3Rd Waterberg Conference an Overview of Transnet's Plans For

Fossil Fuel Foundation: 3rd Waterberg Conference An overview of Transnet’s plans for Waterberg coal 15/16 October 2014 1 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

3 The mandate: Transnet vision and mission

Vision Mission

To meet customer demand for To enable the competitiveness, reliable freight transport and growth and development of the handling through: South African economy by • Fully integrating and delivering reliable freight maximising the use of its transport and handling services unique set of assets; that satisfy customer demand. • Continuously driving cost efficiency; and • Demonstrating a concern for sustainability in all we do.

4 The task: Coal is important to Transnet

Coal % of total railed in 2013/14 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Tons Revenue

5 • Coal is expected to remain between 42% and 44% of all tons railed over the next 10 years The tools: Rail and port infrastructure overview

Total network : 30 400 track km : 20 953 route km Core network : 12 801 route km

Network electrification: • 50kV AC (861km) • 25kV AC (2 309km) • 3kV DC (4 935km) • Diesel (11 974km)

Mosselbay

6 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

7 Market Demand Strategy

. R312bn capital investment programme over the next 7 years . Expanding rail, port and pipeline infrastructure . Increase in capacity to meet market demand . Continued financial stability and strength . Significant productivity and operational efficiency improvements . Shift from road to rail – reducing the cost of doing business and carbon emissions . Enabling economic growth . Job creation, skills development, localisation, empowerment and transformation opportunities 8 Transnet Corporate Plan CAPEX spending totals

60 000

50 000

40 000

30 000 Rm

20 000

10 000

- 2 015 2 016 2 017 2 018 2 019 2 020 2 021

9 • Transnet has committed to spend R312bn in the next 7 years Transnet Corporate Plan CAPEX spending breakdown

• Over the 7 years 49% will be spent on expansions and 51% on sustaining and maintaining current infrastructure • TFR accounts for about 67% of total investment of which 71% will be spent on rolling stock acquisitions • Ports account for a further 26% of Transnet’s total capital investment 10 • The majority of investments will be on GFB, export coal, export iron ore and maritime containers Transnet Corporate Plan CAPEX spending benefiting the Waterberg

Province / Total Total 2015 2016 2017 2018 2019 2020 2021 Integrated coal system 2015 2016 2017 2018 2019 2020 2021 Function (Rbn) (Rbn) Rolling Stock 12 12 15 15 16 16 11 97 Ermelo to Richards Bay 2 2 4 3 4 3 3 21 KZN 6 11 10 9 16 17 17 86 Lephalale - Pyramid 0 0 1 1 2 1 1 5 Various 6 4 4 4 6 7 7 38 Swazi link 0 0 0 0 1 1 1 5 Eastern Cape 1 3 8 9 5 2 2 30 Welgedag - Ermelo 0 0 0 0 1 1 1 4 Western Cape 3 3 3 4 5 6 5 29 Non capacity creating 0 0 0 - - - - 0 Mpumalanga 0 1 2 2 3 3 2 14 Botswana link - 0 0 - - - - 0 Gauteng 2 2 1 1 1 1 1 9 Lephalale - Ermelo - 0 0 0 - - - 0 Limpopo 0 0 1 1 2 1 1 5 Grand Total 2 2 4 5 7 8 6 35 Northern Cape 0 0 0 0 1 0 - 2 • MDS spend of R312bn that will benefit the Waterberg: Free State 0 0 0 0 0 0 0 1 • Limpopo province directly ~ 2% North West 0 ------0 • Coal system benefit ~ 11% Grand Total 31 36 45 47 54 53 46 312 • + Rolling stock ~ significant portion of 31%

11 • Significant spending that will benefit the Waterberg The Human Capital strategy will have a specific focus on job creation and skills development

• Total employees (including contractors) are expected to increase by 10% from 68 906 to 74 776 in 2020/21 • With such a capital intensive strategy it is key that Transnet increases its skills base 12 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

13 Demand forecasting: Overview

FREIGHT DEMAND MODEL (FDM) 30 year ECONOMIC DATA GAIN Port, Rail, Road and Conningarth production and Pipeline forecasts consumption of commodities by district and growth for 30 years

TRANSPORTATION MODEL (TTM) Transnet flows demand on LIQUID FUELS network: rail, ports, pipelines MARKET SHARE MODEL (LFDM) MODEL (MSM) EON / ETP Transnet flow model and determines rail growth forecasts for addressable market 30 years (RAM)

• The demand planning process in Transnet employs a suite of four models. These are used to determine the demand for transportation for all types of freight and then predicting how this demand will change over the next 30 years. 14 Mining freight: Supply/Production and Demand/Consumption areas

2012

0 – 0.2 mtpa

0.2 – 0.4 mtpa

0.4 – 0.6 mtpa

0.6 – 0.8 mtpa

0.8 – 1 mtpa

1 – 2 mtpa

2 – 5 mtpa

5 – 25 mtpa

25 – 50 mtpa

50 – 200 mtpa

2042

16 Demand forecasting: Market share considerations

Longer distances High volumes Certain Commodity types Short-haul distribution is more efficient Rail is a bulk mover Typically bulk minerals heavy on road Big parcels in a single move goods/containers/etc.

Corridor effect Concentrated corridors attract more traffic

Road friendly Road or rail Rail friendly

• Fundamental to the working of the Freight Demand Model is the ability to analyse the quantities, parcel sizes and distances associated with each commodity on the network. • Rail naturally works better for longer distances, big parcel sizes and bulky commodities. 17 Coal from the Waterberg

• Coal from the Waterberg used in these scenarios.

