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Heading heading heading Date Transnet Freight Rail Ms Nisha Jones General Manager Commercial 4 February 2016

Transnet freight rail corridor development programme and road to rail strategy

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Heading heading heading

DateTransnet Freight Rail Ms Nisha Jones General Manager Commercial

4 February 2016

PAGE

CONTENTS

1

• TFR Rail market share• Integrated Rail System• Development & Rail migration• Bimodal Video• Transnet Infrastructure Investments• Infrastructure development for Economic Growth• Terminals, HUBS and CUF• Road to Rail journey progress• Express Train• Value Chain co-ordination• Volume Growth since MDS implementation• Rail addressable market share• Collaborate to to leverage best of Transport System

Advantages• Benefits of Road+ Rail• Corridor Developments

PAGE

Rail market share growth is a fundamental driver of the MDS

2

Job Creation

Reducing the Cost of Logistics

Catalyst for Economic Growth

Road-Rail Freight Industry Imbalance

Meet Freight Demand & Improve Service Delivery

Regional Integration

Market Demand Strategy

2

PAGE

Integrated Rail System requires effective Interfaces to offer Logistics Solutions

3

Locomotives

Network Infrastructure

Wagons

Crew & Operations

Yards – Crew / Loco Changes; Trains

National Command & Control

Customer Sidings and Loading Equipment

Common User Facilities

Container Terminals

Ports & Back of Port Facilities

Freight Nodes & Logistics Parks

Collaboration – Road Hauliers and Logistics

Service Providers

Technology & Systems

Investment in Technology – Bimodal

& Swop Bodies

PAGE

Creating the fundamentals for Logistics Development and Rail Migration

Rolling StockLocomotives:

− New dual voltage locos to reduce throughput time and improve service reliability

Wagons:

− Develop common wagon chassis to reduce shunting, enable faster wagon turnaround, improved asset utilisation, increased density and lower unit costs

− Investigate feasibility of swop body / containers

Infrastructure maintenance & development− “A” standard network upgrade and modernisation− Weighbridges

Development of Terminals, CUFs and Distribution hubs – Location and Upgrading

Technology & Systems− Bi-modal Road–Rail technologies –piloting on NatCor and CapeCor -

suitable to service intermodal, agricultural and FMCG flows− Specialised haulage power, handling technologies to work in various terrains

and terminals, specialised loading and lifting equipment or trailing vehicles

Customer Siding Development, Maintenance and Management including Loading & Offloading Equipment

Logistics alliances and Logistics skills development North-South corridor development, operations model, business

model and pricing Real estate development – logistics & warehousing facilities Systems development – Track and Trace; Web interface

4

PAGE

The majority of Transnet investments will be in General Freight within Freight Rail

Commodity split (Rbn)

Divisional split (Rbn)

Major programmes

GFB rail capacity growth to meet market demand volumes from 88.0 mt in 2013/14 to ~200mt in 2021/22

Completion of the New Multi-Product Pipeline (NMPP)

Increase export coal to 97.5mt –including Waterberg

Increase exportiron ore to 71.0mt

Increase exportmanganese to 16mt

Increase in fleet and improvementto the infrastructure

24

25

32

151

30

3

26

9

Containers (Ports)

Export Iron Ore

Export Coal

GFB

Bulk

Piped Products

Break Bulk

Other

4 11

33

47

4

201Other

TPL

TPT

TNPA

TE

TFR

Other

5

PAGE

A catalyst for infrastructure development and economic growth

6

Sishen

Saldanha

Cape Town

East London

Port Elizabeth

Hotazel

Musina

Kimberley

Polokwane

De Aar

Ngqura

Ermelo

Lephalale

Durban

Richards Bay

Johannesburg

SADC

Containers and Intermodal

Iron Ore

Manganese

Coal

Agriculture/ Timber

Rock-phosphate/ Magnetite

Chrome and Ferrochrome

Phalaborwa

Maputo

Coal Exports :81mtpa Rolling Stock Fleet

Standardisation : EWDP Locomotives & Jumbo wagons

Power Upgrades

Capacity Increase : Iron Ore Exports New loops and in–port rail track Power upgrades Tippler & Port handling

infrastructure Increase berth capacity Additional rolling stock

Manganese Exports : 5.5 - 16mtpa New export facility in Port of

Ngqura Heavy haul rail operating

principles Doubling of sections, provision of

new loops and extension of passing loops to accommodate 200 wagon trains

General Freight system modernisation & expansion Locomotives Wagons Network

Infrastructure

6

PAGE

New locomotives being deployed across the network to improve reliability and predictability and reduce transit time

