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PRASA PRESENTATION TO PORTFOLIO COMMITTEE ON TRANSPORT GROUP CEO

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Title: PRASA PRESENTATION TO PORTFOLIO COMMITTEE ON TRANSPORT GROUP CEO


1
PRASA PRESENTATION TO PORTFOLIO COMMITTEE ON
TRANSPORT GROUP CEO LUCKY MONTANA 10 OCTOBER
2012
2
CONTENT
  • INTRODUCTION
  • BCKGROUND
  • CHALLENGES FACING RAILWAYS
  • STRATEGIC OBJECTIVES
  • PERFOMANCE IN 2011/12
  • PROGRESS ON OTHER KEY STRATEGIC PROGRAMMES
  • ROLLING STOCK FLEET RENEWAL PROGRAMME
  • FINANCIALS 2011/2012
  • KEY CHALLENGES
  • CONCLUSION

3
INTRODUCTION
  • Financial Year 11/12 significant historic for
    passenger railways
  • Commencement of Fleet Renewal Programme
  • Commencement of National Signaling Upgrade
    Programme
  • South African Railways both Freight and
    Passenger have entered new cycle of investment,
    renewal ,capacity expansion, technology upgrades
    to support the countrys long term growth
  • PRASAs three principal tasks at heart of
    strategy
  • Modernisation
  • Short Term visible improvements in quality of
    train services
  • Securing PRASAs financial sustainability

4
BACKROUND
  • PRASA established to house the assets, finances,
    personnel and operations of the former SARCC, its
    subsidiary, Intersite, Metrorail, Shosholoza Meyl
    and Autopax - Owns, Manages, Operates, Maintains
    Assets under its control.
  • End fragmentation in passenger services
  • Invest and Revitalise rail passenger transport
  • PRASA established to be the leading provider of
    Integrated Public Transport Solutions

5
CHALLENGES FACING PASSENGER RAIL
  • Railway infrastructure and technology has reached
    the end of its design lifespan
  • Poor levels of reliability and predictability
  • High costs of maintenance
  • Failure to contribute to an efficient transport
    system
  • Inability to support economic development
  • Limited access to socio-economic opportunities
    for rural and urban poor

6
STRATEGIC OBJECTIVES
  • Deliver on Legal Mandate of PRASA
  • Position Rail as the Preferred Mode of Transport
    in High-
  • Volume Corridors
  • Double Market Share of Rail by 2017
  • Facilitate Access for the Rural and Urban Poor
  • Ensure Financial Sustainability of PRASA
  • Modernize Passenger Rail Systems
  • Contribute to Integrated Public Transport
    Solutions in South
  • Africa
  • Integration within the SADC Region

7
PERFORMANCE IN 2011/12
8
HIGHLIGHTS FOR THE YEAR
  • Going concern issue, as previously indicated
    through technical insolvency position was
    addressed in the short-term through the prior
    period correction of R2,7 billion on amortisation
    of Capital Subsidy.
  • Improvement of 96,4 on prior years shortfall of
    R795,6 million to R28,9million in current year,
    mainly due to fair valuation of investment
    property
  • PRASA had committed and spent R4.328 billion of
    an allocated Capital Budget of R6.1bn 70
    spending. However, the overall budget had been
    committed by 31 March 2012 for Multi-Year Capital
    Projects such as Signaling Modernization Projects
    in Cape Town, Gauteng and Durban.
  • Delivery of 510 coaches against a target of 450
  • The Accelerated Rolling Stock Programme has
    created 2205 Jobs

9
HIGHLIGHTS FOR THE YEAR
  • Passenger numbers in Metrorail 18,6 below target
    but showed 9,5 annual improvement
  • Fatalities declined 7 resulting in a decline in
    the Fatality rate per million passengers of
    16,1
  • Crime incidents against passenger declined by 22
    incidents or 4 with a resultant decrease in the
    Crime index 100 000 passengers of 12,2
  • Autopax passenger numbers increased by 25 from
    2.7 million to 4.5 million