18 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

19 Planning hierarchy

The Long-term Planning Framework (LTPF) provides Transnet and the Operational Planning: Level 1 Where: Operating Divisions broader stakeholder community with a planning framework within What: Operational Plans which the long-term development of South Africa’s Freight Purpose: Resource allocation & Operational enablement Transportation network and the expansion of Transnet’s operational Timescale: Day-, week- , month- , months ahead footprint can be executed. Business Planning: Level 2 Where: Operating Divisions What: Business Plan, OD Strategic Plans Planning in Transnet happens at various levels. Purpose: Resource Planning & Strategic Enablement Timescale: 7 to 10 year rolling At a corporate level the main elements are the MDS and LTPF – both rolling plans, updated annually Corporate Strategic Planning: Level 3 Where: ODs and Corporate Centre What: MDS and Corporate Planning The MDS (Market Demand Strategy) is Transnet’s seven year Purpose: Strategic Target Setting, Integration & Funding plan to fulfil its mandate to enable economic growth by providing Timescale: 7 to 10 year rolling Port, Rail and Pipeline infrastructure capacity ahead of demand. It includes an aggressive investment plan of more than R300bn, rd Long-term Planning: Level 4 currently in its 3 year of implementation. Where: Transnet-wide What: LTPF (Long-term Planning Framework) The MDS’s capital plans are framed by a 30 year LTPF (Long-term Purpose: Long-term Capacity and Sustainability Planning Framework). The LTPF is a framework to guide strategic Planning investment decisions and offers a neutral view on capacity Timescale: 30 years requirements not impacted by affordability, profitability and other business constraints. National and Provincial Planning: Level 5 Where: National and Provincial Government What: National & Provincial Development Plan, PICC /SIPs The LTPF in turn is driven by Freight Demand Projections for a Purpose: Developmental Strategies and Enablement 30-year planning horizon, making use of a number of sophisticated Timescale: 10 - 30 years forecasting models.

20 Making sustainability part of planning: Moving from compliance to value creation

From Compliance… Sustainability Concepts …to Value Creation SUSTAINABILITY 1.0 SUSTAINABILITY 2.0 • Ensure compliance • Improve access • Minimize risk • Enhance relations • Maintain Health • Support innovation • Protect the environment • Enable sustainable growth

Transnet sustainability framework 21 High level capacity development process

Current network Freight demand infrastructure forecast (30 years)

The LTPF development Installed capacity Capacity required process stretches over a Capacity gaps (current) (future) 15- to 18-month planning

cycle. Aligned

Capacity Development Initiatives • Interventions Energy Needs • Development potential (future) • Scenario planning

Project plans MDS Demand (Most likely) (7 years)

Capital Requirements Corporate Plan Capital requirements 7 years (30 years unconstrained) Gap

• Infrastructure demand and availability are compared and the most appropriate capacity development initiatives are planned and costs and timelines determined. 22 • Demand alignment with the 7 year Corporate Plan is ensured. Capacity creation logic

Impact

• New track gauge standards

4 • Axle loading upgrades Massive investment • Speed standards Extensive disruption or incompatibility • New vehicle gauge standards Quantum New wave of competitiveness infrastructure • Additional passing loops • Track realignment Expensive investments Incremental 3 • Extension of crossing loops Moderate disruption infrastructure • Electrification Long lead times Step-up capacity

• Advanced braking systems • In-cab signalling 2 Incremental capacity • Distributed power Equipment and Moderate and • New locomotive designs technology direct cost

• Longer trains Quick change Low cost 1 • Better planning • Maintenance Operational discipline and

• Reliability redesign

Capacity solution space

• Bottom-up solutions are the most affordable and provide the best fit to existing systems 23 • Consider the operational improvements prior to implementation of major and costly new infrastructure solutions Integrated Supply Chain Optimisation Strategy

Rail Consolidation Mainline Railway Rail Consolidation Facility Operation Facility

Customer Sidings Port Facilities Load-Out Stations (Rail Offloading, Terminal & Comparative Cost Ship Loading) Contributors

OPEX CAPEX

Sidings Consolidation Rail Consolidation Port

System Optimisation Principles • Mainline railway operation is normally the highest cost contributor in supply chain • Operations/service design of other systems to be adjusted to optimise rail component (e.g. train lengths, axle loads, TATs, etc.) • Other means of funding to be explored to optimise Customer sidings and ports, e.g. PSPs., after interventions to optimise rail operations • Similar operations optimisation to be done for port facilities to support other transport modes (road and pipelines) 24 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

25 Current coal export system operating philosophy

100 Wagon trains from Lephalale to Ermelo • 6 000t/train at 20t/axle 100 Wagon trains from Mpumalanga to Ermelo • 8 400t/train at 26t/axle 200 wagon trains from Ermelo to Richards Bay • 12 000/16 800t/train at 20/26t/axle

Diesel traction

Electric traction (25kV AC)

Electric traction (3kV DC)

3 Traction changes

27 Medium term coal export system operating philosophy (1)

200 Wagon trains from Lephalale to Ermelo • 12 000t/train at 20t/axle 200 Wagon trains from Mpumalanga to Ermelo • 16 800t/train at 26t/axle 200 wagon trains from Ermelo to Richards Bay • 12 000/16 800t/train at 20/26t/axle

Diesel traction

Dual voltage traction (25kV AC + 3kV DC)

1 Traction changes

28 Medium term coal export system operating philosophy (2)

Dual voltage traction (25kV AC + 3kV DC)

