was restructuring at its Sishen and Kolomela mines.
Iron ore and coal exports are managed through Transnet Freight Rail, a division of Transnet and the group’s largest contributor to revenue comprising 52% of some R61,1bn in the 2015 financial year – a 8% improvement in the top-line compared to the 2014 financial year.
Pretax earnings were 8.1% higher at some R25.6bn generating cash from operations of R30.6bn, about 30% higher year-on-year.
Capital investment was 5.7% higher at R33.6bn taking Transnet’s overall spend in terms of its Market Demand Strategy, a R310bn capital roll-out over a five-year period, to R92.8bn.
Owing to the higher cash generation, Transnet was able to lower gearing – net debt to equity – to 40% from 45.9% in the previous financial year. Roughly 74% of all capital investment went into the company’s rail activities which also includes general freight.
