JOHANNESBURG (miningweekly.com) – Transnet CEO Brian Molefe has reiterated that the State freight logistics group is ready to enter into partnerships with the private sector on a case-by-case basis. But he also promises "vigilance" so that some of the "spectacular" deal reversals that have afflicted other such partnerships, in sectors as diverse as airlines and airports, are avoided.

The group has identified several possible public sector participation (PSP) opportunities, but had not yet modelled how much capital expenditure (capex) these could feasibly leverage beyond the group's R110.6-billion, five-year budget through support of client or other private company balance sheets.

The projects currently being canvassed include the integration of further Waterberg export and domestic coal, which could raise capacity to between 80-million and 135-million tons a year.

Currently a study is being undertaken together with the coal industry. However, Transnet is also looking to fast track the development of a 70 km link through Swaziland, to remove general freight from the coal corridor from Ermelo to Richards Bay.

Molefe indicates that Swaziland has already indicated a willingness to invest in the line, with support from development financiers, while Transnet will contribute general freight volumes. He hopes that the project will emerge over the coming 24 to 36 months, and reports that it could help align the capacity of the coal line with the 91-million Richards Bay Coal Terminal. In 2010/11 the channel delivered only 63-million tons, below its own 72-million ton nameplate.

Other possible PSP projects could be pursued with iron-ore and manganese miners in the Northern Cape, as well as to equip the remaining two berths at the Ngqura container terminal and to build new inland terminal capacity in Johannesburg and Pretoria.

For the rail business, various partnership models will be considered, from build-operate-transfer schemes, to opening access to privately owned locomotives and wagons, to private wagon ownership and lease agreements.

Molefe also says that negotiations surrounding the acquisition of the old Durban International Airport site are under way with Airports Company South Africa and that the deal should be completed in the current financial year.

Thereafter, it will look to partner with private investors to develop what could be a R75-billion dig-out port and container terminal on the site.

But Molefe says that it will not move ahead with PSPs from an ideological stance and he stresses that he will not be "romantic" about future partnerships. He recalls major disappointments, including the reversal of the South African Airways and Acsa partnerships. He also raises questions about the value contributed by Telkom's strategic equity partners, selected in 1997.

Therefore, he plans to take some of the offers from the private sector "with a tablespoon of salt".

That said, he remains open to future partnerships, particularly where Transnet's own balance sheet is a constraint to growth and development.

In the meantime, the group is pursuing its internally funded capex plans, for which funding has or is being secured.

It spent R21.5-billion in 2011, which was marginally short of budget and will spend R25.9-billion, R22.4-billion, R24.6-billion, R18.7-billion and R19-billion over the years from 2012 to 2016.

Transnet will have to borrow R25-billion over the coming five years to fund its capex, with cash from operations accounting for R96.4-billion. The money has so far been raised on the domestic and foreign capital markets as well as from development finance institutions, export credit agencies, bank loans and commercial paper.

Transnet aims to increase the size of the Domestic Medium Term Note programme from R30-billion to R60-billion to fund its 2012 capex.

It also plans to expedite the closure of its unfavourable R6-billion T18 bond that was placed with the Public Investment Corporation (PIC) in 2007, when Molefe was ironically CEO of the PIC. The bond is due to expire only in 2018.