0 Traction changes

29 Long term coal export system operating philosophy

200 Wagon trains from Lephalale to Richards Bay • 16 800t/train at 26t/axle 200 Wagon trains from Mpumalanga to Ermelo • 16 800t/train at 26t/axle

Dual voltage traction (25kV AC + 3kV DC)

0 Traction changes

30 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

31 Options proposed Waterberg rail logistics plan

Exxaro: TM (N)

Conveyor from 1. Bypass line via GG Sekoko to TM LOS

1 1 1 Sekoko 1 1 1. Conveyor to LOS at TM (N) 1

1 Exxaro: TM (S)

1. Line + LOS 1

Resgen Anglo Sasol TFR Exxaro: GG

1. Line + LOS 1. Line + LOS 1. Line + LOS via (Resgen) 1. 100 W Compilation Yard 1. Expand LOS for all Exxaro coal 2. 200 W Compilation Yard 33 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

34 Options for capacity creation

Reduce throughput time Run more trains • Equalise demand and scheduling • Upgrade train control systems • Improve terminal processes • Improve electrification system • Improve track maintenance planning • Add trackside monitoring equipment • Improve rolling stock reliability • Improve asset security systems Increased • Improve average speed (limited)

Run heavier trains volumes Run longer trains • Install higher axle load track • Increase length of passing loops • Upgrade structures • Reconfigure terminal infrastructure • Match traction type – 25kVA • Increase electrical supply • Increase electrical supply • Improve traction force distribution • Improve braking systems • Flatten gradients and ease curves

Supporting technologies

Standardisation • Train configuration Integrated system Operational planning • Traction type approach • System redundancy • Axle load • Reliability of rail sub • Consolidated bulk • ECP/DP systems loading terminals • Train control • Terminals, rail and port • Long-term Planning • Electrification systems sustainability Framework • Wagon types 35 Infrastructure condition

Train Control Systems

OHTE Perway (Track)

Good: Full operational capacity achievable Average: Required operational capacity achievable Poor – < 20% remaining life

36 Implications of demand on network loading

2014 2024

2034 2043

Below 0,5mtpa 0,5 to 1mtpa 1 to 5mtpa 5 to 10mtpa 10 to 20mtpa 20 to 60mtpa Above 60mtpa

37 Network utilisation if no investments are made

2014 2024

2034 2043

Percentage utilisation of capacity available for train operations

Light traffic – < 60% Moderate traffic – 60-80% Heavy traffic – 80-95% Traffic limit – 95-105% Heavy congestion – 105-130% Network collapse – >130%

38 Core network systems

39 Coal system: status quo

Notes • The system consists of both heavy haul and lighter axle load capacity sections • Section 3 is a heavy-haul coal export line from Ermelo to Richards Bay • Clay soil formation on parts of Section 1 inhibits axle load capacity increase on that section • Planned maintenance activities on the Welgedag – Richards Bay section will address the Perway condition through the replacement of rail, sleepers, ballast and turnouts • The outdated telecoms infrastructure needs to be replaced in the next seven years

Line properties

Section Line type Axle load Traction Train control Sharpest curve Steepest gradient 1. Lephalale – Pyramid Single 20t Diesel/25kV AC TWS 200m 1:75 2. Welgedag – Ermelo Double 20/26t 3kV DC CTC 153m 1:100 3. Ermelo – Richards Bay Double 26t 25kV AC CTC 550m 1:160 4. Glencoe – Vryheid Single 20t 3kV DC RTO 200m 1:66 5. Komatipoort – Richards Bay Single 20t Diesel/25kV AC TWS 250m 1:120

40 Coal system: demand

Lephalale  Ermelo Top 10 Commodities (Mtpa) Commodity 2014 2030 2043 200 Export Coal 64.00 93.60 116.90 180 160 Domestic Coal 11.10 27.90 41.30 140 Containers 0.30 4.10 11.50 120 Chrome 2.40 7.80 10.60 100 Industrial Chemicals 0.62 1.50 4.30 80 Ferrochrome 1.50 2.80 4.30 60 40 Processed Foods 0.03 1.58 3.80

Demand Growth (Mtpa) 20 Cement 0.95 1.60 2.80 - Other Agriculture 0.010 0.19 2.60 20142014 20182018 20232023 20282028 20332033 20382038 20432044 Iron & Steel 0.06 0.94 2.10

Ermelo  Lephalale mtpa

200

150

100

50 Demand Growth (Mtpa) - 2014 2018 2023 2028 2033 2038 2044 2014 2018 2023 2028 2033 2038 2043

41 Coal system: demand

Top 10 Commodities (Mtpa) Ermelo  Richards Bay Commodity 2014 2030 2043 Export Coal 69.5 106.4 132.9 300 Chrome 2.4 7.8 10.6

250 Domestic Coal 2.3 5.8 8.3 Containers 0 2.2 4.6 200 Wood & Wood Products 1.6 2.7 4.7 Ferrochrome 1.6 2.9 4.4 150 Industrial Chemicals 0.6 1.5 4.3 100 Iron & Steel 0.1 0.9 2.1 Ferromanganese 0.2 0.9 1.5

Demand Growth(Mtpa) 50 Other Agriculture 0 0.1 1.4

- Section demand (2043) 2014 2018 2023 2028 2033 2038 2043 Ermelo  RB RB  Ermelo 0 100 200 0 200

