South African freight transport firm Transnet has signed a R12bn ($854m) club loan with five financial institutions to fund new locomotives.

According to Transnet, the agreements confirmed ‘buoyant investor appetite’ for the company and its portfolio of projects.

The latest loan agreement completes the majority of the funding required for the company’s programme to acquire 1,064 locomotives from four manufacturers.

"The agreements confirmed ‘buoyant investor appetite’ for the company and its portfolio of projects."

The club loan includes R3bn ($213m) each from Absa, Nedbank and Bank of China, and R1.5bn ($106m) each from Futuregrowth Asset Managers and Old Mutual Specialised Finance.

Transnet raised the funds in the open market following investor roadshows targeted at potential funders within South Africa.

The company has concluded 15-year loan agreements separately with each lender, but on the same commercial terms such as a four and a half year grace period while the locomotives are built.

The club loan is in addition to the loan facility agreed with China Development Bank (CDB) last June.

CDB has agreed to sanction a R30bn ($2.4bn) loan to Transnet as part of a bilateral memorandum of understanding (MoU) between the presidents of the two countries.

For this programme, the company has secured loans of $1.5bn from CDB, R6.9bn ($490m) from Export Development Canada and R2.8bn ($231m) from Germany’s KfW Development Bank.

The US Exim has guaranteed a R6bn ($426m) loan financed by Absa, Standard Bank and Old for this project.

In last March, Transnet has awarded a contract for 1,064 diesel and electric locomotives to four rail manufacturers.

China’s CSR Zhuzhou Electric Locomotive and Bombardier will build 599 electric locomotives, while General Electric Technologies and CNR Rolling Stock will supply 465 diesel locomotives.

The company noted that all but 70 locomotives will be built at its plants in Koedoespoort, Pretoria and Edwin Swales in Durban.

The CDB loan will be used to fund locomotives that the company is buying from China South Rail (CSR) and China North Rail (CNR).

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

The loan from KfW Development Bank will finance 240 electric locomotives being purchased from Bombardier.