Transnet expects to tap its recently established USD 2 billion Global Medium Term Note program within the next 6 months. This initial foray will be for a minimum of USD 500 million, but probably for USD 750 million.
MR Chris Wells acting CEO tells Engineering News that the capital will be deployed to help the group part fund a 5 year infrastructure investment program, currently valued at ZAR 93.4 billion, to the end of March 2014. This investment program may be enlarged further, with details expected to emerge sometime during the first half of 2010.
Transnet's GMTN was listed on the London Stock Exchange in early February, enabling the company to issue bonds in either the US or the European debt capital markets, without having to undertake the costly processes associated with preparing separate bond listings.
The facility adds to the utility’s fundraising repertoire, which already includes a ZAR 30 billion Domestic Medium Term Note program, bilateral loans worth ZAR 7 billion, as well as various export credit and development finance arrangements.
Transnet has raised over ZAR 24 billion for its investment programs into railways, pipelines and harbors, including ZAR 8 billion through the DMTN program, and Wells stresses that it has all its funding in place for the current financial year, which ends on March 31st 2010.
Mr Wells said that "We are actually sitting with over ZAR 6 billion cash on hand, having raised the funding ahead of need. The beauty of the global bond issuance is its size, because we would probably only tap the market for a minimum of USD 500 million, but probably for around USD 750 million, at a time."
He added that "If we issued this bond in dollars, we would swap it out to rand and fix it for five years. So we continually monitor the all in costs to us, so that we are able to move at any time when we believe these costs to be attractive."
These favorable conditions relate primarily to the relative strength of the South African currency, which was one of the world’s top three performers in 2009 and which has continued to hold onto gains in early 2010.
Assuming prevailing interest rates and a rand trading in the range of between ZAR 7.50 and ZAR 8 to the dollar, Wells believes the window of opportunity remains ajar for the international bond issuance.
Transnet plans to raise about ZAR 35 billion in the medium term to fund investments into projects such as the expansion of the coal and iron-ore rail channels, the enlargement of the Cape Town harbor's container terminal; the creation of the Ngqura port and container terminal; the port channel widening at Durban; a new multi product fuel pipeline from Durban to Johannesburg; and the procurement of up to 500 new locomotives.
(Sourced from www.engineeringnews.co.za)
