ROLLING STOCK FLEET RENEWAL

PROGRAMME

Media Briefing

14th February 2012

Content • PRASA Strategy (2012 – 2015)

• Twin Goals

• PRASA’s Strategy to Local Production and Local Development

• Local Content

• Targeted Components for Local Production

• Key Contractual Requirements

• Technology

• Roll-out of the New Fleet

• Fleet Distribution

• Modernisation Corridors

• Market Engagements

• Rolling Stock Programme Timelines

• Concluding Remarks

PRASA Strategy (2012-2015)

• PRASA is implementing a bold plan to transform and modernize passenger

railways – investment of R136bn is anticipated over the period ahead

• Elements of modern railways from 2014/15 – Integrated Solution

– New Modern Commuter Fleet

– New Depots

– Modern Signaling and train control systems

– Modern Stations

– Integrated ticketing system

– Telecommunications

– Signage

– Speed Gates

– Train timetabling and utilisation to reduce journey times

– Sustaining existing fleet until withdrawal from service

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PRASA Strategy (2012-2015) Cont...

• High Quality services from 2014 in Modernization Corridors:

– Mabopane – Germiston - Johannesburg

– Naledi - Johannesburg

– Leralla - Germiston

– Umlazi - Durban - KwaMashu

– Bridge City – Durban

– Pretoria – Johannesburg

– Khayelitsha - Cape Town

– Kapteinsklip - Cape Town

– Mdantsane – East London

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Rolling Stock Fleet Renewal Programme

5

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Twin Goals

• Modern trains

–proven technology

– incorporating international best practice and safety standards

• Rolling Stock Manufacturing Supply Chain in South Africa

–competitive and sustainable

–showcasing effective implementation of B-BBEE and meeting localisation tragets

PRASA’s strategy to local production and

local development

• Alignment of procurement initiatives to the Government primary objective

for localization – high level local content relative to import content;

• Assist in creating local industries that can sustain local production –

setting high local content targets;

• Focus on manufactured and non-manufactured areas such as

engineering, technology transfer, design and components manufacturing;

• Long-term investment outlook – create long term certainty in the market –

procure new rolling stock over a 20 year period;

• Set high targets for BBBEE participation in the recapitalization

programme

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PRASA’s strategy to local production and

local development (Cont)...

• Set a minimum target of 65% local content for the

manufacturing – identify certain components for local

manufacturing;

• Skills development and transfer for local labour to sustain

local production; and

• Commitment to stimulate local economic development.

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Local Content

• 65% local content trajectory over 7 years

• Yearly local content targets

– Bids will contain detailed plans setting out RSMs

proposals for:

• Skills transfer

• Investment in plant

• Priorities for component localisation as per the

Designation Sector Report

– Car body, bogie, coupling, suspension, braking,

alternators, traction and electrical systems, assembly

– Establishment of SA factory

Local Content (cont.)

• RSMs’ Plans will be

–Validated during bid evaluation

–Monitored regularly (e.g. quarterly) throughout 10 year contract

–Contractualised and linked to payment / damages mechanisms to

•motivate compliance by RSM

•ensure procurement decision remains robust and resistant to challenge if trajectory not achieved in practice

Targeted components for Local Production

Car Body

• Car body shell

• Door system

• Windows

• Seats

• Heating and ventilation

• Lighting

• Grab pillars and rails

• Interior cladding

• Passenger gangways

• Cable and wire

• Coupler and draft gear

Bogies

• Bogie frame

• Traction motors and gears

• Wheels

• Axles

• Bearings

• Suspension

• Braking system

Electric System • Air System

• Auxiliary converter and batteries

• Electric propulsion

• Dynamic regenerative brake

• Control, diagnostic and communication system

Train manufacturer SPV

RSM

Tier 1 Supply Chain Providers

PRASA

supply agreements

Factory Builder

Master Agreement Manufacturing and maintenance support obligations

Illustrative “Contract Matrix” being developed and validated

Binding obligations for technical resources, IP rights etc. Depot Builders

Depot Construction & Fit Out Contracts

Parent Company Guarantee / Step In Rights

Tier 2 Supply Chain Providers

Factory Development Agreement

supply agreements

Other Equity Partners inc B-BBEE

Shareholding

Also interface with RSM to ensure fitness for purpose and timing interfaces

Key Contractual Requirements

• First batch – Ten year contract with delivery starting 2015 and ending 2025

• Second batch – 10 year contract for delivery until 2035

• A contract with design, build and shared maintenance responsibility

• Technical support and skills transfer to PRASA

• RSMs required to:

– set up a Factory Plant in South Africa

– cultivate a local supply chain with South African companies

Technology

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Key technical features

Electric Multiple Units (EMUs)

■ Cape Gauge

■ 3 KV DC traction

■ 25 KV AC for Eastern Cape

■ 12 car units (Splittable)

■ CCTV

■ Onboard Communication

■ WIFI

■ Automatic Train Protection

■ Route Map

■ Accessible for people with disabilities

■ 120 kph (potential for 160 kph)