Witbank

Richards Bay

Vryheid

Ermelo

Pyramidsouth

Johannesburg

45D CNR

23E BOMBADIER

Phalaborwa

Komatipoort

Groenbult

Musina

Polokwane

Thabazimbi

Lephalale

KaapmuidenNelspruit

Ladysmith

Glencoe

Durban

Kroonstad

Bloemfontein

Kimberley

Sishen

Hotazel

Saldanha

CapetownPort Elizabeth

East London

Springfontein

Noupoort

De Aar

Beaufort West

Standerton

Swazi Link

Mafikeng

Port Shepstone

22E CSR

Newcastle

21E CSR

Roossenekal

Lydenburg

Ogies

Coligny

44D GE

7

43D GE

Assembly in Durban: 23E Bombadier

45D CNR

Assembly in Pretoria: 22E CSR44D GE

PAGE

BelconCape Town

Port Elizabeth

Ngqura

Cato Ridge/Umlaas Rd

Harrismith

Mahikeng Pyramid

Sentrarand

Tambo SpringsVaal

Phalaborwa

Musina

Polokwane

Airport Dig Out

DCT (New)

Bloemfontein

Waterberg Coalfields

Coalfields

Koppies

Kascon/City Deep

Richards Bay

Maputo

Saldanha

Sishen

Hotazel

Lohatla

8

Terminals, CUFs and Hubs to improve integration and service to customers

Recent Hub / Terminal Development

Bloemfontein – Containerised Manganese Pendoring Multi-User Facility – Chrome &

Ferrochrome Lohatla – Manganese Newcastle – Coal & Ferrochrome Newcastle - CAB Multi-User, Multi-Product

