Boosting the coffers earmarked for its ambitious locomotive fleet acquisition programme, State-owned logistics group Transnet has announced the successful conclusion of a R12-billion club loan with five of the country’s major financial institutions, ratifying what the parastatal described as “buoyant investor appetite” for the company and its portfolio of projects.

Transnet’s successful raising of the funds in the open markets followed investor roadshows led by acting group CEO Siyabonga Gama and acting group CFO Garry Pita and targeted at potential funders in South Africa, which involved the group touting its overarching Market Demand Strategy (MDS).

Participants in the club loan, which was concluded with each funder separately but on the same commercial terms, were Absa, Nedbank and the Bank of China, each of which committed to funding of R3-billion, as well as counterparts Futuregrowth Asset Managers and Old Mutual Specialised Finance, which pledged R1.5-billion apiece.
 
This R12-billion funding boost followed the inking of a $1.5-billion loan facility with the China Development Bank (CDB) in June, for which Transnet had, following the signing of a memorandum of agreement between China and South Africa, retained the option to increase to $2.5-billion.
 
Elaborating on the specifics of Monday’s funding deal, Gama told a media briefing in downtown Johannesburg that all funders had agreed a term of 15 years at competitive rates, including a grace period of four-and-a-half years, while the locomotives were under construction.

This was in keeping with the company’s approved funding strategy aimed at achieving a balance between long-term debt and assets.
 
Transnet said on Monday that, with the addition of the most recent funding, it had raised “the majority” of the funding required for its locomotive fleet acquisition programme, adding to the earlier $1.5-billion CDB loan; a R6.99-billion loan by Export Development Canada; R2.76-billion in funding pledged by the KfW Development Bank; and a US Exim-guaranteed loan of R6-billion financed by Absa, Standard Bank and Old Mutual Specialised Finance.
 
The parastatal claimed that it spent an “unmatched” R108.9-billion on rail, port and pipelines infrastructure since the launch of the MDS in 2012, adding that this would increase 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 ten years, possibly taking MDS investment to a record R500-billion. All further investments on infrastructure are subject to validated demand,” Gama maintained.
 
Transnet last year awarded a contract for the building of 1 064 diesel and electric locomotives to four global original-equipment manufacturers, two of which – CSR Zhuzhou Electric Locomotive and Bombardier Transportation – were contracted to build 599 electric locomotives, while the remainder – General Electric Technologies and CNR Rolling Stock – were tasked with delivering 465 diesel locomotives.

All but 70 of these locomotives would be built at Transnet Engineering’s plants in Koedoespoort, Pretoria, and Edwin Swales, in Durban.
 
“The acquisition of the 1064 locomotives is central to Transnet’s MDS, which is 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,” he remarked.
 
Transnet committed to continuing to raise funds on the open markets on the strength of its balance sheet, with a standalone investment-grade credit rating, and did not rely on the fiscus for any funding or guarantees.

The remainder of the capital investment programme would be funded through cash generated from operations, Gama assured.