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Imran Karim, Senior Key Account Executive, Transnet Engineering gave this presentation at the 4th annual Mozambique Coal conference, the very first event to focus on the coal industry in the......

Imran Karim, Senior Key Account Executive, Transnet Engineering gave this presentation at the 4th annual Mozambique Coal conference, the very first event to focus on the coal industry in the Mozambican region and has had the support from the Mozambique Government since the inaugural event in 2010.

With 300+ attendees each year, this event sees geographical delegate representation as diversed as Australia, South Africa, India, Bostwana, Canada, United-Kingdom, Egypt, Indonesia, Pakistan, United Arab Emirates USA, Singapore, Thailand, Japan, and of course Mozambique.

For more information about the annual event, please visit www.immevents.com/mining-conference/mozambique-coal-conference

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  • 1. Mozambique Coal Conference 2013 Infrastructure Development Support for Mozambique Coal Published July 2013 © Transnet Engineering (TE) a division of Transnet SOC
  • 2. PAGE 1 Contents TE - Who are we? The Mozambique coal mining expansion Opportunities for strategic partnership Conclusion 1 2 3 4
  • 3. PAGE 2 South Africa has embraced the challenge “Regional and continental infrastructure development is of fundamental importance to the realisation of Africa's economic growth and development imperatives.” […] As regional leaders, we carry a particular responsibility to serve as champions in driving industrial and infrastructure development both at the regional and continental levels.” President Jacob Zuma - on Infrastructure Development “Our foreign policy prioritises the building of relationships in the African continent, the focus of which is to promote development, contribute to the resolution of conflicts and to build an environment in which socio- economic development can take place”. Minister of Public Enterprise: Malusi Gigaba – Reiterates SA’s Foreign Policy on 28 June 2013
  • 4. PAGE 3 Transnet Structure TE summary and overlay within Transnet 1 SOC – State Owned Company SOURCE: Team analysis TE - WHO ARE WE? National Ports Authority Freight Rail Port Terminals Pipelines Transnet SOC1 Engineering Rolling Stock Manufacturing: ▪ Manufacture ▪ Assembly ▪ Rebuilds ▪ Refurbishments ▪ Upgrades & Conversions ▪ Maintenance & Service National Ports Authority: ▪ Responsible for the safe, efficient and effective management of South African Ports Port Terminals Operator: ▪ Monitoring and executing port terminal operations within South African Ports SA Rail Line & Freight Operator:  Rail Operator responsible for rail freight logistic solutions  Serve the mining, manufacturing and industrial sectors Pipeline Operator: ▪ Transportation of petroleum products via a pipeline network within South Africa
  • 5. PAGE 4 Continuous technology advancements and improvements Running Maintenance Refurbishing & Conversions Locos, wagons, coaches, components Heavy Maintenance Upgrades Locos, wagons, coaches, components New Builds Locos, wagons Leasing 1859 – Landing of the first railway locomotive in South Africa at Cape Town Running maintenance was first established TE brings over 150 years of experience in the rail engineering sector and has built substantial expertise... TE’s evolution and transformation of the SA transport industry1 1950s – Koedoespoort plant established to refurbish steam locos 1970s – Started refurbishing electric locos 1999 – Expanded capability to upgrade locos starting with 6E1 to 17E 2007 – Upgrading of diesel locomotives 2008 – Entered the new build market TE - WHO ARE WE?
