Transnet concludes funding for 1,064 locomotive deal

Transnet Group Chief Executive, Brian Molefe.

State-owned freight logistics group, Transnet, announced a combined R13bn funding for its long awaited 1,064 locomotive acquisition programme.

Making the announcement at its Esselenpark campus, Transnet Group Chief Executive Brian Molefe said the funding was raised in two agreements with various financial institutions in the country as well as others from Canada and the United States of America.

 “The first agreement is a R6bn US-Exim Bank funding guarantee for 293 locomotives to be built by General Electric. The funds, in terms of the guarantee, were raised from Barclays/Absa (R2.25bn), Standard Bank (R2.25bn) and Old Mutual (R1.5bn).”

“The second agreement is a R6.99bn loan facility for the funding of locomotives from Bombardier,” Molefe said.

Molefe said the funds will be raised from Export Development Canada (R5.24bn); Investec Bank Limited (R1.75bn), while the US-Exim-backed guarantee is a 14-year facility and will be drawn over a three-year period in line with the delivery schedule for the locomotives.

Molefe said the Export Development Canada and Investec facility is 13 years.

“These agreements are in line with our funding strategy as it relates to our focus on diversifying sources of funding and raising debt cost effectively. They will also enable us to match our assets liabilities profile that makes it possible for us to maintain our investment grade credit rating,” he said.

The Transnet boss further said he is encouraged by the vote of confidence that the institutions are showing in Transnet and the country.

“These agreements are proof of attractiveness, commercial viability and bankability of Transnet capital programmes. They confirm that we are on the right track.

“They are a massive thumbs-up for South Africa’s infrastructure build programme and the National Development Plan (NDP,)” he said.

In March last year, Transnet announced the awarding of a R50bncontract for the building of 1 064 diesel and electric locomotives.

The contract was awarded to four global original equipment manufacturers –two North American manufacturers and two Chinese manufactures.

The companies are Bombardier Transportation and China South Rail Zhuzhou Electric Locomotive, with contracts to build 599 electric locomotives; and General Electric (GE) Technologies and China North Rail Rolling Stock to build 465 diesel locomotives.

GE is 100% complete with the technical design and their first locomotives will be rolled out in July. The locomotives will be built at Transnet facilities in Koedoespoort, Pretoria.

Bombardier is also 100% complete with the technical design of the locomotives, which will be built in Durban.

China South Rail has completed the technical design of the locomotives. The first prototype will roll off the production line at the end of March and will be built in Koedoespoort.

China North Rail is 90% complete with the technical design on the locomotives, which will be built in Durban.

This acquisition programme will form the biggest rail recapitalisation programme in South Africa’s history