http://www.engineeringnews.co.za/article/transnets-r24bn-diesel-loco-contract-includes-localisation-plan-2010-01-07

Transnet's R2,4bn diesel loco contract includes localisation plan

Published 07 Jan 10        By: Terence Creamer
Ninety of the 100 diesel-electric locomotives to be supplied by GE South African Technologies (GESAT) to South Africa's State-owned freight logistics group Transnet, at an unverified price of R2,4-billion, would be produced locally by Transnet Rail Engineering (TRE), GESAT has confirmed.

GESAT, which is a venture involving GE Transportation, of the US, and the Mineworkers Investment Company, which holds a 25% interest in the company and is its empowerment partner, was awarded the contract in December following a confined tender process initiated in late 2008.

This so-called "urgent" tender was issued in the wake of revelations that the award of a contract for 212 locomotives to the Electro-Motive Sibanye Joint Venture had been irregular.

Following the revelations, which eventually helped precipitate the controversial and contested suspension of the Transnet Freight Rail CEO Siyabonga Gama, Transnet terminated the 212 locomotive tender and issued a "separate" and "distinct" tender for 100 locomotives.

Engineering News Online reported previously that the invitation had been issued to three companies including GESAT, Siemens and Electro-Motive. But on December 18, 2009, the State utility confirmed that the contract had been awarded to GESAT, which was confirmed as the preferred bidder by acting CEO Chris Wells earlier in the month.

Wells also indicated previously that, despite the urgent need to recapitalise the general freight business' aged locomotive fleet, Transnet would seek to maximise the local content of the acquisition in line with the Competitive Supplier Development Programme (CSDP).

The CSDP governs the localisation and skills development offsets arising from procurements made by Transnet and South Africa's power utility Eskom. It was developed as a replacement for the national industrial participation programme (NIPP) for the large parastatal procurement programmes, but, like NIPP, it also seeks to leverage industrial development, job creation and transfer of skills from the procurement programmes for the large State-owned enterprises, without stipulating precise percentages.

In this instance, GE Transportation would manufacture ten of the locomotives at its facilities in Erie and Grove City, in the US, while the balance would be produced by TRE, using kits provided by the American group.

The first locomotives were scheduled to be delivered in early 2011. Local assembly, with kits from Erie and engines from Grove City, should begin at the end of 2010, and the last locomotive was scheduled for delivery in 2012. Engineering News Online could not immediately ascertain whether any components would also be sourced locally.

But in a press statement, GE Transportation president and CEO Lorenzo Simonelli stressed that production would be localised locomotives and that the projects could help GESAT and TRE jointly expand their regional footprints.

"GE's extensive knowledge in localising locomotive assembly can be witnessed in some of the world's leading developing economies such as China, Brazil and Kazakhstan," he added, noting that these manufacturing sites had been customised to country requirements and capabilities.

"We worked closely with Transnet Rail Engineering to develop a comprehensive localisation plan that complements local strengths and transfers world-class skills and technology where applicable," Simonelli outlined.

Transnet described that contract as the biggest CSDP commitment to date under its R80-billion capital investment programme.

GESAT would supply GE model C30ACi, which will be the first AC diesel-electric locomotive to be introduced to sub-Saharan Africa. It will have an engine that delivers 3 300 gross horsepower, using an electronic fuel-injection system to improve engine efficiency.

However, Transnet has indicated that it would probably be seeking additional locomotive capacity, and has also hinted to an enlarged investment plan beyond the current R80-billion programme, which cuts across its railways, harbours and pipelines businesses.

The expanded investment plan would be unveiled in February, would probably involve a 10% increase in the current rolling five-year budget. Transnet's rail corridors were likely to be the main beneficiaries, particularly the key commodity corridors.

The group had invested R62-billion over the last four-and-half years in the upgrading and modernising of existing facilities, as well as in expanding infrastructure capacity.

The group reported in December that its projects were fully funded up until the end of the current financial year to March 31, 2010, and that it had R8-billion in cash on hand, which had been raised "opportunistically" ahead of requirements.