1

Transnet Capital Expansion Programme

ONE PROGRAMME

TWO HUGE CHALLENGES

ANN WILSON

CPO TRANSNET CAPITAL PROJECTS

Transnet’s Vision And Mission

Transnet Limited is a focused freight transport company delivering:

Integrated, efficient, safe, reliable and cost effective services which help promote economic growth in South Africa

PROVIDING

Market share

Productivity and profitability

Capacity for customers ahead of

demand

IMPROVED

INCREASED

2

Discontinued businesses

Transnet

Freight Rail

RAIL

Transnet

Rail Engineering

TRANSNET COMPANY

PORTS

National

Ports Authority

Transnet

Port Terminals

Transnet Pipelines

PIPELINE

Operating divisions(continued businesses)

• SA Express

• Transtel Telecoms

• Viamax

• Autopax

• freightdynamics

• Housing Loan Book

• Shosholoza Meyl

• Arivia.kom

DiscontinuedBusinesses

Supporting businesses: Property, Capital Projects

Structure to support strategy

Market Challenges: 2012 - 2030

Commodity 2013 → 20302007→ 2012Current requirement

Vehicles

Containers

Coal

Liquid bulk

Manganese

Iron ore

1 500 000 units

42 million tons

8.8 million tons

92 million tons

92 million tons

13.5 million TEU

~ 3 x60 million tons30 million tons

~ 4 x600 000 units400 000 units

~ 8 x15 million tons5.2 million tons

~ 4 x6.3 million tons2.1 million tons

~1.35 x84 million tons68 million tons

~ 4 x4.8 million TEU3.3 million TEU

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All Operating Divisions have high growth expectations over the next 5 years

6030

2006/07 2011/12

+100%

8467

+25%

10880

+35%GFB

Mv

Coal exportMt

Ore exportMt

Freight rail

Pipelines

13.99.9

2006/07 2011/12

+40%Refinedproducts

b.lit

NPA/Ports Terminals

3,4004,800

+41%

555,000

2006/07

925,000

2011/12

+67%

ContainersTEUs

Auto-mobiles

UnitsMajor volume growth for

• Coal (domestic) : 7• Manganese : 3• Iron and Steel : 3

Capex Spending (Continuing Businesses)Five-year Plan: R78 Billion

* Latest estimate R11.2bn

13%

Pipelines

Port Terminals

12%

National Ports Authority

24%

Rail Engineering

5%

Freight Rail

45%

PIPELINETransnet Pipelines R11 bn• Multi-product pipeline – R10,9 bn• Gas line upgrading – R0,2 bn

PORTSTransnet Port Terminals R9,5 bn• Durban – R0,9 bn• Richards Bay – R0,7 bn• Ngqura – R1,5 bn• Cape Town – R0,4 bn• Saldanha – R2,9 bn

PORTSTransnet NPA R18,5 bn• Richards Bay – R0,8 bn• Ngqura – R4,7 bn• Cape Town – R3,8 bn• Durban – R7,6 bn• Floating craft – R0,7 bn

RAILTransnet Rail Engineering R4,1 bn• Equipment - R2 bn• Upgrade of facilities – R1,1 bn

RAILTransnet Freight Rail R34,8 bn• Coal Line – R4,9 bn• Ore Line – R3,8 bn• General Freight – R15,3 bn• Maintenance

Capitalisation – R10,8 bn

*

Infrastructure investment driven by National Infrastructure Plan – 5 year rolling plan, 30 year framework – based on market predictions and customer

requirements

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THE INFRASTRUCTURE CHALLENGE

CAPE TOWN CONTAINER TERMINAL Upgrade to a modern deep water 4-berth container terminal to handle 1.4 million TEU p.a. throughput at the Port

ReconfigurationBasin Deepening

Container Handling Equipment

Quay Refurbishment

5

PORT OF NGQURA

Port of Durban

6

Durban Harbour Entrance WideningExecution Phase

Widen the Entrance Channel

121m to 220m

Deepen the Entrance Channel

12.8m to 19m/17m/16m

Sand by Pass System

Durban Point Car Terminal – Ph 1Feasibility / Execution Phase

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Re-engineering of DCT Execution Phase