Ermelo Richards Bay  Ermelo

300

250

200

150

100 Vryheid

50 Demand Growth(Mtpa) -

2014 2018 2023 2028 2033 2038 2043 Richards 42 Bay Current Train Lengths

Lephalale

Phalaborwa

100w

Rustenburg 50w Emalahleni Maputo

Rietvallei Ermelo

Constraints Richards Bay - Eastern Mainline topography (Horseshoe) - CFM line criteria - Overvaal tunnel - Cato Ridge to Durban topography 43 Durban Aspirational Train Lengths (Coal System)

Lephalale

Phalaborwa

200w

Rustenburg Emalahleni Maputo

Rietvallei Ermelo

Coal Upgrade Initiatives - Optimised Port criterion = 200w, 26t/a - Coal Line already 200w, 26t/a - Construct double Overvaal tunnel to replace failing existing and increase capacity Richards Bay - Extend 26t/a lines to Emalahleni and Ogies - Upgrade Lephalale to Ermelo for 200w trains (Stage 2-5) - Extend Lephalale to Botswana (200w trains) - Waterberg Heavy Haul line (200w, 26t/a) 44 Durban Utilisation Analysis

Status Quo

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 Lephalale Constraints:

Thabazimbi 1. Single Line – Overvaal Tunnel 2 5 7 2. Unable to accommodate 200 wagon trains between Lephalale and Pyramid 3. At grade crossings at Ilangakazi and Sikame Rustenburg 4. Single line sections between Pyramid and Zesfontein (25km) 5. Limited crossing opportunities for 200 wagon trains 4 between Lephalale and Pyramid 6. Headways (Signal Spacing) 7. Limited crossing opportunities for 200 wagon trains between Lephalale and Pyramid Ogies 8. Limited slot capacity for GFB Trains

Ermelo

1 3 Percentage utilisation of capacity available for train operations

< 60% : Light utilisation 6 60 – 80% : Moderate utilisation

8 80 – 95% : Heavy utilisation

95 – 105% : Utilisation limit

105 – 130% : Over-utilisation

45 >130% : System failure Richards Bay Utilisation Analysis

Post Interventions

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 Lephalale Interventions

Thabazimbi All infrastructure capacity creation interventions based on 2 5 7 first extending non-coal bulk train lengths to 75 wagons

1. Double the Overvaal tunnel Rustenburg 2. Extend 5 crossing loops between Lephalale and Pyramid to accommodate 200 wagon trains 3. Provide grade separations at Ilangakazi and Sikame 4 4. Double single line sections between Pyramid and Zesfontein (25km) 5. Extend 3 crossing loops between Lephalale and Pyramid to accommodate 200 wagon trains Ogies 6. Reduce signal spacing between Ermelo and Richards Bay 7. Extend 2 crossing loops between Lephalale and Pyramid to accommodate 200 wagon trains 8. Extend non-coal bulk train lengths to 150 wagons south Ermelo of Ermelo

1 3 Percentage utilisation of capacity available for train operations

< 60% : Light utilisation 6 60 – 80% : Moderate utilisation

8 80 – 95% : Heavy utilisation

95 – 105% : Utilisation limit

105 – 130% : Over-utilisation

46 >130% : System failure Richards Bay Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

47 Richards Bay – Status quo

48 Richards Bay coal exports – Demand versus capacity

• RBCT capacity capped in this scenario to 110mtpa • Richards Bay marine services (TNPA) will be able to handle export overflow of about 20mtpa • Private or Transnet terminal operations capacity may be developed for non-RBCT exports

49 Richards Bay – Layout development

Current Layout Short Term Layout

Medium Term Layout Long Term Layout

51 LTPF 2014 – Ports Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

52 PLP delivery phases

Completed Various programmes

Concept Pre-feasibility Feasibility Execution Finalise

(FEL 1) (FEL 2) (FEL 3) (FEL 4) (Close-out) Phase

• Develop detailed

technical designs

• Identify all land •

Assess needed alternative • Conduct options: environmental • Acquire the land • Define the

 Technical impact • Construct closed concept and feasibility assessments • Test and • Close-out the develop  Land • Obtain commission programme conceptual requirements environmental • Hand over to designs  Environmental approval operations

Main Activities Main impact • Define delivery

 Financial costs detailed costs programme

Gate 1 Review & Approval & Review 1 Gate Approval & Review 3 Gate

Gate 2 Review & Approval & Review 2 Gate • Develop the business case Acceptance & Review 4 Gate • Obtain funding

53 1a. WATERBERG EXISTING LINE UPGRADE Expansion from 5 to 27mtpa (3 to 23mtpa of Coal)

Project description:

Development of the Waterberg feeder rail system to accommodate demand for: (a) domestic and export coal and (b) iron-ore, granite and other general freight originating from the Waterberg and Rustenburg area. The project consists of upgrading the existing route to increase capacity to an estimated 27 Mtpa of coal. Rail infrastructure expansion through incremental upgrades of the existing rail networks and yards by means of additional loops, maintaining the existing axle loads, electrical upgrades and improved train control systems.

Five Stages from 5 Mtpa up to about 27 Mtpa:

• Stage 1: Matlabas loop extension (moved to Coal to 81Mtpa) • Stage 2: Thabazimbi extensions • Stage 3: Ferrogate, Arthersview, Paul, Phokeng, Rooiheuwel and Pyramid South. • Stage 4: Lengthen Matlabas loop for 200 wagon trains, Lengthen Northam, Additional loop at Thabazimbi and Additional loop at Pyramid South • Stage 5: Lephalale to Thabazimbi electrification

Capacity beyond 27 Mtpa will be investigated as part of the study.