10
HIGHLIGHTS FOR THE YEAR
  • Investment initiatives in new capacity and
    modernizing rail
  • Recapitalization of the fleet commenced following
    approval by Cabinet of detailed feasibility
    study.
  • 7225 new coaches for Metrorail to be acquired.
  • Funding commitment and Affordability Limit of R40
    billion was set by Minister of Finance in
    February 2012
  • Programme to introduce modern, electronic
    interlocking systems commenced.
  • Gauteng Phase 1 commenced.
  • Phase 1 for KZN and Western Cape tender approved
    and have entered implementation phase.
  • Implemented Capacity-Enhancement and
    Infrastructure Upgrade Projects

11
  • Improving Safety - Platform Corrections

After
Before
The step here was 650mm. A standard step in a
building is 170mm. The standard step for
commuter trains is 190 mm - 230 mm.
View of completed platform
12
  • Station Modernisation- Rebranding Wayfinding
    Signage

13
  • Station Upgrades and Modernisation

Cape Town Station
14
HIGHLIGHTS FOR THE YEAR

15
LOWLIGHTS FOR THE YEAR
  • Irregular expenditure R25.676 million mainly
    due to lapsed contracts at Autopax
  • Wasteful expenditure R5 million due to late
    payment interest charges  
  • Shosholoza Meyl challenges - 
  • Severe impact on PRASAs operational cash flow
    with R1,1billion over 24 months a PRASA
    cross-subsidy
  • Revenues and subsidy do not cover minimum
    operational expenditure shown as R1,4billion p.a.
    by due diligence of 2008.
  • Passengers declined 7,5.

16
LOWLIGHTS FOR THE YEAR
  • Property Portfolio still not delivering value,
    with income being 48,8 below budget, with the
    Non-timely Approval of Section 54 PFMA request to
    DOT being one of the major contributing factors
  • Quality of Service in PRASA Rail
  • Poor demand due to slow economic recovery,
    industry capacity constraints, crime and
    vandalism of key assets such as signal cables
  • Poor levels of reliability of aged infrastructure
  • Operational Inefficiencies and outdated methods
  • Two accidents in April and May of 2011 resulted
    in increased injury rate of 59.

17
TIMING OF PROCUREMENT PROCESS OF EQUITY PARTNERS
  • The Bidders, as part of their bid responses will
    be expected to indicate the percentage of equity
    for the BEE Partners
  • The process to procure the Equity Partners will
    commence in October 2012, the anticipated
    timetable is indicated below

STAGE KEY DATES AND ACTIVITIES
Release of B-BBEE Procurement Documents 17 October 2012
Clarification process 18 October to 7 December
Proposal Submission Date 14 December 2012
Evaluation and Selection Completed 31 January 2013
Interface between Preferred Bidder and Equity Partners From February 2013 to Financial Close
18
PROGRESS ON KEY INFRASTRUCTURE PROJECTS
19
  • SIGNALLING PROGRAMME
  • Upgrading the signalling system of PRASA key
    strategic priority
  • Only 23 of the 163 (14) of the signalling
    installations have not reached the end of their
    design lives
  • PRASA is replacing all existing signalling
    interlocking, which consists mainly of obsolete
    mechanical and electro-mechanical systems, with
    electronic interlockings as the technology of
    choice.
  • Gauteng Phase 1 currently underway
  • Board has approved Kwazulu Natal and Western
    Cape
  • Gauteng Phase under evaluation
  • The signalling programme is one of the key
    priorities of PRASA over the period ahead. In the
    next three years, the project has been allocated
    an amount of R2.4 billion, including
    telecommunication, with R768 million in 2012/13,
    R814 million in 2013/14 and R855 million in
    2014/15.

20
  • BRIDGE CITY
  • Bridge City a new town centre being created 17
    kilometres from the Durban city centre, bridging
    the communities of Phoenix and Inanda, Ntuzuma
    and KwaMashu (INK) and linking them into the
    urban system
  • PRASA constructing a 3.2km rail extension - the
    rail service will be complemented by an
    integrated bus and taxi interchange located
    adjacent to the railway station
  • The overall developments in the area include a
    regional hospital, retail, residential,
    magistrates court and other commercial
    facilities. PRASA will spend approximately R700
    million for the construction of the rail line.
  • Phase 1 Station Box (100 complete)
  • Phase 2 - Construction of the new station
    building (100 complete)
  • Phase 3 Construction of the new rail link.

