[miningmx.com] – TRANSNET raised the curtain on its recently announced R300bn expansion programme - which it dubbed its Market Demand Strategy (MDS) - saying it included an ambition to take thermal coal export capacity to 98 million tonnes a year (Mtpy) by 2019. This is in excess of the 91Mtpy of installed capacity at Richards Bay Coal Terminal (RBCT) and represents a massive 44% improvement in seven years. Transnet is forecasting railing 75Mtpy in the 2012/13 financial year. There are plans, too, to increase iron ore exports 57% to 83Mtpy by 2019 incurring an outlay of R25bn. Expenditure on coal export capacity, which includes some 22Mtpy from the Waterberg coalfields in the Limpopo province, is R32bn. The expansion programme extends far beyond coal and iron ore exports, however. The MDS sees expansions in Transnet's port and pipeline infrastructure and a major shift from road to rail usage. Transnet Rail Engineering, its rolling stock and locomotive manufacturer, will invest R4bn in capital which includes a tender, already issued, for some 1,000 locomotives. Roughly half of the total expenditure is on Transnet's general freight business which includes domestic coal supplies to Eskom, which will grow by 305% to 29.6Mtpy by 2019 and some 18Mtpy of iron ore and 11.7Mtpy of manganese, increases of 134% and 144% respectively. All in all some 588,000 jobs will be created as South Africa's infrastructure is expanded and rolled out of which some R205bn in on the country's rail network. "The MDS is the centerpiece of government's growth strategy through investment in infrastructure and a key component of enabling aspirations of the New Growth Path," said Brian Molefe, group CEO of Transnet. The R300bn expansion programme was first unveiled by President Jacob Zuma in the February State of the Nation Address. It is part of an initiative to stimulate economic growth and create jobs, and takes Transnet's budget from the previous five year, R110bn capital expenditure corporate plan. A crucial part of the capital investment will be funding of which about 70% - about R200bn - would be from operating cash flow. The thinking is that Transnet will benefit from efficient implementation of volume growth. Asked if the group had the discipline to keep to its capital plans, Molefe said 90% of its budget had been spent in the 2011/12 financial year (end-March 2012): “We already have traction; we just have to keep doing what we’ve achieved already,” he added. However, Molefe identified Transnet’s 2015/16 financial year as an important period when it would have to support R20.5bn in funding requirement. “That is the crunch year. If we survive that year we will survive the whole seven years,” he said.
The balance of the capital requirement would be financed through the issue of bond issuances, commercial paper, bank loans and a combination of foreign direct investment, export credit agency capital and term notes known as Global Medium Term Notes (GMTN). Transnet conducted a $2bn GTMN in London in February 2010. Importantly, the South African government would adopt a zero dividend policy. Tariffs would also be kept to CPI plus 2%, a level Molefe said was reasonable. “I don’t believe this is inflationary as we are taking money and investing it in capital which develops the opportunity for economic growth.”
CIL targets 10Mt imports in 2012/13
By: Ajoy K Das
10th April 2012
KOLKATA (miningweekly.com) - Coal India Limited (CIL) has forecast that it would have to import ten-million tons of coal during 2012/13 if the miner was to conclude fuel supply agreements (FSAs) with power producers, as directed by the government under a Presidential order.
“CIL will first have to see how much of the increased demand can be met through higher production. If required, CIL will import ten-million tons during the current year,” chairperson and MD-designate S Narsing Rao said.
Compelled by the government, CIL would be concluding at least 50 FSAs before end-April with various thermal power producers for an aggregate generating capacity of 28 000 MW.
Last month, CIL’s board of directors refrained from taking a decision on signing new FSAs stipulating a graded penalty system for failing to supply a minimum of 80% agreed offtake, owing to stagnating mine production, inadequate logistics, infrastructure and a lack of expertise in global trading to import coal and meet domestic supply shortfalls.
This was despite directives from the office of the Prime Minister that CIL should urgently resort to importing coal to tide over the crippling shortage of coal faced by thermal power producers.
Having failed to force the world’s largest coal miner to sign FSAs and meet the demand-supply gap through imports, the Indian government issued a Presidential order to CIL, by virtue of being the largest equity stakeholder in the company.
The Presidential order, power reserved by the government to direct public sector companies, was used rarely, such as in the case of national emergencies, and according to the Coal Ministry the shortfall in coal supplies threatening power generation warranted the issue of such an order to CIL.
“CIL is in a bind. It has no choice but to adhere to government's directive and import to meet shortfall. But the higher the imports, the higher will be the losses for the miner,” a CIL official said.
The landed cost of imported coal would be based on gross calorific value (GCV) of the coal, as in international practice. But CIL’s domestic sale price was based on useful heat value of seven grades, A to G.
Earlier this year, CIL had implemented a price regime for the domestic market based on GCV but was forced to abandon it in the face of opposition from political parties and power producers who argued that the new pricing would increase the power tariff burden on consumers.
However, Coal Ministry officials said that a second attempt would be made to restart GCV-based pricing shortly. During financial year ended March 2012, CIL’s production of raw coal remained almost stagnant at 435.84-million, or 4.52-million tons higher than the corresponding previous period, or a mere 1% growth.
Edited by: Esmarie Swanepoel
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19.5¢ Sentiment: LT Buy Disclosure: Held
