Transnet raises R12-billion loan
State-owned freight transport and logistics company, Transnet, on Monday signed a R12-billion club loan with five major financial institutions, confirming buoyant investor appetite for the company and its portfolio of projects.
The company will use the proceeds of the loan to fund its locomotive fleet acquisition programme. The acquisition is the single-biggest item of Transnet’s record-breaking infrastructure investment programme – the Market Demand Strategy.
Participants in the club loan, which was concluded with each funder separately but on the same commercial terms, are ABSA (R3-billion), Nedbank (R3-billion), Bank of China (R3-billion), Futuregrowth Asset Managers (R1.5-billion) and Old Mutual Specialised Finance (R1.5-billion).
Transnet’s success in raising the R12 billion in the open markets follows investor roadshows targeted at potential funders from within South Africa. These sessions, which were led by the acting Group Chief Executive, Siyabonga Gama, and acting Group Chief Financial Officer, Mr Garry Pita, were intended to share the company’s performance and prospects and not for the purposes of making deals.
The club loan is in addition to the $1.5-billion loan facility agreed with China Development Bank (CDB) in June this year. The company has an option to increase the CDB facility to $2.5-billion as part of an MOU between China and South Africa.
All the funders agreed a term of 15 years at competitive rates, including a grace period of four and a half years, while the locomotives are under construction. This is in keeping with the company’s approved funding strategy aimed at achieving a desired match between long-term debt and assets.
Including this club loan, the company has raised the majority of the required funding for the locomotive fleet acquisition programme as follows:
- China Development Bank $1.5-billion
- Export Development Canada R6.9-billion
- KFW Development Bank R2.7-billion
- US Exim guaranteed loan of R6 billion financed by Absa, Standard Bank and Old Mutual Specialised Finance
- Club loan R12-billion
Transnet has spent an unmatched R108.9-billion in its rail, ports and pipelines infrastructure since it launched the MDS in 2012. This will improve to R125 billion by the end of the current financial year.
In addition, Transnet has committed to cement its position as South Africa’s leading investor with further investments of between R340-billion and R380-billion over the next 10 years, possibly taking MDS investment to a record R500-billion. All further investments on infrastructure are subject to validated demand.
In March 2014, Transnet awarded a contract for the building of 1 064 diesel and electric locomotives to four global original equipment manufacturers. The company awarded CSR Zhuzhou Electric Locomotive and Bombardier Transportation contracts to build 599 electric locomotives and; General Electric Technologies and CNR Rolling Stock to build 465 diesel locomotives.
All the locomotives except 70 will be built at Transnet Engineering’s plants in Koedoespoort, Pretoria and Edwin Swales in Durban.
The acquisition of the 1 064 locomotives is central to Transnet’s capital investment programme, the Market Demand Strategy, aimed at increasing volumes while reducing the average age of the company’s locomotive fleet. The MDS underpins Transnet’s plans to grow volumes from the current 226.6 million tons.
Transnet continues to raise funds on the open markets on the strength of its balance sheet, with a standalone investment grade credit rating, and does not rely on the fiscus for any funding or guarantees. The remainder of the capital investment programme is funded through cash generated from operations.
IMAGE sourced from www.railpictures.net
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