21
Bridge City Rail Link with new Bridge City Station
  • Progress on Key Strategic Projects
  • Progress as at end February 2012
  • Bridge City Station completed -
    March 2011
  • Rail Extension design completed - April 2011
  • Construction commenced - June 2011
  • Key steps for 2012/13
  • Earthworks completed - March 2012
  • Viaduct and bridges completed -
    June 2012
  • Rail Link completed - March 2013

22
  • BRIDGE CITY

23
  • BRIDGE CITY

24
Greenview Capacity Enhancement Project
  • Mamelodi is one of PRASAs Priority A corridors
    in terms of demand and rail activity.
  • Daily passengers on corridor 91 000. Peak hours
    passengers 38 000.
  • Section from Eerste Fabrieke towards east has
    most passenger demand.
  • Rail line from Eerste Fabrieke is currently only
    a single line, causing a 30 minute delay for
    turn-around of trains.
  • The communities stopped trains in 2009 as
    communities of Greenview and Pienaarspoort have
    no access to rail services.
  • Greenview doubling and additional station
    capacity will provide for 50 increase in
    passengers over medium to long term(39 000
    passengers ? 58 000 passengers per day.
  • Doubling of the line with new signaling and
    additional rolling stock will increase capacity
    with 100 (Currently 114 trains per day on the
    section).

25
Mamelodi Extension with new Greenview station,
doubling of lines and upgraded Pienaarspoort and
Mamelodi stations
  • Progress on Key Infratructure Projects
  • Progress as at end September 2012
  • Doubling of line - 65 complete
  • Delays as result of liquidation of main
    contractor
  • Key steps for 2012/13
  • Completion of doubling of line - June 2013
  • Tender re-award for Mamelodi Upgrade and
    Greenview - April 2012
  • Delay as result of default of preferred bidder
  • Construction to commence Mamelodi and Greenview -
    May 2012
  • Tender award for Pienaarspoort station upgrade -
    May 2012
  • Construction to commence - June 2012
  • Completion of all stations - June 2013

26
Background
  • THE PROJECT ENTAILS THE DOUBLING OF EXISTING
    RAILWAY LINE FROM EERSTE FABRIEKE TO GREENVIEW,
    INCLUDING EARTHWORKS, TRACKWORK, SUBSTRUCTURE,
    ALTERATIONS TO ROAD-OVER-RAIL BRIDGE, SIGNALLING
    AND ELECTRIFICATION, AND UPGRADING OF MAMELODI
    GARDENS AND PIENAARSPOORT STATIONS AND
    CONSTRUCTION OF A NEW STATION AT GREENVIEW

27
Mamelodi Rail Expansion
28
Mamelodi Gardens Station
  • Existing Stations to be upgraded
  • Package 1 includes the lengthening of the station
    platform

29
Greenview Station
  • Doubling of the Tracks and Station Infrastructure
    is 65 complete.
  • Package 1 includes the passenger platform
    foundations, building foundation piling and
    column stubs
  • New Station to be constructed in Greenview and
    upgrading of two other stations

30
Modern Architectural Design
Mamelodi Gardens Station
Greenview Station
Pienaarspoort Station
31
Contract Packages
  • Contract Package 1
  • Earthworks, Station Platform, Piling at
    Platforms, Bridgework and Culverts
  • Package 1a OHTE
  • Package 1b Perway
  • Package 1c Signalling
  • Package 1d Telecommunications

32
Contract Packages
  • Contract Package 2
  • Mamelodi Gardens Station Building above platform
    level
  • Contract Package 3
  • Greenview Station Building above platform level
  • Contract Package 4
  • Pienaarspoort Station
  • Contract Package 5a
  • Infrastructure Changes required at Pienaarspoort
    Station.
  • Contract Package 5b
  • Elimination of level crossing.

