Transnet - Financing of electric locomotives

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South Africa's state-owned transport and logistics company, Transnet, has launched the Market Demand Strategy (MDS), a seven-year investment program to modernize and expand the country's logistics capacities. As part of the MDS, around ZAR 312 billion (approx. EUR 23.7 billion) is to be invested in all strategically relevant areas of the company by 2020/21. Around two thirds of the investments will flow into the Transnet Freight Rail (TFR) division, with the aim of making rail freight transport more competitive by increasing capacity and efficiency and thus gaining market share over road freight transport (so-called Road to Rail Strategy). The investment program includes the procurement of new electric locomotives in order to increase the performance, availability and reliability of the fleet, enable more sustainable operations and be able to cope with the planned increase in the range of transport services offered. For this purpose, a total of 1,064 new locomotives with a value of up to ZAR 66 billion (approx. EUR 5 billion) are to be procured by 2020. Following an international public tender, contracts were awarded to four international manufacturers. 240 highly efficient electric multi-system locomotives of the TRAXX Africa type will be supplied by the Canadian-German company Bombardier Transportation (BT). The contract value is estimated at EUR 800 million. The loan presented here is intended to finance part of this procurement and thus particularly promote the high proportion of local South African value creation in production. The gain in market share of rail freight transport relative to road transport, which is aimed at through the implementation of the MDS, will contribute to saving specific CO2 emissions. The use of modern, efficient locomotives will also further reduce energy consumption per tonne transported. The project thus contributes to increasing energy efficiency in the transport sector and thus to climate protection in South Africa. According to the South African government's specifications, the majority of the added value in the production of the locomotives will take place in South Africa, so that new jobs will be created, the local supplier industry will be strengthened and technological know-how will be passed on. For this purpose, a Federal Development Fund loan of up to EUR 200 million (or the equivalent in ZAR) has been issued to Transnet. The loan is being provided on behalf of the state and is covered by the federal guarantee framework.