Download Slide 1

Spoornet
Rail Freight Challenges
Positioning for Growth and Prosperity
Siyabonga Gama
Chief Executive, Spoornet
Global Rail Freight Conference
22-24 March 2007
1
Transnet Structure
Strategy
Delivering effective
and competitive
services
Focused freight
transport company
TRANSNET COMPANY
Structure
Non-core portfolio
Operational divisions
(continued businesses)
RAIL
Spoornet
Enabling economic
growth
Transwerk
PORTS
National
Ports
Authority
SA Port
Operations
Discontinued
businesses
PIPELINE
Petronet
•
•
•
•
•
•
•
•
SAA
Viamax
V & A Waterfront
Autopax
Metrorail
freightdynamics
Equity Aviation
VAE Perway
Other to be sold
• Propnet – non-core
portfolio
• Housing assets
• SA Express
• “C” class preference
shares
2
Spoornet Network
Messina
Spoornet is the
largest division of
Transnet with a
focus on the
transportation of
freight.
Pretoria
Johannesburg
Sishen
Kimberley
Bloemfontein
Richards
Bay
Durban
High Density
Light Density
East
London
Port Elizabeth
Saldanha
Cape Town
3
Low Density
No Service Lines
Facts about Spoornet
●
Moves 17% of the nations freight annually
 70mt of export coal on the heavy-haul Ermelo – Richards Bay line
 32mt of export iron ore on the heavy haul Sishen - Saldanha line
 80mt of general freight across various freight corridors
●
30% of the core network carries 95% of freight volumes
●
3 million inter-city passengers annually
●
Annual revenues of over R14billion (US$2.2bn)
●
R7 billion in annual capital investment over the next 5 years
●
Total assets of R24 billion ( ’03/07) up from 18.4bn (’03/06)
●
25 068 employees system wide (from 33 450 in March 2006)
4
Spoornet Statistics
●
●
●
●
●
●
●
●
●
●
Freight Wagons
Locomotives
Track km
Route km
Freight volumes
93 700 (active)
2 157 (active)
30 400 km
20 298 km
182 mV (2005/06)
Passenger Coaches
Long distance Passengers
Blue Train occupancy
1 227 (active)
3.15 million (2006/05)
164 trips, 90%
Turnover
Employees
R14.3 billion (2005/06)
25 068 (Dec. 2006)
5
Spoornet : Density over the network
Messina
High Density Lines (<3m nt/a)
High Density Lines (3 - 7m nt/a)
High Density Lines (7 - 10m nt/a)
High Density Lines (10 - 20m nt/a)
High Density Lines (20 - 30m nt/a)
High Density Lines (>30m nt/a)
Low Density Lines (Open)
No Significant Service Lines
Picked up Lines
Louis Trichardt
Soekmekaar
Ellisras
Vaalwater
Drummondlea
Chroomvallei
Zebediela
Phalaborwa
Naboomspruit
Middelwit
Nylstroom
Steelpoort
Marble Hall
Roossenekal
Northam
Graskop
Plaston
Cullinan
Mafekeng
Lichtenburg
Hawerklip
Bethal
Orkney
Schweizer-Reneke
Wolwehoek
Sishen
Vrede
Westleig
h
Naroegas
Warrenton
Glen H
Bultfontein
Upington
Lothair
Standerton
Vierfontein
Makwass
ie
Pudimoe
Gelukpos
Potchestroom
Klerksdorp
Ottosdal
Hotazel
Machadodorp
Baberton
Olifantsfontein
Johannesburg
Coligny
Vermaas
Komatiepoort
Belfast
Rayton
Pretoria
Charlestown
Utrecht
Hlobane
Warden New Castle
Whites
Virginia
Bethlehem
Vryheid
Harrismith
Glencoe
Theunisen
Kimberley
Kakamas
Douglas
Bloemfontein
Belmont
Prieska
Ladysmith
Winburg Marquard
Koffiefontein
Bergville
Ladybrand
Sannaspos
Kranskop
Moorleigh
Nkwalini
Eshowe
Stanger
Howick
Hilton
Underberg
Donnybrook Richmond
Mid Ilovo
Springfontein
Dreunberg
Jamestown
Noupoort
Kootjieskolk
Calvinia
Kokstad
Aliwal North
Sakrivier
Bitterfontein
Rosmead
Barkley East
Maclear
Simuma
Port
Shepstone
Queenstown
Qamata
Tarkastad
Beaufort West
Klawer
Seymour
Somerset East
Klipplaat
Porterville
Saldanha
Prins Alfred
Hamlet
Atlantis
Simonstad
Kelso
Coal exports
> 70mt
Umtata
Hofmeyer
Cape Town
Harding
Durban
Schombee
Hutchinson
Iron ore exports
> 30mt
Mandonela
Franklin
Matatiele
Bethulie
Richards Bay
Greytown
Maseru
Copperton
De Aar
Empangeni
Fort
Beaufort
Blaney
East London
Touwsrivier
Ladysmith
Worcester
Franschhoek
Stellenbosch
Strand
Amabele
Cookhouse
Kirkwood
Calitzdor
p
Oudtshoorn
George Avontuur
Protem
Alexandria
Patensie Uitenhage
Port Alfred
Port Elizabeth
Riversdale
Mosselbaai
Knysna
Bredasdorp
6
General Freight > 80mt
General Freight: Portfolio Mix (Rbn)
Coal & Containers
generate highest
revenues.