33
Project Overall Progress
  • Contract Package 1
  • Doubling of the Line (Physical progress 80)
  • Contract Package 2
  • Mamelodi Gardens Station Building above platform
    level (Contract has been awarded to Bila Civil
    Contractor)
  • Contract Package 3
  • Greenview Station Building above platform level
    (Problems with Preferred Contractor alternate
    contractor to be in place mid March 2012)
  • Contract Package 4
  • Pienaarspoort Station (Planning to call tenders
    for construction by end March 2012)
  • Contract Package 5
  • Bridge at Pienaarspoort for elimination of level
    crossing and Track work (Planning to call tender
    for infrastructure changes by August 2012. Bridge
    to be built by National Roads Authority)

34
Key Issues (Challenges)
  • Formalisation of Agreement between PRASA and CoT
    for the use of CoT land.
  • Relocation of the informal settlement at
    Greenview.
  • Approval of Station Drawings and Authority to
    start construction.
  • Pienaarspoort Level Crossing Closure.
  • Access Roads and Intermodal Facilities to be
    provided by CoT (Re-planning of new Township
    north of Greenview)

35
The Rolling Stock Fleet Renewal Programme
contributing to Governments Industrial Policy
Action Plan (IPAP2) strengthening Local
Manufacturing Production, Skills Development
and Job Creation
36
  • Forecast Commuter Rail Volumes Market
    Engagement Indicate

Total R123.5bn over the 20 year period
New Fleet requirement 7224 procurement at 360
coaches per year for two x 10 year contracts
The Programmatic procurement will result in
Long term procurement will allow local capability
to evolve to above 65 of the value of a coach
produced locally
Creating 65 000 direct and indirect jobs
37
TECHNOLOGY AND CAPACITY
Rolling stock technology and capacity Rolling stock technology and capacity
Platform Electric Multiple Units (EMUs) Cape Gauge 3 kV DC traction 12 car units To be made up of proven standard components and designs
Capacity 2 503 passengers per train set loading 5 pax/m2 12 higher capacity than existing rolling stock
Estimated overall cost 3 600 vehicles (1st batch) (10 years) 5 712 vehicles (16 years) 7 224 vehicles (includes estimated growth) R123.5 bn (20 years)
38
EMU NUMBERS
7 224 vehicles
39
ROLLOUT OF THE NEW FLEET
Rollout of 360 vehicles per annum
40
INFRASTRUCTURE INTERVENTIONS
  • Infrastructure
  • Infrastructure intervention envisaged at an
    estimated cost of R13.5 bn (excl new corridors)
  • Intervention needed to permit operation of new
    rolling stock
  • Intervention needed to obtain optimal use of new
    rolling stock
  • Depots
  • New depots required at all sites
  • Gauteng R1.5 bn
  • Cape Town R1.5 bn
  • Durban R1.0 bn
  • East London R0.3 bn
  • Port Elizabeth R0.3 bn

41
MAIN FEATURES OF PROCUREMENT
  • Contract structure
  • Contract with design, build, and defined
    maintenance responsibilities for the RSM
  • Period of rolling stock roll-out
  • Stretch the period of rolling stock roll-out to
    approximately 20 years, with the initial batch
    enduring over 10 years (2015 to 2025).
    Subsequent procurement could take the form of a
    second batch over 10 years, or several subsequent
    batches over shorter periods, depending on the
    state of readiness of new lines that are
    currently in planning stages
  • Flexibility
  • Procurement framework to be designed as flexible
    as possible to provide PRASA optimum protection
    in procurement, given complexity of project

42
STRATEGIC GOALS
Modern Trains
South African Factory
Economic Development
42
43
INDUSTRIAL REGENERATION
  • This is much more than a train supply contract
    this Project will regenerate South Africas
    rolling stock manufacturing industry supply
    chain

44
INDUSTRIAL REGENERATION
  • RFP Issued Closed on 30 Sept 2012
  • 7 Bids Submitted China North Railways
  • China South Railways
  • Bombadier
  • Dudula Rail
    (ABB Satdler),
  • Gibela Rail
    (Alstom)
  • CSR/Wictra
  • Evaluation of the Bids Underway
  • Preferred and Reserve Bidders to be announced End
    of Nov 2012
  • Financial Close by June 2013