Estimated Total Cost: R5.0 bn (Escalated)

Challenges Status Quo

• Limited water resources in the Waterberg area will significantly impact the full development of • Tender for the FEL-2/3 for stage 3-5 EPCM Service Provider will be mines due to lower quality of coal and environmental compliance issues closed on 27 Aug 2014, envisage approval for award 02 Oct 2014 (TCP NAC), • MCWAP II (water provision program) required for expansion beyond 15mtpa • Level Crossing tender will be awarded in Mid-Aug 2014, • Topographical Survey and Geo-Tech consultants on site for Stage 2, • Mineral qualities for domestic market unknown Consultants will continue with Stages 3-5 after stage 2 is completed, • Environmental tender for stage 2 award envisaged Mid-Aug 2014, • Sanction number required for the material can be ordered for stage 2 • Line electrical capacity simulation underway, • Conducted risk workshop for business/commercial, operational and projects risks, • FEL-2 for stage 2 is being finalised by TCP. FEL-3 will commence after approval of the FEL-2 54 1a. WATERBERG EXISTING LINE UPGRADE Expansion from 5 to 27mtpa (3 to 23mtpa of Coal)

Development Timeline 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23

FEL-2&3

Construction

Capacity mtpa 3.5 4.2 4.2 4.2 6.3 12 23 23 23 23 23

Corporate Plan ETC (Rm) 14/15 15/16 16/17 17/18 18/19 19/20 20/21 Total for 7 years

Waterberg FEL 3 Phase 2-5 (23Mtpa) Electrification and Atlanta 100 60 ------60 link

Waterberg - Phases 2-5 Additional passing loops OHTE Train 3 860 2 28 400 600 1 000 907 600 3 537 Control and ESKOM supply

Waterberg - Phase 6 (23Mtpa) Electrification of Thabazimbi to 1 050 - - - 50 502 448 50 1 050 Lephalale and upgrade OHTE Pyramid to Ogies (partial)

Total 5 010 62 28 400 650 1 502 1 355 650 4 647

55 Staged Infrastructure Upgrades

Complete electrification Musina Lephalale to Complete 200 wagon Completed: Thabazimbi compilation yard at Lephalale Stage 1

Interim working Lephalale Lengthen Matlabas solution for loop for 200 wagon Lephalale yard trains. Phalaborwa FEL3/4: Thabazimbi-Pyramid South: One Stage 2 Complete crossing loop at Northam and one Matlabas Loop for Thabazimbi additional loop each at Thabazimbi 100 trains. and Pyramid South to be used to change locomotive mode Thabazimbi: One (Diesel/AC/DC). Komatipoort FEL3/4 – Full EPCM: 200 wagon line Stage 3 and change over Pyramid for (Diesel/AC). Stage 4 Ogies Maputo Stage 5 Two double line Ermelo sections between Additional Simulations Bleskop – Norite Complete 6 crossing loops for 200 Required for Stages 3-5 (5km) and Dam – wagon trains at Ferrogate, between Pyramid and Arthersview, Paul, Phokeng, Onderstepoort Ermelo due to: Rooiheuwel and Pyramid South. - 200 wagon trains (7km). Latter loop to be used to change - GFB growth locomotive mode (AC/DC). - Service design changes

56 Richards Bay Social considerations: Existing line runs through town and villages

57 Existing line macro geotechnical considerations

58 Existing line test pit profiles and predicted expansion indicate axle load upgrading not justifiable

Test Predictive pit expansion (mm) 1 9 2 58 3 74 4 122 5 62 6 71 7 28 59 8 35 Given the social, geotechnical and line standards, a new heavy haul line is the preferred option

BOTSWANA RSA

Groenbult Lephalale (Ellisras)

Polokwane Matlabas <1:100 Finding a new route is ultimately X the only option for large scale Vaalwater capacity development Thabazimbi Naboomspruit Steelpoort X Modimolle (Nylstroom) 1:160 Bela-Bela (Warmbaths) 1:100 92.8km 1:160 107km 90.5km 1:125 Roossenekal Atlanta 41km 1:160 Boshoek X Pyramid 262km Belfast RAIL LINE to Maputo Pyramid Greenview Rustenburg Witbank Pendoring South X Wonderfontein Blackhill Welgedag Existing lines Ogies Potential New lines Springs

Hamelfontein ERMELO Trichardt COAL LINE to Richards Bay 60 1b. WATERBERG NEW HEAVY HAUL LINE New line: capacity from 40  80  112mtpa

Project description:

The project consists of a study for a proposed new heavy haul line between Lephalale and Ermelo for traffic demand beyond the 23 Mtpa additional coal capacity expansion of the existing line. Line capacity will initially be 40 Mtpa scalable to 80 Mtpa and 112 Mtpa, possibly in single line configuration.

Estimated total cost for 112mtpa:

(Not Funded) R51.1bn un-escalated including rolling stock R31.4bn un-escalated (infra only, single line)

Challenges Status Quo

• There is uncertainty about the capacity demand for the new heavy haul line. This is due • Pre-feasibility (FEL 2) study being set up. to the uncertainty about the coal reserves in the Waterberg area. • FEL 2 funding has been approved. • There are exclusion zones in the Waterberg biosphere and national parks which are expected to limit the options for the new line.

• It is anticipated that the environmental approval process will be lengthy, due to the proposed line traversing agricultural, rural, mining and game farming areas, and possibly areas earmarked for metropolitan development.

