Transnet in $2.5bn funding guarantee with China
by Staff Writer,
2015-12-02 20:36:09.0
TRANSNET and China Export Credit Insurance Corporation (Sinosure) has agreed to a $2.5bn funding guarantee for the transport parastatal in a ceremony witnessed by President Jacob Zuma and his Chinese counterpart Xi Jinping.
The agreement was signed on Wednesday by Transnet acting group CE Siyabonga Gama and Sinosure’s Li Hao‚ in the presence of Public Enterprises Minister Lynne Brown.
Transnet will use the guarantee to finance the procurement of mechanical and electrical products and equipment from Chinese enterprises. It will also cover funding for the operation‚ maintenance and other services from Chinese enterprises in South Africa.
Transnet and Sinosure agreed that the guarantee should preferably be used for railway‚ ports and pipeline projects in SA and can be extended to other areas‚ should the parties agree.
Credit in terms of the agreement shall not exceed 15 years. This is in line with Transnet’s stated objective of matching the tenor of its liabilities with the life of its assets.
"The guarantee enables Transnet to raise funds in the markets for the financing of its infrastructure investment programme‚ including acquisition and maintenance of its locomotive fleet. Importantly‚ it guarantees Transnet favourable repayment terms‚ including longer tenor and competitive interest rates‚" Transnet said.
Chinese companies have won significant open and competitive bids to supply rolling stock and equipment to Transnet.
In April last year‚ Chinese manufacturers China South Rail Zhuzhou Electric Locomotive and China North Rail Rolling Stock were awarded contracts to build 359 electric and 232 diesel locomotives respectively‚ with Transnet.
In 2013‚ the company also bought seven new state-of-the-art ship-to-shore cranes for its port operations in Durban from Chinese original equipment manufacturer ZPMC.
The relationship extended to funding. In June this year‚ Transnet secured a $2.5bn bilateral loan from China Development Bank.
"Transnet has spent an unmatched R108‚9bn on its rail‚ ports and pipelines infrastructure since it launched the MDS (market demand strategy) in 2012. This will improve to R125bn by the end of the current financial year.
"In addition‚ Transnet will invest a further R340bn to R380bn over the next 10 years. This will possibly take our MDS investment to a record R500bn‚" Transnet said.
It added that the agreement confirmed the continued attractiveness of Transnet’s portfolio of projects‚ the company and SA among major international investors.
"Crucially‚ it is in line with the company’s agreed funding strategy, which is premised on diversifying its investor base and sources of funding 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 operations.
"Transnet raises funds on the strength of its own balance sheet‚ with a standalone investment-grade credit rating‚ and receives no funding or guarantees from the fiscus."
TMG Digital
Picture: ARNOLD PRONTO
TRANSNET and China Export Credit Insurance Corporation (Sinosure) has agreed to a $2.5bn funding guarantee for the transport parastatal in a ceremony witnessed by President Jacob Zuma and his Chinese counterpart Xi Jinping.
The agreement was signed on Wednesday by Transnet acting group CE Siyabonga Gama and Sinosure’s Li Hao‚ in the presence of Public Enterprises Minister Lynne Brown.
Transnet will use the guarantee to finance the procurement of mechanical and electrical products and equipment from Chinese enterprises. It will also cover funding for the operation‚ maintenance and other services from Chinese enterprises in South Africa.
Transnet and Sinosure agreed that the guarantee should preferably be used for railway‚ ports and pipeline projects in SA and can be extended to other areas‚ should the parties agree.
Credit in terms of the agreement shall not exceed 15 years. This is in line with Transnet’s stated objective of matching the tenor of its liabilities with the life of its assets.
"The guarantee enables Transnet to raise funds in the markets for the financing of its infrastructure investment programme‚ including acquisition and maintenance of its locomotive fleet. Importantly‚ it guarantees Transnet favourable repayment terms‚ including longer tenor and competitive interest rates‚" Transnet said.
Chinese companies have won significant open and competitive bids to supply rolling stock and equipment to Transnet.
In April last year‚ Chinese manufacturers China South Rail Zhuzhou Electric Locomotive and China North Rail Rolling Stock were awarded contracts to build 359 electric and 232 diesel locomotives respectively‚ with Transnet.
In 2013‚ the company also bought seven new state-of-the-art ship-to-shore cranes for its port operations in Durban from Chinese original equipment manufacturer ZPMC.
The relationship extended to funding. In June this year‚ Transnet secured a $2.5bn bilateral loan from China Development Bank.
"Transnet has spent an unmatched R108‚9bn on its rail‚ ports and pipelines infrastructure since it launched the MDS (market demand strategy) in 2012. This will improve to R125bn by the end of the current financial year.
"In addition‚ Transnet will invest a further R340bn to R380bn over the next 10 years. This will possibly take our MDS investment to a record R500bn‚" Transnet said.
It added that the agreement confirmed the continued attractiveness of Transnet’s portfolio of projects‚ the company and SA among major international investors.
"Crucially‚ it is in line with the company’s agreed funding strategy, which is premised on diversifying its investor base and sources of funding 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 operations.
"Transnet raises funds on the strength of its own balance sheet‚ with a standalone investment-grade credit rating‚ and receives no funding or guarantees from the fiscus."
TMG Digital
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