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June 25, 2015

South Africa’s Transnet secures $231m loan to fund Bombardier locomotives

South African freight transport firm Transnet has signed a R2.8bn ($231m) loan with Germany's KfW Development Bank to fund the purchase of 240 electric locomotives, which are part of the company's 1,064 locomotives acquisition programme.

South African freight transport firm Transnet has signed a R2.8bn ($231m) loan with Germany’s KfW Development Bank to fund the purchase of 240 electric locomotives, which are part of the company’s 1,064 locomotives acquisition programme.

The loan will contribute 20% to the total financing for the procurement of these 240 electric locomotives by the South African company from Bombardier Transportation.

The loan will mature in 15 years, with a five-year grace period in which the company will only be paying interest, according to sanews.gov.za.

"The efficient transportation of goods will contribute significantly to making South Africa’s economy more competitive."

KfW is acting on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).

The funding will support South Africa’s strategy to increase the efficiency and capacity of its freight transport sector, thereby achieving a modal shift from road to rail.

The order for these electric locomotives is part of the company’s significant contribution to protect the climate by reducing CO2 emissions.

KfW Group executive board member Dr Norbert Kloppenburg said: "This project will play a pivotal role in South Africa’s economic development and the creation of new jobs.

"The efficient transportation of goods will contribute significantly to making South Africa’s economy more competitive.

"Up to 15,000 new jobs will be created, the local supplier industry will benefit and technological expertise will be passed on."

As part of its 1,064 diesel and electric locomotives acquisition programme, Transnet entered into a $4.26bn agreement with four global original equipment manufacturers in March last year.

As part of that deal, the company has ordered 599 electric and 465 diesel locomotives from General Electric, China North Rail (CNR), China South Rail (CSR) and Bombardier Transportation.

The company noted that all the locomotives except 70 will be built at its engineering plants in Koedoespoort, Pretoria and Durban.

Earlier this month, China Development Bank (CDB) has agreed to sanction R30bn ($2.4bn) loan to Transnet as part of a bilateral memorandum of understanding between the presidents of the two countries.

The loan will be used to finance locomotives that the company is buying from CSR and CNR.

The company has a total of 232 diesel and 359 electric locomotives on order with CNR and CSR respectively.

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