  • 6. PAGE 5 TE began its journey in 1860, and is currently a leading Rail Engineering & Manufacturing firm TE journey to date TE - WHO ARE WE? REVENUE R15bn DEPOTS 132 EMPLOYEES ~13,0001 ASSET VALUE R8.4bn FACTORIES 6 OFFERINGS 9 PRODUCTS TE Today Coaches WagonsLocomotive FoundryAuxiliaryRotating machines Ports Rolling stock Equipment Wheels 1850 200919161892 1990 1994 First railway in South Africa established – Natal Railway Company South African Railways and Harbours was born under the Union of SA Transwerk branded as a separate entity within Transnet Links between various Railway Companies started to develop SA infra- structure management became a company entity, and Transnet was born Transnet rebranding and structuring completed – Transwerk became TE First locomotive arrived in SA – beginning of TE Arrival of the first train at Johannesburg from Cape Town via Bloemfontein TE produces the worlds most advanced health train (Phelopepa 1) TE partners with leading international OEM’s to create world class products for Africa Official opening of the first public railway in South Africa, from Point to Durban Today Transnet Engineering is the backbone of South Africa’s railway industry with nine product-focused businesses, 132 depots, six factories and ~13,000 employees countrywide. The organization is dedicated to in-service maintenance, repair, upgrade, conversion and manufacture of freight wagons, mainline and suburban coaches, diesel and electric locomotives as well as wheels, rotating machines, rolling stock equipment, castings and auxiliary equipment and services
  • 7. PAGE 6 Contents TE - Who are we? The Mozambique coal mining expansion Opportunities for strategic partnerships Conclusion 1 2 3 4
  • 8. PAGE Coal Production (mtpa) Mozambique Share of Mining Sector Value by Segment % 7SOURCE: BMI Mozambican Coal Mining Growth Company Mine Estimated Production (mtpa) Year Vale Moatize 22 2014 Rio Tinto Benga 20 2015 Beacon Hill Resources Minas Moatize 4 2012 Nippon Steel Corp Revuboe 5 2015 ENRC Estima 20 2016
  • 9. PAGE Mozambican Transport Coal Corridor Projects •The Sena railway line is Mozambique's only existing route for coal exports, linking the Moatize region with the port of Beira. The railway can carry 3.5mtpa, which is insufficient. Delays in upgrading the project have seriously dented the country's ability to ramp up coal exports and this was exacerbated by flooding in February 2013 which cut off part of the line temporarily. Beira Corridor •Vale is investing significantly in a railway line to link the Moatize basin with the port of Nacala via Malawi. The project includes construction of a 900km railway line and upgrades to the deepwater port of Nacala. Nacala Corridor •Kazakh mining company ENRC has also announced plans to build a railway and coal export terminal at the port of Nacala. Construction is due to start in 2014 and be completed in 2016. The project, which would run adjacent to Vale's Nacala corridor, is envisaged to carry 40mtpa in the initial phases. ENRC Project (Tete-Nacala) •The recent project to be proposed is a railway line and port project that would carry coal 525km from the Moatize basin to Macuse in the central coastal Zambezia province. The tender was released in early 2013. The winning bidder is due to be announced shortly. It is hoped that the railway will carry 20mtpa. It is unclear which port it would use as its end destination, as Macuse lies between Beira and Nacala. There are some indications that a new port will be built to service this rail line. Moatize-Macuse •China has announced it is in negotiations for US$1.5bn in financing for the construction of a deepwater terminal at Nacala. The project would be able to handle 20mtpa. China Nacala Port Project 8 Growth in Coal Mining SOURCE: BMI
  • 10. PAGE Mozambican Coal Mining Growth The Tete province has the largest under- developed coal basin in the world. Coal production exports from Tete are expected to reach 40Mtpa by 2017 and 100Mtpa in the longer run. There are several new rail lines and ports under development and upgrade. These are desperately needed to alleviate the transport bottleneck as the freight volumes increase. It is an absolute imperative to support the this coal sector rail infrastructure with safe, reliable and efficient rolling stock and rail related products for sustainable, effective and efficient operations. 9 Growth in Coal Mining SOURCE: Team analysis
  • 11. PAGE 10 Contents TE - Who are we? The Mozambique coal mining expansion Opportunities for strategic partnerships Conclusion 1 2 3 4
  • 12. PAGE Key Stakeholders 11 100 MTPA of COAL
