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

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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
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