[miningmx.com] – TRANSNET raised the curtain on its recently
announced R300bn expansion programme – which it dubbed its Market Demand
Strategy (MDS) – saying it included an ambition to take thermal coal export capacity
to 98 million tonnes a year (Mtpy) by 2019.
This is in excess of the 91Mtpy of installed capacity at Richards Bay Coal Terminal
(RBCT), and represents a massive 44% improvement in seven years. Transnet is
forecasting railing 75Mtpy in the 2012/13 financial year.
There are plans, too, to increase iron ore exports 57% to 83Mtpy by 2019, incurring an
outlay of R25bn. Expenditure on coal export capacity, which includes some 22Mtpy
from the Waterberg coalfields in the Limpopo province, is R32bn.
The expansion programme extends far beyond coal and iron ore exports, however.
The MDS sees expansions in Transnet’s port and pipeline infrastructure and a major
shift from road to rail usage. Transnet Rail Engineering, its rolling stock and
locomotive manufacturer, will invest R4bn in capital. This includes a tender, already
issued, for some 1,000 locomotives.
Roughly half of the total expenditure is on Transnet’s general freight business,
including domestic coal supplies to Eskom, which will grow by 305% to 29.6Mtpy by
2019, and some 18Mtpy of iron ore and 11.7Mtpy of manganese, increases of 134%
and 144% respectively.
All in all some 588,000 jobs will be created as South Africa’s infrastructure is
expanded and rolled out, with some R205bn to be spent on the country’s rail network.
“The MDS is the centerpiece of government’s growth strategy through investment in
infrastructure, and a key component of enabling aspirations of the New Growth Path,’
said Brian Molefe, group CEO of Transnet.
The R300bn expansion programme was first unveiled by President Jacob Zuma in the
February State of the Nation Address. It is part of an initiative to stimulate economic
growth and create jobs, and takes Transnet’s budget from the previous five-year,
R110bn capital expenditure corporate plan.
A crucial part of the capital investment will be funding, of which about 70% – about
R200bn – would be from operating cash flow. The thinking is that Transnet will
benefit from efficient implementation of volume growth. Asked if the group had the
discipline to keep to its capital plans, Molefe said 90% of its budget had been spent
in the 2011/12 financial year (end-March 2012): “We already have traction; we just
have to keep doing what we’ve achieved already,’ he added.
However, Molefe identified Transnet’s 2015/16 financial year as an important period,
during which it would have to support R20.5bn in funding requirement. “That is the
crunch year. If we survive that year, we will survive the whole seven years,’ he said.
The balance of the capital requirement would be financed through the issue of bond
issuances, commercial paper, bank loans and a combination of foreign direct
investment, export credit agency capital and term notes known as Global Medium
Term Notes (GMTN). Transnet conducted a $2bn GTMN in London in February 2010.
Importantly, the South African government would adopt a zero dividend policy. Tariffs
would also be kept to CPI plus 2%, a level Molefe said was reasonable. “I don’t
believe this is inflationary as we are taking money and investing it in capital, which
develops the opportunity for economic growth.’
