Transnet gets R6bn guarantee from US-Exim

one of the batch of 233 new locomotives that will be delivered to Transnet by General Electric. Transnet has received a R6bn guarantee from US-Exim for this deal. Image: Wikipedia

Brian Molefe, Chief Executive of Transnet‚ said that the guarantee was a massive thumbs-up from the international investor community‚ affirming Transnet's credit-worthiness and South Africa's attractiveness as an investment destination.

"The guarantee from US-Exim enables Transnet to raise funds in the markets for the financing of the GE locomotive transaction. It allows for Transnet to negotiate favourable repayment terms‚ including the time and interest rates.

"The required funding will be raised through bank loans supported by the US-Exim guarantee. The terms of funding to be backed by the guarantee will be dependent on a number of factors‚ including market conditions‚ pricing and investor appetite‚" Molefe said.

Funding fleet renewal

The facility will be drawn over three years in line with the delivery schedule for the locomotives. The repayment period is 14 years. Molefe said this term would extend Transnet's debt maturity profile while improving the match between assets and liabilities.

In March this year‚ Transnet announced an agreement to purchase 599 electric and 465 diesel locomotives from four original equipment manufacturers‚ including GE. The guarantee is mainly intended for GE's share of the locomotives - 233 locomotives as well as other equipment from the manufacturer.

The locomotives are part of Transnet's locomotive fleet renewal programme - a key element of the company's seven-year R312bn investment programme. The majority of the locomotives being built at Transnet's engineering and manufacturing facilities throughout South Africa.

The contracts require stringent supplier development‚ skills development and localisation commitments in line with government policy.

Molefe said the agreement was in line with the company's agreed funding strategy which was premised on diversifying sources of finance in a cost effective manner. Funding from the debt capital markets accounts for only a third of Transnet's investment programme - the remainder will be raised from cash generated from the group's operations.

He pointed out that Transnet raised funds on the strength of its financial position and received no funding or guarantees from the Treasury.