61 1b. WATERBERG NEW HEAVY HAUL LINE New line: capacity from 40  80  112mtpa

Development Timeline 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/30 30/31 31/32

FEL-2 setup

FEL-2

FEL-3 setup

FEL-3

Approvals & construction setup

Construction phase 1

Construction phase 2

Construction phase 3

Capacity mtpa 40 40 40 40 80 80 80 80 112

Total for 7 Corporate Plan ETC (Rm) 14/15 15/16 16/17 17/18 18/19 19/20 20/21 years FEL 3 (40Mtpa) Completely new single line 26t/axle 200 Wagon Ermelo to Thabazimbi via Atlanta (no RS) Atlanta 100 - 10 60 30 - - - 100 section only Latest investment estimates

Lephalale to Ermelo: Heavy haul line (26t/a): Infrastructure 31 711 - - - - - 643 1 440 2 082 only

Lephalale to Ermelo: Heavy haul line (26t/a): Rolling Stock 19 345 - - - - - 967 2 321 3 289 only

62 Various route proposals are being pursued to unlock Botswana coal and expand capacity for existing coal sources

Zimbabwe RSA-Botswana East Rail link link West Rail link (TKR) Botswana 4 Mozambique Lephalale Namibia 3 2 Proposed Techobanine port New heavy haul 1 Maputo Techobanine Ermelo Swaziland

Swazi link Coal Backbone Richards Bay Coal Link New Coal 1 Central Basin Durban Terminal 2 Waterberg Fields De Aar 3 Botswana South Fields 4 Soutpansberg/ Limpopo

Saldanha East London Ngqura Cape Town 63 1c. BOTSWANA LINK LINE New line: capacity from 20  40mtpa

Project description:

Development of the Waterberg rail system to accommodate coal and other traffic from Botswana through the Waterberg and Rustenburg regions. The project consists of a study to consider a possible new heavy haul line between Lephalale and the Botswana rail network.

Line capacity will be 20mtpa scalable to 40mtpa in single line configuration.

Estimated total cost:

(Not Funded) R5.0bn un-escalated (infra only)

Challenges Status Quo

• There is competition from other proposed new lines i.e. Walvis Bay and • FEL 1 study completed Techobanine. • FEL 2 funding has been approved • Demand confirmation difficult due to uncertainty around Botswana resources and reserves. • Awaiting finalization of Botswana Rail involvement / relationship.

• Exclusion zones from Waterberg biosphere and national parks expected to limit new line options.

• Lengthy environmental assessments and approvals expected.

64 1c. BOTSWANA LINK LINE New line: capacity from 20  40mtpa

Development Timeline 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 FEL-2 setup FEL-2 FEL-3 setup FEL-3 Approvals & construction setup Construction phase 1 Construction phase 2 Capacity (mtpa) 20 20 40

Total for 7 Corporate Plan ETC (Rm) 14/15 15/16 16/17 17/18 18/19 19/20 20/21 years

Botswana Link FEL3 100 30 70 - - - - 100

Total for 7 Latest investment estimates ETC (Rm) 14/15 15/16 16/17 17/18 18/19 19/20 20/21 years

Lephalale to Botswana rail network: Phase1 4 680 - - - - - 936 1 872 2 808

Lephalale to Botswana rail network: Phase2 315 ------

Total 4 995 ------2 808

65 1d. SWAZILAND RAIL LINK

Project description:

This is a bilateral project between Transnet and Swaziland Railway, aimed at establishing a strategic rail link from Lothair to Sidvokodvo in Swaziland. The link seeks to create a dedicated Export General Freight (GF) rail corridor to the eastern seaboards ports of Richards Bay and Maputo. The benefits of the project include:

1. Providing up to 43mtpa of a single line rail capacity to the eastern seaboard ports. 2. Freeing up a maximum of 12 slots (currently used for GF) on the Coal Line, thus unlocking capacity for export coal and improving the efficiency of the Coal Line. 3. Enhancing the integration of the railways of South Africa, Swaziland and Mozambique 4. Acting as a catalyst for regional and local economic development. 5. Providing socio-economic opportunities (jobs, skills, business opportunities etc.) thus contribution towards the fight against poverty. The key dependencies for the success of the link are the upgrades required on the adjacent networks viz. Davel – Lothair, Sidvokodvo – Phuzumoya – Mpaka – Maputo and Phuzumoya – Golela – Richards Bay.

The project is being delivered in three phases: • Phase 1 – deliver capacity of up to 16mtpa (20t/axle – 150 GFB wagon trains) • Phase 2 – deliver capacity of up to 32mtpa (20t/axle – 150 GFB wagon trains) • Phase 3 – deliver capacity of up to 43mtpa (26t/axle – 150 GFB wagon trains)

Estimated total cost:

R6.8bn (Escalated) (Excluding rolling stock) (Project Not Funded)

Challenges Status Quo

• Close monitoring of the community engagements especially in Swaziland and land related matters. • The last 10km of the alignment before Sidvokodvo has been concluded and geotechnical investigation is underway. There are no plans to move any schools as initially indicated • Long lead times for Water Use and Borrow Pit licences, 18-24 months in South Africa and Swaziland. Ministerial Committees to be engaged to assist with expediting the process • EIA approvals not received yet in both countries . Asset and infrastructure survey has been completed.

• Ensuring that the work-streams deliver on the targets as set to enable the completion of the Business • MOU with RSA landowners was signed on 26/08/14. Sale negotiations with RSA landowners to be Case and the Feasibility Study report for the New Link as agreed with the Inter-Rail Committee concluded by end of September 2014.