45
Economic Development and BBBEE
45
46
ECONOMIC DEVELOPMENT APPROACH
  • The PRASA approach to Economic Development ("ED)
    is informed by, inter alia, the following
  • Opportunity presented by long term investment in
    the Rolling Stock Fleet Renewal Programme
  • Opportunity presented by structuring new project
    companies and/or entities to be created for
    implementing the Programme
  • Government objectives and policy framework for
    B-BBEE (various policy documents and papers)
  • Legislative requirements and guidelines such as
    the Broad-Based Black Economic Empowerment Act,
    2003 ("B-BBEE Act") and the Preferential
    Procurement Policy Framework Act, 2000 ("PPPFA")
    in relation to procurement.

47
JOB CREATION AND B-BBEE ELEMENTS FOR THE
PROGRAMME
  • The Job Creation and B-BBEE elements for the
    Programme were developed taking into account the
  • policy and regulatory framework, which includes
    the
  • Constitution
  • PPPFA
  • B-BBEE Act and B-BBEE Codes
  • socio-economic conditions in South Africa, which
    include
  • high unemployment rate
  • lack of education
  • lack of skills

48
OBJECTIVES IN THE PROGRAMME FOCUSING ON BLACK
PEOPLE
  • PRASA has developed outputs for ED, informed by
    regulatory framework and socio-economic
    conditions in South Africa
  • Outputs developed for ED are as follows
  • sustainable job creation for black people, the
    youth, women and South Africans
  • Increased black equity
  • the empowerment of a broader base of people to
    contribute towards the economy
  • the involvement of women in a meaningful manner
  • skills development for black people - engineers,
    artisans, technicians and technologists, etc.
  • subcontracting to black owned enterprises
  • development of small, medium and micro
    enterprises

49
JOB CREATION AND B-BBEE ELEMENTS FOR THE
PROGRAMME FOCUSED ON BLACK PEOPLE
  • Job Creation, which focuses on jobs for South
    Africans, Black South Africans and Skilled Black
    People
  • Ownership, which focuses on shareholding in the
    Project Company by Equity Partners (Black People,
    Black Women and Broad-Based Ownership Schemes
  • Management Control, which focuses on the
    involvement of Black People and Black Women in
    top and senior management
  • Employment Equity, which focuses on the
    involvement which focuses on the involvement of
    people with disabilities, Black People and Black
    Women in top and senior management

50
KEY FEATURES OF ECONOMIC DEVELOPMENT
  • Local Factory in South Africa constructed and
    operational by July 2016 (3 years after financial
    close)
  • Minimum 40 local content by year 3 of delivery
  • Minimum of 65 Local Content by value of trains
    to be sourced locally no later than 2021/22
  • Development of rail related skills and transfer
    of skills generally to South Africans
  • Subcontracting with entities owned by black
    people, small entities and entities owned by
    women
  • Development of small enterprises and communities

50
51
SEPARATE PROCESS ON EQUITY PARTNERS
  • PRASA intends to have significant ownership by
    black people, black enterprises and broad-based
    ownership schemes in the Programme
  • The separate procurement process has been
    undertaken to enable PRASA to structure the
    participation of the Equity Partners to ensure
    that such participation
  • empowers a broader base of people
  • benefits the employees to be involved
  • serves to revitalize the rail industry
  • introduce new participants in the rail sector

52
ATTRIBUTES OF THE EQUITY PARTNERS TO BE PROCURED
  • The Equity Partners will be comprised of the
    following shareholding by
  • by black enterprises, who are
  • investor enterprises, comprised of black people,
    black women and people with disabilities
  • actively involved in the rail sector, comprised
    of black people, black women and people with
    disabilities
  • employee trusts, comprised of
  • a trust for the employees of the Project Company
  • a trust for PRASA employees
  • an educational trust, focused on the development
    of skills in the rail sector, which will include
    skills such as those of engineers, technologists,
    technicians, and artisans