End April 08• Efficiency improvements (truck stop)

Complete• Reconfiguration of the existing DCT stacking

areas

End July 10• Repairs, maintenance and upgrade of DCT infrastructure

End Nov 09• Provision of additional stack space at Y-Site and

relocation offacilities

Completion DateProject Schedule

Pier 1 Status 15 December 2007General Photograph

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Marine Programme Maydon WharfFeasibility Phase

All Marine works requirementsInfrastructure requirements and supporting services

Verification of the rail capacity requirements Environmental specialist studies

Quay wall refurbishment

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BAYHEAD EXPANSIONCurrent Layout

BAYHEAD EXPANSIONArtist’s Impression of Proposed Layout

•Phase 1 (6 berths, 3.7 mil TEU’s) Cost R37.7B (R 10,189/TEU)

•Phase 2 (5 berths, cum. 3.1 mil TEU’s) Cost R20.1B (R 6,484/TEU)

•Total 6.8M TEU, R57.8B

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Port of Richards Bay Layout

Richards Bay Container Terminal & MPT ExpansionFeasibility Phase

Estimated

Contract Value Summary

Interim Works

Paving

> R250m

> Mar 08 – Jul 09

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Contents 1

Contents 1

Contents 1Contents 1

Oreline Expansion ProgrammePhase 1A / 1B & 1C Expansion Update29 Mtpa 39 Mtpa (1A) 45 Mtpa (1B) 58 Mtpa (1C)65 Mtpa (2A) 90Mtpa (2B) : Export

Loop 19

Postmasburg Link

Loop 1

Loop 2

Loop 3

Loop 4

Loop 5

Loop 6

Loop 7ALoop 8

Loop 10Loop 9

Loop 11 Loop 12

Loop 13 Loop 14

Loop 15 Loop 16

Loop 17

Loop 18

Salkor North

Salkor Yard

Port Link

Rail Scope

• Loop Extensions

• Salkor Yard Upgrade

• New North Loop

• New Loco Workshop

• Formation Repairs

• Feeder Line Upgrade

• Eskom Supply Upgrade

• New Rail Link – Sishen South

• Train and Formation Maintenance Equipment

Oreline Expansion ProgrammePort Scope

• Reclamation

• Roads & Underground Services

• New By-pass Conveyor

• New Stacker Reclaimers

• RO Plant

• Power and System Upgrade

• Dredging & Staggered Shiploading

Reclaimed area

S/R 4

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• Refurbishment of the Dry Bulk Terminal – Port of Richards Bay

• Manganese Export Terminal Refurbishment – Port Elizabeth

• New Manganese Export Terminal Feasibility Study – Port of Ngqura

• Orex Terminal Ship Loader Trippers Redesign and Build – Port of Saldhana

SPECIAL PROJECTS – Current Assignments

SPECIAL PROJECTSRichards Bay Dry Bulk Terminal

• Upgrades to 40 km of Conveyors• Refurbishment of two (2) wagon Tippers• Extension of Conveyor P1 / P2 Gantry• Refurbishment of Ship Loaders and unloaders

(x 11)• Infrastructural Upgrades and Refurbishments• Operational and Maintenance Improvements

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SPECIAL PROJECTSPort Elizabeth 4.2 Mtpa Manganese TerminalRefurbishment

PE Port

Ngqura Port

Stockyard Stacker & Reclaimer

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TipplerTippler

Shiploader

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INDIANINDIANOCEANOCEAN

DURBANDURBAN

HOWICK

LADYSMITHLADYSMITH

BETHLEHEM

VOLKSRUST

NEWCASTLEKROONSTAD

KLERKSDORP

POTCHEFSTROOM

WITBANK

WALTLOOWALTLOOPRETORIA WEST

SECUNDA

STANDERTON

ALRODEALRODE

COALBROOKSASOLBURG

SCHEEPERSNEK

MAHLABATINI

HILLCREST

TARLTON

LESOTHO

NATAL

FREE

STATE

GAUTENG

ø457,2

ø406,4ø323,8

QUAGGA

N

RUSTENBURG

MAGDALA

NORTH - WESTMPUMALANGA

KWAZULU /

AIRPORT

VRYHEID

RICHARDS BAY

( 18" )