Facility Maluti-a-Phofung (MAP) IDZ / SEZ

development connectivity

Super terminal

Intermodal terminal

Freight nodes

Mineral nodes

General freight terminal

PAGE

Road to Rail Strategy – Journey Progress

9

Market retention Scheduled railway Commodity focus

2012 2014 2016 2018 2020

Str

ate

gy

Syste

ms

Pri

cin

g

Investment `Marketing People

Market Share 2012

Rail Tons % of Total Surface

11.7%

Rail Addressable ~27%

Market growth

Hubs & Intermodalism

Market attraction

Integrated logistics service provision / Supply chains

Locomotives Commodity specific

wagons

Network upgrade to ‘A’ Standard

Bimodal technology

Hubs & Terminals

B2B systems & web-based interface

Customer relationship management

Key Account management

Collaboration Customer

experience PSPs &

Alliances

Marketing new services

Management/ Leadership

Operations & Technical railway skills

Culture building

Business Transformation

Strategy refinement

Market analysis & opportunities – 18mt

Heavy haul & other mining – pit to port

Agriculture Pit to plant Stockpile to stockpile

Plant to plant

Plant to DC

Domestic IntermodalDC to DC

SAP IATS

Lead to Cash

Web based B2B Interaction

Annual negotiations

Volume guarantees

Take / Pay

Competitive pricing linked to investment

Value-based integrated pricing structures

Logistics skills

Commodity Strategies

Market Share 2024

Rail Tons % of Total Surface

15.7%

Rail Addressable >46%

PAGE

Express Train

10

PAGE

Value Chain Coordination

11

PAGE

Volume Growth following MDS implementation in 2012 - 2015

12

+11,7%

2014

88,0

2013

83,0

2012

81,0

2015

90,5

General Freight

Significant rail volume growth despite low economic growth

201,0

2015

226,7

+12,8%

2014

210,4

2013

207,7

2012

Total TFR

PAGE 13

94 95 90 87 88 86 84 83 84 78 72 74 81 83 88

21 24 26 28 30 30 32 37 45 46

52 56

6467 65

64 66 67 69 67 63 62 62 62

6869 68

0

20

40

60

80

100

120

140

160

180

200

220

20

25

30

35

40

45

50

55

60

65

70

179

2009

177

2008

179

2007

180

2006

182

2005

181

208

181

27

2003

176

25

2002

181

2001

185

2000 2014

210

54

201320122004

201

2011

182

2010

179

Export Iron Ore

Export Coal

RAMS Tons

General FreightRAMS TonKm

Rail Addressable Market Share reflects Rail capture since MDS in 2012

Accelerating Implementation

Developing Bi-Modal technology

Building a commercial and

logistics mindset – beyond sale

of rail transport

Value propositions to meet

specific customer

requirements

Building alliances to fast-track

opportunities

Building market reputation

through reliable and efficient

service delivery

Rolling stock and network

modernisation programme

RAMS – Rail Addressable Market Share

PAGE

Collaborate to leverage best of Transport System Advantages

14

Transport

System

Primary benefits Secondary benefits

Rail High economies of scale

Environmental friendly (Low carbon

emissions)

Fuel efficient

Cost advantage

Lowering logistics costs

Reduced road infrastructure &

externality costs

Increased safety on roads

Road/ Bi Modal Flexibility

Adaptability

Accessibility

Lower inventory and storage cost

Premium service levels and price

Pros Potential for innovative solutions Understanding new and untapped

markets Understanding and having direct

access to supply chain stakeholders Create common vision for supply

chain success

Cons Sharing of sensitive information First & Last Mile Pricing vs Integrated

solution pricing Anti-competitiveness (Colluding) Conflicting Individual Stakeholder

strategies

Collaboration

PAGE

Benefits

Road plus Rail and Intermodal

solutions are imperative in a

growing freight Transport

market

o Innovation

o Collaboration

o Co-operation

o Credibility

o Trust

15

PAGE 16

CARBON FOOTPRINT

IN 2016, THE GOVERNMENT WILL IMPLEMENT A CARBON EMISSIONS TAX, PROPOSED

AT R120 PER TONNE OF CO2e (CARBON DIOXIDE EQUIVALENT), WITH THE AMOUNT SET

TO BE INCREASED 10% PER YEAR. RAIL OFFERS ~90% MORE ECO-FRIENDLY SERVICE

WITH SIGNIFICANT CARBON EMISSIONS SAVINGS ACHIEVED.

PAGE

EMISSIONS TAX BENEFIT

EXAMPLE BASED ON 100 TEUS MOVED FROM DURBAN PORT- JOHANNESBURG

TONNES OF CO2 EMISSIONS

EMISSIONS TAX

ROAD 306,42 R36 770,40

RAIL 66,82 R8 018,40

SAVING 239,60 R28 752

PAGE

LTPF Corridor Development Approach

• Corridor Dedication: The LTPF strategy aims to develop corridors dedicated commodity types in the long term; thereby maximizing the gain from infrastructure and service optimization

• Operating Philosophy: The LTPF considers the operating philosophy of the entire supply chain, including mainline, loading operations, yards and rolling stock.

PAGE

LTPF Corridor Development Approach

• Corridor Dedication: The LTPF strategy aims to develop corridors dedicated commodity types in the long term; thereby maximizing the gain from infrastructure and service optimization

• Operating Philosophy: The LTPF considers the operating philosophy of the entire supply chain, including mainline, loading operations, yards and rolling stock.

PAGE

Summary of LTPF Strategy and Initiatives at a Corridor level

Create Long Loops

Remodel Salkor Yard

OTF Changeover

Partial Doubling

Common User Facility

Heavy Haul Line

Botswana Link

Swazi Rail Link

150W Loop Extensions

Cato Ridge Bypass

Compilation YardCoega Port

25kV AC Conversion

150W Loop Extensions

Common User Facility

GAUTENG - DURBAN• Long Term: 150W CAB trains. Cato

Ridge bypass, Skansdam Link • Medium Term: 75W CAB trains.

