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August 22, 2008


Transnet will still raise ZAR 37 billion for CAPEX plan

It is reported that state owned freight logistics group Transnet still planned to raise about ZAR 13.7 billion on the local and international capital markets during its 2008-9 financial year, as part of a bigger ZAR 37 billion, five year capital raising exercise, despite the considerable tightening in credit associated with the growing risk aversion in the wake of the US subprime debacle.

Speaking at a media briefing in Johannesburg, Ms Maria Ramos CEO of Transnet said that the bulk of the money would be raised in the domestic market, but added that the group would continually review its strategy in light of any new international market developments and the global credit crunch.

Ms Ramos said that the bulk of the capital would be raised over the next three years, with ZAR 13.7 billion penciled in for the current financial year and ZAR 10 billion for 2009-10, before tapering off to about the ZAR 3.5 billion to ZAR 4 billion levels in the two subsequent financial years. She said that the ZAR 37 billion would be used to fund part of an ZAR 80 billion capital expansion of Transnet's rail, port and pipeline businesses around ZAR 47 billion of this had been allocated for growth projects and the ZAR 33.7 billion balance for replacement capital.

She acknowledged that any debt rising would be more complex and difficult than it might have been a year ago, given the growing risk aversion globally. But she insisted Transnet, which had a good local and international track record and whose credit rating had improved materially over the past few years, should be favorably positioned relative to other companies seeking to raise capital.

Ms Ramos added that infrastructure companies, in general, were more likely to attract global investor interest, reporting that potential investors still demonstrated a strong appetite for Transnet business at a meeting she attended in the UK last week.

Transnet is also convinced that its balance sheet was now robust enough to withstand higher gearing levels and that even after raising the ZAR 37 billion its self imposed debt equity ceiling of 50% would not be breached.