( 16" )( 12" )

ø457,2

(18")

ø406,4

( 16" )

BHT

MEYERTON

MNGENI

VAN REENEN

DUZI

INGOGO

WILGE

LANGLAAGTELANGLAAGTE

FORT MISTAKE

EMPANGENI

VREDE

MOOIRIVER

“T”

Coastal Terminal /

Pump Station # 11

6

10

Pump Stations

#2 and #6

Inland Terminal &

Pump Station

16” JP to Alrode (ALR) &

16”ALR to Langlaagte

16” Kendal to Waltloo

2

JAMESON PARKJAMESON PARK

KENDAL

INDIANINDIANOCEANOCEAN

DURBANDURBAN

HOWICK

LADYSMITHLADYSMITH

BETHLEHEM

VOLKSRUST

NEWCASTLEKROONSTAD

KLERKSDORP

POTCHEFSTROOM

WITBANK

WALTLOOWALTLOOPRETORIA WEST

SECUNDA

STANDERTON

ALRODEALRODE

COALBROOKSASOLBURG

SCHEEPERSNEK

MAHLABATINI

HILLCREST

TARLTON

LESOTHO

NATAL

FREE

STATE

GAUTENG

ø457,2

ø406,4ø323,8

QUAGGA

NN

RUSTENBURG

MAGDALA

NORTH - WESTMPUMALANGA

KWAZULU /

AIRPORT

VRYHEID

RICHARDS BAY

( 18" )

( 16" )( 12" )

ø457,2

(18")

ø406,4

( 16" )

BHT

MEYERTON

MNGENI

VAN REENEN

DUZI

INGOGO

WILGE

LANGLAAGTELANGLAAGTE

FORT MISTAKE

EMPANGENI

VREDE

MOOIRIVER

“T”

Coastal Terminal /

Pump Station # 11

6

10

Pump Stations

#2 and #6

Inland Terminal &

Pump Station

16” JP to Alrode (ALR) &

16”ALR to Langlaagte

16” Kendal to Waltloo

2

JAMESON PARKJAMESON PARK

KENDAL

NEW MULTI PURPOSE PIPELINE (NMPP)

Transnet Pipelines NMPP Project

• Terminals

– Coastal Terminal

• 2 X 20 000 m3 tanks contained in concrete bunds

• 4 X 40 000 m3 tanks contained in concrete bunds

– Inland Terminal

• 2 X 20 000 m3 tanks contained in concrete bunds

• 4 X 40 000 m3 tanks contained in concrete bunds

• Pipeline

– 535km of 24” pipeline

– 170km of 16” pipeline

– 4 pump stations

• 2 along the route

• One at each of the terminals

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THE SOCIO ECONOMIC CHALLENGE

SOCIAL ECONOMIC CHALLENGE

•Expanded Public Works Programme & ASSGISA

•Poverty alleviation & local labour

•Significant Skills Shortage

•Industry Representative of Countries Demographics

•Development of Emerging Contractors

•Sustainable & Competitive Industry

•NEC3 contract administration skills

•Safety Culture - 0.25 LTI frequency rate target

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“INSANITY IS DOING THE SAME THING OVER AND OVER AND EXPECTING A

DIFFERENT RESULT“

SOMETHING NEEDS TO CHANGE IN ORDER TO DELIVER BOTH OBJECTIVES

SUCCESSFULLY

DIFFERENT APPROACH TO DELIVERY

The way employer and contractors engage needs to change.

We need to work in collaborative partnershipstowards a common goal in such a way that

maximises the skills and knowledge available and incentivises both parties to achieve this; ultimately creating a win – win – win for the

Employer, Contractor and South Africa.