Double the remainder of the Gauteng Freight ring and improve connectivity and routing

• Short Term: Reduce headways to 20min

GAUTENG – CAPE TOWN• Long Term: Up to 150 wagon

trains, operated in DP mode. Potential for 25kV AC electrification

• Medium Term: 75 Wagon trains serving Gauteng Intermodal Super terminals. Further doubling

• Short Term: Operational improvements. Partial doubling Kimberley – De Aar

NORTH EASTERN SYSTEM

• Long Term: GFB bulk export corridor modelled on heavy-haul principles

• Medium Term: Swaziland Rail Link alternative route to Richards Bay terminal. 150W bulk trains

• Short term: Efficiency improvements. Common user facilities, standard 75W bulk trains

COAL SYSTEM• Long Term: 200W Heavy Haul from

Waterberg to Richards Bay, single pit-port train configuration

• Medium Term: Expand backbone capacity -2nd and 3rd 26t/a lines

• Short term: Efficiency improvements. Project Shongololo increases operational efficiency by bypassing Ermelo balloon. Expand existing Lephalale line capacity 200W DP trains

ORE LINE• Long Term: Double line

operation• Medium Term: Interim GFB

crossing loops• Short Term: Optimise slot

capacity through long-loop philosophy

MANGANESE LINE• Long Term: 26t/a Axle Load Upgrade• Medium Term: 200W Heavy Haul Pit-

Port Operation • Short Term: Bridging Capacity

Solutions via Swartkops, Durban Wests, Saldanha MPT

Skansdam Bypass Link

40km Doubling

15 min signal spacing

200W Loop Extensions

Loop Extensions

200W Crossing Loops

Multi User Facility

Rail in Port remodeling

Short Term: < 7 yearsMedium Term: 7 – 15 yearsLong Term: > 15 years

PAGE

Iron Ore and Manganese systems

Sishe

n

De Aar

Noupoort

Kimberley

Hotazel

NgquraPort Elizabeth

Mossel Bay

Saldanh

a

PortIron Ore System

Manganese

System

Multi-User facility for train compilation

and to service junior miner entrants

Multi-User facility for train compilation

and to service junior miner entrantsUpgrade Strategy

• Long Term: Double line operation

• Medium Term: Interim GFB crossing loops

• Short Term: Optimise slot capacity through long-loop philosophy Phased Doubling

(> 17Mtpa Total section

demand)

10 Loop Extensions (> 9 Mtpa)

1 New Crossing Loop (>9 Mtpa)

10 Loop Extensions (> 9 Mtpa)

Iron Ore Exports

Manganese Exports

On-The-Fly voltage

changeover

Salkor North Extension

Salkor Yard Remodeling

200W compilation yard

Electrification to TipplersUpgrade Strategy

• Long Term: 26t/a Axle Load Upgrade

• Medium Term: 200W Heavy Haul Pit-Port Operation facilitated by dual-voltage locomotives

• Short Term: Bridging Capacity Solutions via Swartkops, Durban Wests, Saldanha MPT

-

10

20

30

40

-

20

40

60

80

100

120

2 New Loops (> 9 Mtpa)

GFB Crossing Loops (> 62 Mtpa)

8 Loop Extensions (>16 Mtpa)

1 New Crossing Loop

*(…Mtpa ) Manganse Exp Volume

*(…Mtpa ) Iron Ore Exp Volume

PAGE

Coal and GFB Minerals

Richards Bay

Port

Coal System

North Eastern

System

26t/a Heavy Haul line (>24 Mtpa)

Corridor Dedication Strategy• Dedication of corridors allows for

greater optimization and exploitation of network infrastructure, and standardization of train configuration

• Coal: Waterberg – Mpumalanga –Vryheid – Richards Bay

• GFB Mineral: Rustenburg –Mpumalanga – Phuzumoya –Richards Bay

Upgrade Strategy• Long Term: GFB bulk export corridor

modelled on heavy-haul principles• Medium Term: Swaziland Rail Link to

unlock alternative route to Richards Bay terminal

• Short term: Efficiency improvements, creation of common user facilities, standard 75W trains

Cross-border link to Botswana

coal fields

Coal System

AC Electrification

Common User facility

150 Wagon crossing loops (> 20 Mtpa Magnetite)

150W Loops (> 12 Mtpa GFB Bulk)

