GE tipped to supply Transnet with engines

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Johannesburg - General Electric (GE) will probably be named today as the preferred bidder to supply 465 diesel locomotives to state-owned Transnet as part of a R35 billion investment, according to people familiar with the matter.

Another manufacturer was likely to be named as the preferred bidder for a contract to supply 599 electric locomotives, said the people, who declined to be identified because the decision was not public yet.

The logistics parastatal is buying the diesel and electric locomotives to upgrade the transport infrastructure and improve export capacity. The government has said the R35bn earmarked for the more than 1 000 locomotives would be spent over a seven-year period.

Transnet, which operates railways, ports and pipelines, plans to spend a total of R307bn over that period.

The Department of Public Enterprises, which oversees Transnet, said that it would announce “one of the biggest infrastructure transactions in South Africa” today.

The diesel locomotive contract tipped for GE may be worth less than $1bn (R10.7bn), based on calculations using prices Transnet paid in a different order announced in September last year.

Transnet spokesman Mboniso Sigonyela declined to comment on the deal.

GE had bid on the contract to supply diesel locomotives, spokeswoman Jennifer Erickson confirmed. She declined to comment further.

Alstom spokeswoman Virginie Hourdin said the French maker of trains and power equipment had responded to the locomotive tender early last year and was now awaiting its outcome.

Siemens, Europe’s biggest engineering company, withdrew from the tender after initially bidding for the electric locomotive part, according to a person familiar with the matter. A company representative declined to comment.

More than two-thirds of Transnet’s capital expenditure will be used to renew and expand the company’s freight rail infrastructure.

The company plans to lift cargo volumes, which include coal, manganese and iron ore, to 350.3 million tons a year by March 2019, according to the company’s website.

To create jobs and develop expertise, South African state-owned companies in the past have preferred suppliers who committed to manufacturing major parts of their offerings domestically.

GE has already built 143 locomotives for Transnet at a South African factory, according to the rail operator.

The Export-Import Bank of the US had backed a R1.1bn loan to Transnet to pay for the engines, Transnet said in September last year.

In 2012 the company agreed to pay China’s CSR Zhuzhou Electric Locomotive R2.6bn for 95 locomotives. – Bloomberg


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