Transnet secures credit guarantee

TRANSNET has secured a R6-billion funding guarantee from United States export credit agency US-Exim for the funding of the diesel locomotives the company is buying from General Electric (GE).

The group chief executive of the state-owned ports‚ rail and pipeline company‚ Brian Molefe‚ said yesterday the guarantee was a massive thumbs-up from the international investor community‚ affirming Transnet’s creditworthiness 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 General Electric locomotive transaction. It allows for Transnet to negotiate favourable repayment terms‚ including the tenor 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.

The facility will be drawn over a three-year period 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‚ 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 acquisitions from the manufacturer.

The locomotives are part of Transnet’s fleet renewal programme – a key element of the company’s seven-year R312-billion investment programme. The majority of the locomotives are to be 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.