PRASA looking to sell 20% of Intersite to inject funds

[Steve Appleton]

From Business Day, 4 October 2011, http://www.businessday.co.za/Articles/C ... ?id=155063

Prasa plans to sell 20% stake in Intersite
The loss-making Passenger Rail Agency of SA (Prasa) is looking to sell a 20% stake in its subsidiary, Intersite, to a strategic equity partner, which it hopes will inject about R1bn into the unit
LINDA ENSOR
Published: 2011/10/04 08:25:47 AM

CAPE TOWN — The loss-making Passenger Rail Agency of SA (Prasa) is looking to sell a 20% stake in its subsidiary, Intersite, to a strategic equity partner, which it hopes will inject about R1bn into the unit.

The sale is just one of the initiatives Prasa is taking to strengthen its balance sheet and enable it to pursue a R107bn fleet renewal programme over the next 20 years.

Intersite, which leverages Prasa’s nonoperational and nonstrategic assets, has been restructured ahead of the anticipated sell-off, which Prasa has asked Transport Minister Sbu Ndebele to approve. Transaction advisers have been appointed to help structure the proposed deal.

A list of 22 properties, including stations, development land and commercial buildings, has been identified and the buyer would be given the option of a further 10% stake later.

Prasa CEO Lucky Montana said in the group’s annual report, tabled in Parliament yesterday, that the Intersite transaction was "critical". "It is vitally important that the transaction is concluded by March 2012 as part of injecting in the short term much-needed cash into Prasa whilst securing the financial sustainability of Prasa in the long term," he said.

The auditor-general has again drawn attention to Prasa’s financial vulnerability . It suffered a R1bn loss last year following a R1,3bn loss the previous year. By end-March its total liabilities exceeded total assets by R186m, a reversal of the previous year when assets exceeded liabilities by R832m. Current liabilities exceed assets by R1,6bn (R2,7bn).

It is envisaged that the strategic equity partner would acquire a portfolio that might include certain third-party contracts managed by Intersite; equity in development projects under way; exclusive rights to develop certain key station precincts. Nonstrategic properties with commercial potential may also be sold to Intersite.

Department of Transport spokesman Tiyani Rikhotso said Prasa’s application was received at the end of last week and would be considered by the minister.

Intersite used to be Prasa’s property development arm but last year management of the property portfolio became an internal function. Intersite had an operating loss of R9,5m in the last financial year.