Transnet has become so confident that it can raise debt for its infrastructure expansion without government guarantees that it is even looking to redeem the debt raised with historic guarantees.
Reporting its financial results for the six months to September, the logistics parastatal said yesterday that it had raised R9.4 billion by issuing bonds in the domestic market alone in that period.
The utility’s target was to raise R15.5.bn for its full 2013/14 financial year to March.
“We are already left with about R6bn and we are quite confident that we will be able to execute that before the end of this financial year. During this financial year we have not yet tapped the international capital markets. That remains an option that’s available. Our credit ratings remain solid, Moody’s [Investors Service] has confirmed,” Transnet chief executive Brian Molefe said.
Group chief financial officer Anoj Singh said the historic debt Transnet acquired using government guarantees was quite expensive and it wanted to replace it with cheaper debt in future. But the redemption of that debt from holders would depend on market conditions and was not a transaction that would take place right now.
Currently, only 3 percent of Transnet’s debt holds government guarantees.
Transnet congratulated itself for growing its revenue by 14.3 percent in the half year to September and its earnings before interest, tax, depreciation and amortisation by 19.3 percent, despite the domestic economy having grown less than 3 percent.
The logistics utility posted a 71.2 percent increase in profit for the period to R2.85bn. Net operating expenses were lower than expected as the company realised cost savings of R1.4.bn.
Molefe said the growth was underpinned by the fact that there was a huge market share that remained available for Transnet to grow into, including activities where the company had not been efficient in the past. Container and automotive shipments could, for example, move from road to rail.
In the half year, Transnet posted a 26 percent jump in rail transport of containers and vehicles. Mineral and chrome volumes rose 12 percent.
Given this, Molefe said, it would be possible for Transnet to grow faster than the general economy as it executed its market demand strategy.
In executing the strategy, which focuses mainly on capital expenditure to increase the utility’s infrastructure capacity, the group reported that it had spent R11.2bn of its annual budget of R27bn but was confident it would reach the set target as most of the tenders for capital investments had already been awarded.
One of the crucial projects Transnet will execute under the strategy is the building of a new coal line linking Eskom’s new power stations in Lephalale, Limpopo, with the Waterberg coalfields. There is an existing coal line from the Waterberg via Rustenburg and Pyramid South to Ermelo but it is not a heavy-haul line.
Molefe said it was not possible to upgrade it because of the clay earth between Rustenburg and Pyramid. But to strengthen that line, Transnet would be adding loops to it and the first loop had been completed.
The new line that Transnet plans to build will run from Lephalale through Atlanta and will join the existing one in Pyramid.
“So there is an existing line that we are strengthening, we are working to try and carry more volume on the existing line but we are planning to build a completely new line that is more direct,” he said.
The first phase of the Waterberg coal line development should enable 23 million tons of coal a year to be transported to Eskom by 2018.