  • 13. PAGE Benefits of Partnership  Transfer of rail engineering skill from its relatively mature engineering and operational skills pool to key stakeholders including the people of Mozambique  Jointly established state of the art maintenance facilities with modernized machinery and equipment to support the current and future rolling stock demand.  The supply of products and services by Mozambicans in Mozambique  Reduction in the cost of doing business in Mozambique, as localized support will not incur cost due to delayed maintenance support and services  Financial benefit from DFI as well as synergies created during the acquisition and during the life cycle support phases of the rail logistic chain. 12
  • 14. PAGE 13 South Africa’s Heavy Haul Coal Operation
  • 15. PAGE 14 Key Consideration for Rolling Stock 1067mm Current Future? 18 tonnes/axle 50 tonnes 30 years Track gauge Axle weight Payload Standard Air Brakes Operating life Brake System Brake Rigging Maximum operating speeds 1435mm 22-36 tonnes/axle 68-120 tonnes 40 years ECP Conventional Bogie Mounted Brakes 80 km/h 100 km/h Fleet Management Rolling stock Regulations Adhoc Source: Team analysis, tender documents OPPORTUNITIES FOR STRATEGIC PARTNERSHIP 895mm Current Future? 34” 32-35 Wagon Non-steering Coupler Height Wheel Sizes Train lengths Steel Bogie Type Body Material Wheel Profiles Maintenance > 895mm 36” >35-200 wagons Steering SS/Aluminium Conventional New Time/Use Based Condition based Strategic Sourcing Standardization Company Approach Fleet Plan Railway Regulations Industry Approach Customised Industry Norms and StandardsEmergent Mature
  • 16. PAGE Standardisation Higher standardisation leads to larger demand and lower LCCs Source: Team Analysis Capital Cost Lifecycle Cost IndustrialisationRisk Transformation Standardisation Standardisation Standardisation Standardisation 15 The initial cost of Rolling Stock The cost to the company in lost revenue due to the non-availability, delay or cancellation of trains The ability to compete in competitive supply chain for locomotives/ wagon services The capability and capacity of the domestic locomotive/wagon manufacturing & service industry. The total cost of the locomotive over its lifecycle including energy, maintenance and operating costs
  • 17. PAGE Strategic Sourcing initiatives hold many potential benefits for the region 16 1 2 3 4 5 Stimulate regional integration Build local capacity and capability Accelerate economic development Security of supply Reduction of supply, production and maintenance costs
  • 18. PAGE Partner to Achieve 17 Lower cost Ease of working with us Local supply capability Reliable Products Production Capacity Maintenance & Support Green conscious Ease to integrate Wide network Training support Innovation Skills & Capability Flexible Product Differentiation Quality Modern Production Facilities
  • 19. PAGE Comprehensive suite of Rolling Stock support 18 New product development and design Product and component manufacturing Life cycle maintenance (Heavy and light) Cost effective rebuild and refurbishment programmes Financial solutions and purchase plans Training wrt Maintenance, new product & Lean Six Sigma TE can customize complete packages to meet operational requirements from manufacturing and maintenance to other supporting functions ... SOURCE: Team analysis Obsolete product, component & technology upgrades Field service team support Maintenance and fleet planning
  • 20. PAGE 19 Transnet’s Support to Mozambique's Coal Infrastructure Development Group • Supporting Government’s role in the development of the Region and the Continent • Financial support thro DFI as the opportunity may arise Rail (TE) • Supplier Development • Transfer Knowledge and Skills • Conduct Engineering Development for Mozambique Solutions • Supply of wagons and locomotives • Supply of rail maintenance services A Solid History With origins dating back more than a century to the mechanical engineering department of the former South African Railways and Harbours, this engineering organization has actively supported railways in the expansion of the country’s economy. Our institutional capability will help avoid expensive lessons. African Soul – Global Perspective Transnet Engineering has committed itself to significant investments in research and development to service the specific requirements of Africa. This has led to an ever-expanding range of rolling stock solutions and products. We pride ourselves on developing African products by Africans for Africa and our proximity to Mozambique makes us an attractive partner. Conclusion
  • 21. THANK YOU