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Prasa ‘will need billions from Treasury’ for fleet overhaul
Prasa needs billions of rand as a "cash injection" from the Treasury to support the start of its programme to modernise its fleet.
by NICKY SMITH
Published: 2011/04/13 07:05:38 AM
THE Passenger Rail Agency of SA (Prasa), the state-owned manager of Metrorail commuter train services, will need billions of rand as a "cash injection" from the Treasury to support the start of its programme to modernise its fleet.
Prasa may need as much as R5bn from the Treasury to facilitate the start of its procurement of 8600 coaches and 2000 locomotives, Prasa CEO Lucky Montana said yesterday.
Mr Montana was providing feedback after last week’s investor conference, hosted by Prasa and the Department of Transport, to test the interest of financiers and manufacturers in providing the new fleet.
Prasa plans to spend R97bn over the next 18 years to renew its fleet of coaches which, according to Dries van der Walt, Prasa’s group executive manager for strategic asset development, have an average age of 37 years.
The frequency of train failures in SA is once every 22 days and the global average is 800 days. The reliability of the fleet is "quite low", Mr Montana said.
A third of the current fleet of 3600 coaches need to be retired as they have reached the end of their design life. Delivery of the first coaches will need to start in 2013-14 to avoid any disruption to the services that are used by 2,3-million people every day, Mr Montana said.
Prasa does not have the balance sheet to support the financing for the programme and it will need government guarantees, Mr Montana said.
This is in addition to any cash injection needed to ensure an early start to the procurement process.
"Treasury has been extremely positive," Montana said in response to questions about the government’s interest in providing guarantees. The state has provided loans and guarantees to Eskom Holdings, the power utility, to support its programme to build two new coal-fired power stations. There were lengthy delays before the guarantees were given to Eskom, which created uncertainty .
"I am confident, I know that Treasury will come to the party," Mr Montana said. An indication of this support is the R20m that the Treasury has already given Prasa for its feasibility plan.
"There is no going back, if we don’t do (it) now it’s going to be another Eskom," Mr Montana said, referring to blackouts in 2008 when the utility ran out of power due to a lack of investment in capacity.
The feasibility plan will be completed by June and presented to the Cabinet for approval. "We need 600 coaches a year coming into the system over the next 18 years starting in 2013-14," he said.
Prasa met with financiers and rolling stock manufacturers last week to gauge interest in its planned procurement programme. To stimulate SA’s manufacturing sector and create jobs the agency will require that the coaches and locomotives have a minimum of 65% local content.
Manufacturers in their response to Prasa said this target for local content would be "challenging" but "achievable" within five to 10 years, Prasa said.
SA has not invested in passenger rail for about 30 years. Limited new stock has been purchased primarily from foreign companies, which has meant that SA lost the capacity and skills to make rolling stock for rail. Mr Montana said last week that SA had many people who could maintain trains, but could not design them to Prasa’s specifications.
On average foreign manufacturers will also require minimum volumes of about 250 cars a year for a period of at least 10 years to warrant investment in developing local expertise, Prasa said.
Financiers attending the meetings said they would need guarantees and support from the Treasury before participating in the programme, Prasa said. "All required a proper business plan," the statement said, "and not just reliance on state guarantees".
Rolling stock manufacturers with in-house finance capability would be the most competitive, they said.
Financiers involved in the discussions included Bombardier, Landesbank, Siemens, Nedbank , Mitsui, and Vidistep- China Development Bank.
Manufacturers included Siemens, GE Transport, Hitachi, China Railway Construction , Union Carriage Works, Stimela- CSR Nanj ing and Alstom.