Transnet to further boost capex - Wells
New projects on table for 2010/11 linked to coal, ports
June 25, 2009
By SLINDILE KHANYILE
TRANSNET planned to increase its five-year capital expenditure (capex) programme to more than R80.5 billion in two years, Chris Wells, the acting chief executive said yesterday.
Wells refused to say how much more the transport utility was likely to spend.
He said new projects might be added in 2011 and 2012, but stressed that nothing had been approved by the board or the the government yet.
"They will be projects linked to future growth in coal, ports expansion and locomotives," said Wells.
Transnet started rolling out its R80.5bn expansion programme last year. In the 2008/09 financial year, it spent R19.4bn - 23 percent more than the money invested in the 2007/08 financial period.
Freight Rail chief executive Siyabonga Gama told Bloomberg that the company planned to rail 70 million tons of coal to domestic users by 2016, compared with 22.5 million tons currently.
Coal is one of the commodities that has seen volumes decline since 2006. In the year to March, volumes tumbled to 61.9 million tons from 68.8 million tons in 2005/06.
Wells said coal volumes had been disappointing.
He said that two years ago the problems were more operational, but in the 2008/09 financial year the cause for the decline was linked more to the scarcity of the commodity.
Wells said the company had the capacity to deliver 70 million tons, but mining companies were not producing enough volumes.
He expected an improvement by the end of the year.
The company's rail expansion programme had been delayed by a year, due to the non-delivery of locomotives.
However, Wells said that by the end of the year, 70 locomotives would be delivered and more than 200 by the end of next year.
Of the R80.5bn, Transnet had to raise R30bn from the markets. The rest would come from the company's coffers.
Wells said domestic bonds would form the backbone of the borrowings.
The parastatal draws R1bn every month from these bonds.
The company was also having discussions with various development banks.
It was finalising documentation to issue bonds in the US and European markets when the markets were favourable and it would borrow from credit export agencies.
Although it was admittedly difficult to raise money due to the economic slowdown, Wells said it was critical for Transnet to proceed with its capex programme.
"This is the main stimulus package for the country and it will be disappointing to all if we were unable to deliver. In delivering that, we must run Transnet prudently," he said.
Yesterday, the parastatal released its full-year results for the year to March.
Revenue increased 11.6 percent to R33.6bn, while earnings before interest, tax, depreciation and amortisation (Ebitda) rose marginally by 3 percent to R13.2bn. Cash generated from operations grew 2.6 percent to R13.5bn.
Anoj Singh, the acting chief financial officer said it was a year of two halves. He said Transnet was able to grow revenue despite lower volumes, owing to a good performance in the first six months and a renegotiated rise in the export tariff on coal, which brought in R1bn.
Wells said Transnet expected 2009/10 to continue to be difficult and volumes to remain weak for at least the next 18 months.
Transnet would look for coal export opportunities in India and would look at iron ore for growth.
In the year to March, iron ore volumes grew by 5 million tons to 36.8 million tons. Wells said the company had contracts in place for 46 million tons.
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