■ Highest level of safety and comfort

■ To be made up of proven standard components and designs

Fleet Distribution

Gauteng Western Cape eThewini Eastern CapeNew corridors:

Short-term

New-corridors: Medium to Long

Term (estimates)

Vehicles 2 484 1 835 936 228 228 1 512

% Pax on critical link 45% 38% 14% 2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

500

1 000

1 500

2 000

2 500

3 000

Veh

icle

s

Vehicle Requirement per Corridor Category (including spares)

Modernization Corridors (National)

Western Cape

eThekwini

Gauteng

Modernization Corridors (Gauteng)

Modernization Corridors (Western Cape)

Modernization Corridors (eThekwini)

Market Engagements

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April 2011 Market Engagement

The April Market Engagement dealt broadly with:

• Project’s appeal to the market;

• Manufactures’ appetite for localization;

• Establish level of demand to achieve localization targets;

• Manufactures’ ability to supply the quantities of rolling stock required to specifications that

suit local requirements; and

• Financiers ability to provide long-term funding for the programme.

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Feedback on April Market Engagement Outcomes

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RSMs (5-7 April 2011) • Commitment of 5-10 years at +/- 250

cars per year required to justify:

– Local investment

– 65% local content target

• Involvement of B-BBEE / SMME entities envisaged for components supply and skills transfer

• RSMs would like to retain some involvement in on-going maintenance

Rolling Stock Financiers (5-7 April 2011)

• Financiers have sufficient capacity to

finance the project

• Expected cost of capital is accepted on a

lower risk premium

• A penalty and deduction regime is an

acceptable concept

• Government guarantee required

UNIDO surveys (March 2011)

• Based on responses to a survey of

South African component manufacturers,

local content target of 70% - 80% could

be achieved

B-BBEE & SMME

• Agreed to schedule a separate BBBEE

market engagement

• Strong interest in:

– Component supply

– Maintenance

BBBEE Market Engagement

• BBBEE Market Engagement – broadly engaged on the following:

• An understanding of ability and capacity for production and supply of components of

rolling stock;

• Potential blockages which might hinder meaningful achievement of BBBEE in the

programme;

• Familiarise the South African market with the project and its BBBEE requirements;

• Funding support packages for the SMME/Cooperatives;

• Training and development; and

• Emphasize a broad base nature of the acquisition programme.

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Feedback from BBBEE: May and November 2011

• BBBEE & SMME (May 2011)

– strong interest in component supply and maintenance tasks

• BBBEE Market Engagement (November 2011)

– Strong interest in components supply

– Assume maintenance responsibilities

Online Market Engagement

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Local Content Communication Document

Target Audience: Rolling Stock Manufacturers (RSMs)

Date: 15th February 2012 – 29th February 2012

Objectives:

• Provide RSMs with the opportunity to comment on

the key Local Content requirements that will be

contained in the Request for Proposal (RFP). These

inputs will then be incorporated (where deemed

appropriate) into the final RFP document

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Target Audience: Local Supplier Base

Date: 12th February 2012 – 31st March 2012

Objectives:

• Survey the local manufacturing supplier base to

determine capabilities and capacities, and provide

this to RSMs, which will enable them to:

Make a more informed assessment of the local

supplier community

Encourage interaction in order to assess the

potential for collaboration and partnerships

• Assist the RSMs to respond to the RFP with a robust

plan on how to achieve the 65% Local Content

threshold, thereby promoting industrialisation of the

South African rail industry

• Disseminate the survey to a wider local supplier

base to ensure adequate representation

Local Supplier Survey

1 2

Source: Team analysis

Focus of this Presentation

Prior to the issue of the RFP, PRASA is undertaking two market

engagements to communicate PRASA’s key Local Content requirements

and to establish the strength of the local supplier base

Survey of South African suppliers underway

• Announced in press on Sunday 12th and 13th

February 2012

• Web-based survey went live Sunday 12th February

2012

• Targets local suppliers solely

•Seeks statement of current manufacturing capacity

and skills profile

• A South African local supplier database will be

created

Localisation Briefing to RSMs

•Local content document for website upload

on Wednesday, 15th February 2012

•Targets Rolling Stock Manufacturers and

South African Industry

•Explains Local Content Requirements

•Seeks feedback from Industry on the

requirements, which may be reflected in the

RFP

Rolling Stock Programme Timelines

Number Detail Date

1. Budget approval By 1st quarter 2012

2. Procurement preparation September 2011 to mid-March 2012

3. Request for Proposals (RFP) Process March 2012 to July 2012

4. RFP evaluation August to September 2012

5. BAFO process October to December 2012

6. Contract negotiations January to April 2013

7. Financial / Commercial Close June 2013

8. Pre-payment for contract March 2015

9. 1st test vehicle Early 2015

10. Delivery of first train batch Late 2015

Concluding Remarks

•Many RSM have competence to offer proven trains suitable for South Africa

•The challenge for RSMs is to offer convincing bids evidencing robust plans for

–BBBEE

–Localisation

–Skills transfer

–creation of local train manufacturing capability

•The Contract will bind the RSM/SPV into achieving all key deliverables.

Thank You