• Draft Engineering and cost estimate report that will be delivered on 17/09/2014 as input to the Business • The funding model has been approved in principle by the Inter Rail Steering Committee. Case. However this will not be complete to the full FEL3 standards due to the delays in finalising the alignment (last 10km before Sidvokodvo), the Lothair take-off and late submission of geotechnical • The business case is taking shape investigation factual report.

66 1d. SWAZILAND RAIL LINK

Development Timeline 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 FEL-2 FEL-3 Construction WP1: Link Capacity mtpa 16 16 16 16 16

Item ETC (Rm) 14/15 15/16 16/17 17/18 18/19 19/20 20/21 Total for 7 years

Corporate Plan Swazi link FEL 3 (Heavy haul - 200 wagon, 26t/a) 163 66 40 - - - - - 106 Swazi link FEL 4 Construction 4900 - - 100 484 1100 1420 1306 4410 Total 5 063 66 40 100 484 1 100 1 420 1 306 4 516

Project Costing Estimate

WP 1A - Lothair to Border 1 893 379 568 757 189 - - - 1 893

WP 1B - Border to Sidvokodvo 4 884 977 1 465 1 954 488 - - - 4 8884

Total 6 778 1 356 2 033 2 711 677 - - - 6 778

67 1e. COAL EXPORT TO 81mtpa Export coal through RBCT

Project description:

The project incorporates a combination of capital expenditure and operational optimisation initiatives to increase the overall coal export system to 81mtpa.

• Major upgrades to the power supply and OHTE • Running Line upgrades • Matlabas loop extension • Rolling Stock Yards

Estimated total cost:

R5.8bn (Escalated)

Spent cost:

R61m

Challenges Status Quo

• Eskom electrical power supply infrastructure delays may limit planned rail • Project in execution (32 infrastructure work packages at various infrastructure capacity utilization. stages).

• Misalignment with Corporate Plan volume ramp-up. • Matlabas completed in September 2013.

• Timeous procurement of perway material. • Project shongololo will investigate distributed trains to increase capacity.

• Sustaining capex interventions of R15bn are also being pursued.

68 1e. COAL EXPORT TO 81mtpa Export coal through RBCT

Development Timeline 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 FEL-3 Construction phase 1 Construction phase 2 Capacity mtpa 76 76 76 76 76 81 81 81 81 81 81

Demand mtpa (To R/B) 71 67 77 81 84 87 90 94 101 101 101

ETC Total for 7 Corporate Plan

(Rm) years

14/15 15/16 16/17 17/18 18/19 19/20 20/21

Coal 81mtpa - Electrical Power upgrade Greenview Substation Conversion Sustain 62 13 5 21 - - - - 39

Coal Line 81mtpa - for critical items Approval Expand 1 065 2 ------2

Upgrade of line between Rietkuil and Wonderfontein Sustain 36 36 ------36

Coal Line 81mtpa - Matlabas Loop Expand 33 2 ------2

Coal Line Sustain Capacity 71mt-81mt upgrade running lines Sustain 506 52 18 - - - - - 69

Coal Line Sustain Capacity 71mt-81mt OHTE Sustain 122 10 ------10

Coal Line 81mtpa - Yards and Lines Expand 462 155 115 97 - - - - 367

Coal Line 81mtpa - Electrical (Power Upgrades) Expand 2 042 340 432 764 377 - - - 1 913

Coal Line 81mtpa - Electrical (OHTE) Expand 194 109 29 3 - - - - 141

Coal Line Capacity expansion (71mt to 81mt) Upgrade Yards Sustain 441 6 ------6

Coal Line Capacity expansion (71mt to 81mt) Power Supply Expand 186 8 ------8

Coal line 81mtpa - Conditional Monitoring WILMA - Coal Expand 35 20 ------20 Total expansion 4 016 636 576 865 377 - - - 2 453 Total Sustained 1 167 117 23 21 - - - - 161 Total Expansion plus Sustained 5 183 753 598 886 377 - - - 7 797

69 1f. COAL EXPORT TO 91mtpa Export coal through RBCT

Project description:

The project incorporates a combination of capital expenditure and operational optimisation initiatives to increase the overall coal export system capacity to 91mtpa as per the corporate plan volume target. Included are:

• Potential doubling the Overvaal tunnel (now launched as a separate work stream) Note: This will be required as an operational risk requirement and possible capacity relief should the Swazi Link not materialize in time to reroute GFB • Crossing elimination at Sikame and Ilangakazi (rail over rail bridges) • Substantial electricity supply upgrades • Introduction of regeneration technologies on OHTE and Locomotive systems • Terminal upgrades. • Corresponding rolling stock procurement to track demand.

Estimated total cost:

To be determined R8.9bn (Escalated) in the corporate plan

Challenges Status Quo

• Coordinated development of all coal systems. • FEL-1 not yet commenced — planned for Q2 2014/15

• Swazi link project may not remove GFB cola line from line in time to reach targeted volume growth.

• Coal 81 delay will impact on ability to reach capacity in time.