53
30 SHAREHOLDING OF EQUITY PARTNERS
Equity Partner Breakdown in Percentage (out of 100) Breakdown in actual figure (of 30 shareholding)
Active Black Enterprises 33 10
Investor Black Enterprises 24 7
Employee Trust 33 10
Educational Trust 10 3
Total 100 30
54
FUNDING ARRANGEMENTS FOR THE PROGRAMME
  • In order to facilitate the involvement of Black
    People in the Programme, PRASA has engaged the
    National Empowerment ("NEF") and the Industrial
    Development Corporation ("IDC") about the
    possibility of funding the suppliers in the
    Programme to enable the achievement of PRASA
    objectives in the Programme
  • The products have been provided as part of the
    procurement documents for the Programme
  • the Procurement Finance product from the NEF,
    which is for tenders and contracts (and other NEF
    products), which requires that the applicants be
    more than 50 owned by Black People
  • Gro-e-Scheme from the IDC, which is targeted at
    start-up entities, for buildings, machinery and
    working capital
  • It is anticipated that the availability of
    funding will go a long way in assisting Black
    People to participate in the Programme

55
WAREHOUSING
  • The NEF has been brought into the process to hold
    the shares while the procurement process of
    Equity Partners is underway
  • NEF has facilitator status, any shareholding held
    by them is recognised as follows
  • 100 Black owned
  • 40 women owned
  • 10 owned by designated groups (broad-based black
    ownership schemes)
  • In the event that the procurement process the
    Equity Partners being concluded prior to
    Financial Close, it may not be necessary for have
    NEF as the initial holder of the shares in the
    Project Company, subject to any applicable
    funding structure
  • Create a revolving facility amounting to R200m
    for equity portion

56
WAREHOUSING (CONT.)
  • The period it will take before the NEF transfers
    the shares the Equity Partners in the event that
    the NEF warehouses the shares has not yet been
    decided and it will depend on factors including,
    the time it takes to finalise the Equity Partners
    and registration of any trusts
  • PRASA will however, ensure that the shares are
    transferred to the Equity Partners such that
    there is sufficient time in the remainder of the
    contract to enable them to make a meaningful
    contribution to the project and derive commercial
    benefit from it
  • The NEF will become a shareholder during the
    warehousing period and will be entitled to all
    rights of a Shareholder in the Project Company
  • NEF will provide an equity contribution,
    commensurate with its shareholding in the Project
    Company

57
FINANCIALS 2011/2012
58
ABRIDGED GROUP INCOME STATEMENT 2012
59
GROUP SUBSIDY AND FARE REVENUE
60
PRASA RAIL SUBSIDY VS. REVENUE
61
MLPS PASSENGER TRIPS
62
METRORAIL PASSENGER TRIPS
63
KEY RATIOS
64
ASSET BASE
65
CHANGES IN FINANCIAL POSITION
66
IRREGULAR EXPENDITURE
67
  • KEY CHALLENGES
  • Lack of funding of Long-Distance Train Service
    adding huge financial burden on PRASA- main
    contributor to R600 Million loss - PRASA urged to
    shut it down
  • SMEYL transferred from Transnet to PRASA in 2009
    Due Dilligence confirmed a funding requirement
    of R1.4 billion per annum
  • Property Portfolio unlocking its value critical
    Section 54 PFMA approvals critical financing
    development leases and buying back leases
    critical bringing in development partners
    critical
  • Striking the right balance between Operational
    Funding and Capital allocations critical to
    capitalise the costs associated with
    infrastructure upgrade and modernization
  • Going-Concern issue fully addressed however
    Cash remains a major, immediate challenge -

68
  • CONCLUSION
  • Next 12 Months critical
  • Appointment of a Rolling Stock Contractor
    Critical
  • Signing Contract
  • Job Creation, Skills Development and unlocking
    devlopmentment through the Infrastructure
    Modernisation Programme
  • All these testimony of PRASAs intense
    modernisation to create a new modern commuter
    rail system by 2014/15.
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