Re-alignment

New Davel yard facility

Lengthen 6 loops (>11 Mtpa)

2nd and 3rd 26t/a lines Lothair – Sidvokodvo Greenfields Line

(> 12 Mtpa GFB Bulk)

Upgrade Strategy• Long Term: 200W Heavy Haul operation

from Waterberg to Richards Bay, operating on a single pit-port train configuration

• Medium Term: Expand existing Lephalale line capacity as interim phase using 200W DP trains. After operations migrate to heavy haul line capacity will be available for GFB bulk expansion. Expand backbone capacity by addition of 2nd and 3rd 26t/a lines

• Short term: Efficiency improvements, distributed power and dual-voltage technology to enable 200W trains North of Ermelo. Project Shongololo increases operational efficiency by bypassing Ermelo balloon.

Pyramid

Golela

Ermelo

Lothair

Vryheid

Hoedspruit

KomatipoortRustenburg

Phalaborwa

LephalaleGroenbult

Musina

-

20

40

60

80

-

25

50

75

100

125

150

175

Waterberg System

Export Line

Lengthen 3 loops (>16 Mtpa)

Overvaal tunnel (>90 Mtpa)

SRL

Heavy Haul Line

*(…Mtpa )Coal Exp Volume

North Eastern System

PAGE

Durban-Gauteng System

Cape Town-Gauteng System

Port

General freightDurban-Gauteng and Cape corridors

Durban

East London

Ngqura

Port ElizabethMossel Bay

Cape

Town

Saldanh

a

Port Shepston

Richards

Bay

Upgrade Strategy• Long Term: 150W CAB trains,

enabled by DP, servicing Gauteng Intermodal Super terminals, Port of Durban and DDOP . Cato Ridge bypass to separate freight and commuter services.

• Medium Term: 75W CAB trains, extend Durban Pier 1 and 2 terminals. Double the remainder of the Gauteng Freight ring and improve connectivity and routing

• Short Term: Reduce headways to 20min through operational improvements.

Gauteng – Durban System

Double 40km (> 40 Mtpa)

Skansdam Bypass

Double Rooikop - Mapleton

Cato Ridge Bypass (> 28 Mtpa)

Bayhead yard

remodeling for 75/150W

trains

Conversio

n to 25kV

AC

Phased doubling

Lengthen crossing loops for

75W (>3 Mtpa)

Regrade, Realign, Lengthen

Loops for 150W (>6 Mtpa)

Adjust signal spacing

to 15 min (> 55 Mtpa)

Upgrade Strategy• Long Term: Up to 150 wagon

trains, operated in DP mode. Potential for 25kV AC electrification

• Medium Term: 75 Wagon trains serving Gauteng Intermodal Super terminals. Further doubling

• Short Term: Operational improvements. Partial doubling Kimberley – De Aar

King’s rest

container

terminal

Gauteng – Cape System

Pyrami

d

Kimberle

y

Newcastle

Ladysmith

Houtheuwe

l

Bloemfontein

Noupoort

De Aar

-

20

40

60

80 To Coast To Hinterland

Large Scale Intervention: New Line

-

20

40

60

To Cape To Gauteng

75W Trains

(> 37 Mtpa)

150W Trains

(> 45 Mtpa)

*(…Mtpa )Total volume for all commodities, both directions of travel

PAGE

Remodel Salkor Yard

OTF Changeover

Common User Facility

Overvaal

Tunnel

Double Bleskop - Norite

Compilation Yard

Common User Facility

Multi User Facility

Rail in Port remodeling

Key Initiatives which have an indirect effect on system capacityThere are a number of interventions within the development framework which are not directly linked to capacity but

remain key to the successful increase of capacity and improvement in system efficiency

• Operational Improvement

• Sustainability

• Enabler for Change in Operating Philosophy

• Logistics Chain Improvement

Intermodal Terminal Yards

OTF Changeover

Common User Facility

Grade Separation

Grade Separation

Rietvallei Chord

Regrading for 150W Trains

Realignment for 150W Trains

DC to AC conversion

150W Consolidation Yard

150W Consolidation Yard

Power Supply Upgrade

DC to AC Conversion

PAGE

MDS Driving Volumes Back to RailNATCOR/N3 Corridor

Forecast growth in freight on this corridor from 45 Billion Ton-Km(2014) to 113 Billion Ton-Km (2045).