70 1f. COAL EXPORT TO 91mtpa Export coal through RBCT

Coal export to 91Mtpa Development Timeline 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 FEL-1 FEL-2 FEL-3 Construction *Capacity mtpa 76 76 76 76 76 81 97 97 Demand mtpa (Ermelo to R/B) 71 67 77 81 84 87 90 94 *Capacity needed according to Corporate Plan - Beyond 81, Swazi Link and/or Overvaal tunnel will be required for additional slots. Overvaal Tunnel (part of 91Mtpa solution) Possible fast tracking to address operational risk and 97mtpa need - (if Swazi link not available in time) Development Timeline 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 FEL-3 & Environmental

Construction

Slot Capacity added (per day) 18 18 Total18 for 7 ETC (Rm)

Corporate Plan years

14/15 15/16 16/17 17/18 18/19 19/20 20/21

Ermelo Yard Re-configuration Vacuum Break for GF Sustain 7 1 ------1 Ermelo Yard Re-configuration Vacuum Break for GF Expand 241 20 110 111 - - - - 241 Extend FSDT on the Coal Line from Broodsnyersplaas to Ogies Sustain 58 17 ------17 Coal 91 FEL 3 Expand 70 - 20 35 - - - - 55 Coal 91 FEL4 Construction Expand 4 294 - 80 344 540 1 230 1 050 1 050 4 294 Overvaal tunnel doubling FEL 3 Sustain 55 55 ------55 Overvaal tunnel doubling Sustain 3 174 - 120 604 800 850 800 - 3 174 Total Expansion 4 605 20 210 490 540 1 230 1 050 1 050 4 590 Total Sustained 3 294 73 120 604 800 850 800 - 3 247 Total Expansion plus Sustained 7 899 93 330 1 094 1 340 2 080 1 850 1 050 7 837

71 1g. PORT OF RICHARDS BAY General freight capacity expansion to 60.5mtpa by 2040

Project description:

Expansion of the port terminals’ capacity to support the immediate capacity constraints and the medium to long term growth in GF. Terminal designs are required to meet future GF demand increasing form 22.6mtpa in 2010/11 to 60.5mtpa in 2040. The programme follows on from the ECICS study (road and rail) but now includes the harbour bound industries’ (HBI) demand. The inclusion of HBI demand and projects created the need for additional berthing capacity to be investigated. Current execution of a package of immediate works such as creation of stockpile space, slabs and/or paving and replacement of some loading/offloading equipment, (in line with long term expansion) - managed by TCP and TPT at OD level.

Estimated total cost:

R12.2bn (Unescalated) estimated at FEL-2 (Pre-feasibility engineering level)

Challenges Status Quo

• Proposed lease to external parties of port land required for expansions to be reconsidered • FEL 2 studies completed

where not awarded or rescinded where awarded, with possible commercial/legal • Final FEL 2 gate review held and passed on 31 July 2013 consequences. • FEL 2 business case in progress to approve FEL 3 start-up

72 • Demand validation. Project on hold

1g. PORT OF RICHARDS BAY General freight capacity expansion to 60.5mtpa by 2040

Timelines being updated in line with demand validation

Total for 7 ETC (Rm) 14/15 15/16 16/17 17/18 18/19 19/20 20/21 Corporate Plan years

TPT: RBEP 11 076 16 81 17 617 1 794 2 524 - -

Total 11 076 16 81 17 617 1 794 2 524 - -

73 PORT OF RICHARDS BAY (New coal terminal concept study for 32mtpa)

Project description:

A concept study for a new and separate coal export terminal with potential export capacity of 32 mtpa, targeted at emerging coal mining entrants into the coal export market. The new coal export terminal will be a “greenfield” development which will require: • Basin and berths dredged to a depth of -17.5m chart datum; • Quay construction for 2 berths for Cape size vessels; • Construction of a new coal rail yard including tipplers; • Construction of the coal terminal infrastructure and stockyards including all equipment and conveyor systems; • Service networks for roads, water, sewer, electrical, etc. • 2 ship-loaders and 2 stacker-reclaimers

Estimated Total Cost: R13.7bn (unescalated) estimated at pre- feasibility and includes future Port Operator cost

Project status: Development being reconsidered due to demand validation and private development initiatives

Challenges Status Quo

 Pre-feasibility studies completed  No confirmed demand exists to date, to validate the commercial  Final pre-feasibility gate review held and passed on 31 July 2013 viability for a new coal terminal.  Demand validation. Project on hold

74 Contents

Setting the scene

Transnet Market Demand Strategy

Demand

Integrated supply chain approach

Train operating principles

Coal loading at Lephalale

Rail capacity developments

Port capacity developments

Major programmes

Conclusions

75 Conclusions: Rail and Port capacity ramp-up programme summary

Phase 2: Linking RSA-Swaziland: Phase 1: Enable Mine development Botswana via Waterberg Heavy haul rail to Swazilink Phase 1 corridor Rail: Rail: Rail: • Utilise existing available • Botswana link • Botswana link network capacity to RCB and • WB HH line • WB HH line Maputo with upgrades • Swazilink Ph 1 • Swazilink Ph 2

Port Port

~60 • Sufficient capacity at Maputo, • Expanded Maputo coal Durban and RCB current terminals Port terminals • RBCT/RBTG expanded and • Expanded Maputo new terminals coal terminals • Durban • Techobanine Mtpa ~23 • RBCT/RCB expanded and new terminals 8 • Durban 26t per axle, 200 w

Coal capacity Coal heavy haul 20t per axle 100/200 operation wagon operation

1 Lengthen loop at Matlabas

13/14 18/19 23/24 2027+

76 Financial Years Conclusions

• Transnet supports the huge development potential in the coal and mineral mining and beneficiation industries

• Substantial investments have been committed over the medium term to increase rail and port capacity

• Demand validation and commitment for all commodities from the Waterberg region will ensure sufficient rail capacity

• Transnet will continue to engage with all stakeholders to support National, Provincial and Local strategies and growth opportunities

77 Thank you