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SUMMARY OF CONTRACTING CONTRACT OPTIONS

STRATEGY FOR THE NMPP PROJECT

Project Construction Contracts based on

NEC3 ECC

Pipeline Contractor

Pump Station & Terminals Contractor

Tanks Design & Construct Contractor

System Wide Contracts

• Automation• Communications• SAP Integration

ECC Option CWith Over Arching Agreement

ECC Option C or DWith Over Arching Agreement

ECC Option A or C

ECC Option dependant on scope

Arup/Warley Parsons

AllianceDesign, Part

Procurement and Client

Project Management

PIPELINE CONTRACTWhy Option C• Status

– Work scope not fully defined and requires detailed design and engineering;– Need for further Site Investigation;

– Final materials quantification, identification and delivery to be worked out– Opportunity to develop methodology to reduce cost

• Option C provides for risk sharing for the uncertainties to reduce the overall Contractor’s risk in undertaking the Works;

• The final cost will be visible and verified;

• Financial incentive exists to reduce cost, deliver socio economic objectives and share in the savings

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Contract Data Review

KPI’s & Share Range

• Introduced Key Performance Indicators (KPI’s)– These will be used to assess overall performance against wider objectives

and the final score will adjust any Share generated under pain/gain share Clause• i.e. Total share 500,000 ZAR KPI score 96% = share adjusted to 480,000

• Option C, provides for a share range to assess the sharing of any cost under or over the Agreed Target

– i.e. if the cost is 150,000 less than the Agreed Target which may equate to 97% of the Target then the calculation is 150,000 x 45% = 67,500 paid to the Contractor in addition to the Actual Cost with the same principle applied to over spend

PROPOSED CONTRACTING RELATIONSHIP

EPCM AllianceArup

WorleyParsons

(The Consultant)

PSC with contractual roles

& responsibilities

Transnet (The Employer)

Pipeline Contractor

(The Contractor)

ECC Option C with contractual

roles &

responsibilities

OVERARCHING AGREEMENT

PSC with contractual roles & responsibilities

remain

ECC Option C

with contractual roles &

responsibilities remain

The Project Manager & Supervisor

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OVERARCHING AGREEMENT

The purpose / basis of the Agreement is:

• Sets out working arrangement that ties the Employer, the Consultant and the Contractor together to jointly manage a “project target cost”

• Reduces interfaces between the parties and avoids shadow management

• Drives the Parties to all pull together as each party is responsible for the Total Project Budget and can share in the rewards of efficiency whilst ensuring inefficiently is also shared

• All existing contractual liabilities between the Employer & the Consultant and the Employer & the Contractor remain in place.

• Establish and define the roles and responsibilities of the Parties to enable them to work as members of a team focussed upon the successful delivery of the Project

• So far as is necessary amends the Works Contract and the EPCM Contract

• Establish the principle for the operation of a Supervisory Board (to collectively make decisions for the good of the Project)

• Establish the revised incentive arrangement

OVERARCHING AGREEMENT

• Establishes a “Project Target Cost” that the parties are jointly responsible for and manage with all parties being focused on driving down cost, improving quality and ensuring timely delivery

• The “Project Target Cost” includes all elements of the project that the parties have an influence upon

• Includes a normal contingency allowance jointly agreed, built up by a series of Quantitive Risk Analysis Workshops involving recognised Risk Analysis software such as Pallasade @ Risk & Monte Carlo simulation

• The Parties accept by the inclusion of the “Risk Allowance” into the “Project Target Cost,” the “Project Target Cost” is capped with no changes or Compensation Events allowed

• The Win / Win is to ensure the project comes in under the “Project Target Cost”, with all parties benefiting from a share of the savings, whilst delivering all the objectives of the project.

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In Summary

Expanding our toolkit, being flexible in our

contracting approach and working collaboratively to

fully utilise the skills and resources available to us,

will ensure South Africa emerges from the Expanded

Works Programmes with the infrastructure it requires

to ensure continued economic success and with a

skilled, sustainable and representative construction

industry to deliver the next wave of development.