Rail intermodal traffic has increased substantially :

From 4 trains per day in 2011 to 24 trains per day in 2015, Average transit time reduced from 30 hours to 22 hours

Road continues to carry the majority of freight (approximately 78% in Ton Kilometres) on the N3/Natcor corridor.

Transnet is targeting a shift in rail modal share on the N3/Natcor from the current 22% to 39% over the next 30 years. This shift will represent approximately 60% of all rail addressable volumes (RAM) on the corridor.

PAGE

Road and Rail: The huge challenge

Source: 10 th Annual State of Logistics Survey for South Africa: 2013

PAGE

Corridor Capacity Development TranchesCapacity tranches and corresponding expansion projects have been identified. The capacity tranches relate to the dominant

commodity on the relevant network, however it should be noted that they may be influenced by changes in commodity mix

System Tranche Work Packages

Iron Ore

62 – 71 Mtpa Iron Ore Incremental Expansion, Long Loops

71 – 82 Mtpa Iron Ore Intermediate GFB Crossing Loops

> 82 Mtpa Iron Ore Doubling

Manganese Exports

7 – 9 Mtpa Manganese Exp Phase 1: Lengthen Rosmead Loop, 97km doubling

9 - 16 Mtpa Manganese Exp Phase 2: 2 New Loops, Lengthen 10 Loops, 200W Coega Compilation Yard, 200W trains

> 16 Mtpa Manganese Exp 26t Axle Load Upgrade, Lengthen 8 Crossing Loops, Further doubling

Coal – Waterberg

5 – 11 Mtpa Coal Lengthen 1 Crossing Loop, Double Bleskop - Norite

11 – 16 Mtpa Coal Exp Lengthen 6 Loops (Stage 3)

16 – 24 Mtpa Coal Exp Lengthen 3 Loops (Stage 4)

> 24 Mtpa Coal Exp Construct Greenfields Heavy Haul Line

Coal - Backbone + Export

80 – 90 Mtpa Operational Efficiency Improvements (Project Shongololo, Ermelo yard bypass)

90 – 100 Mtpa Double Overvaal Tunnel, Upgrade signaling, Upgrade OHTE

100 – 120 Mtpa 2nd and 3rd 26t/a lines, 25kV AC Conversion, Divert GFB traffic, Upgrade signaling, to 20 min headways

PAGE

Corridor Capacity Development Tranches (continued)Capacity tranches and corresponding expansion projects have been identified. The capacity tranches relate to the dominant

commodity on the relevant network, however it should be noted that they may be influenced by changes in commodity mix

System Tranche Work Packages

Gauteng – Durban

25 – 37 Mtpa Total Vol. (North)

Increase Operational Efficiency (20 min headways)

37 – 45 Mtpa Total Vol. (North)

Accommodate 75W Trains (Lengthen stations, power supply upgrades), Cato Ridge

45 – 55 Mtpa Total Vol. (North)

Accommodate 150W trains (25kV AC conversion, power supply upgrades, yard re-configuration)

55 – 67 Mtpa Total Vol. (North)

Reduce Headways: Block Splits

20 – 28 Mtpa Total Vol (South)

Cato Ridge Bypass

Gauteng – Cape Town

12 – 20 Mtpa Total Vol. (North)

Lengthen Crossing Loops for 75W

20 – 38 Mtpa Total Vol. (North)

150 Wagon Trains (Regrade, Realign, Loop Extensions), Doubling

North Eastern System

12 – 30 Mtpa GFB Bulk ExpSwaziland Rail Link (Greenfields Construction , Brownfields Upgrade), Regrading, realignment for 150W on Swaziland Mainline, Lengthening of Loops

20 – 30 Mtpa Magnetite Exp150W Trains from Phalaborwa (Lengthen 2 Loops, Extend Lines in consolidation yards).

40 – 55 – 65 Mtpa Incremental Doubling of Single Line Sections (Eastern Mainline)

Heading heading heading

DateThank You……