Coal
Other
R1,8bn
R1,6bn
Containers
Phosphate
Ferrochrome
Manganese
70% of other revenue
is from mining/ bulk
related freight.
R1,1bn
The portfolio mix is representative of most freight railways
7
Locomotive Age Profile
Fleet Age - All Locomotives
30 y
200
150
Average
No of Locos
100
50
45
44
43
42
41
40
39
38
36
37
35
34
33
31
32
30
29
27
28
26
25
23
24
21
22
20
19
18
16
17
14
15
12
13
9
10
11
8
7
6
5
4
3
2
1
No of Locomotives
250
Age (Years)
●
●
●
●
The average age of the total fleet is 30 years compared to 12
years US Class One
Last batch purchased more than 12 years ago
Ageing fleet characterised by high maintenance costs, very low
reliability and availability and high number of safety related
incidents
Aggravated by lack of effective maintenance over a long period
8
Wagon Fleet Age Profile
Wagon Fleet Age distribution
Quantity Wagons
16000
14000
12000
10000
Replace with equivalent wagon graph
8000
6000
4000
2000
58
55
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
7
4
1
0
Age (Years)
●
The average age of the General Freight wagon fleet is 34 years
●
Limited investment in wagons over the past 12 years (excl. coal & ore)
●
Capital investment for wagon fleet modernisation behind schedule
●
Availability of wagons is not achieving desired percentage and is
deteriorating
●
Lack of effective maintenance over a long period, leading to current
backlog
9
Where have we come from?
●
●
South Africa
Spoornet
10
South Africa: Economic Outlook
●
Export performance expected to
improve
 high commodity prices
 increased profitability of a
broader range of manufactured
goods
●
Growth in imports likely to
remain high due to continued
strong domestic demand
●
Inflation projected to remain well
within the target range
●
Outlook for achieving 6% GDP
growth by 2010 is bright
11
Issues that being addressed in South Africa
●
Globalization
●
Regional role
●
Increase/enhance competitiveness
 Reduce cost of doing business
 Job creation and poverty alleviation
●
Streamline/improve the national logistics
infrastructure
●
Transformation & BBBEE
●
Understand the interaction between the 1st and
2nd economies
12
Structure of the South African Economy
The total throughput in the South African economy that
requires logistics intervention amounts to 830mt (transportable GDP)
2004
Manufacturing =
18% of GDP
Manufacturing
45%330mt
Mining
49%
370mt
45mt
2004
Agriculture =
6% of GDP @
6%
13
2004
Mining = 7% of GDP
Spoornet’s Strategic Intent
Spoornet is a Freight Railway
that satisfies
the needs of our Customers
●
●
●
●
Enables Economic Growth
Facilitates Trade Growth by
increasing South Africa’s competitiveness
Reduces logistics costs by transferring traffic from
road to rail
Develops Skills
14
Spoornet Strategic Rail Track Map
Divestment of
Non-Core
Non-Freight
Business Activities
Investigate
Vertical Integration
vs. Vertical Separation
Volume &
Market Share
Growth
Improve
Operational
Efficiency &
Customer Service
2012
Desired
Future
SPOORNET
Sustainable Business
Position in
Rail Industry
Strategic
Investment
Current
State of
SPOORNET
Improve
Business
Performance
Stabilise and
Re-engineer the
Business
2005
2007
2008 15
2009
2012
Spoornet Objectives
Safety
Transform Spoornet into a
safe railway
1
Customer Service
Delivery
Retain the desired
customer base and
improve service delivery
2
5
Create Capacity
Invest to maintain,
replace and increase
capacity
Scheduled Freight
3
Railway
Leadership &
Employee Capability 4
Implement efficiency
improvements
Optimise human capital
deployment and development
• Improve Corporate Governance
• Change Leadership
• Focus on high growth, high yield General Freight in key corridors
16
Spoornet : Levers for Growth
Marketing /
Pricing
Capital
Operational
Efficiency Investment
17
Restructuring
People
Spoornet: Projected Volumes (mV) 2007-2012
300
250
200
150
100
50
0
Coal
Iron Ore
General Freight
2006/07
2007/08
68
72
31
79
35
82
2008/09
2009/10
2010/11
2011/12
74
77
81
86
42
89
44
95
44
102
47
105
Growth focus: Market share capture
18
Spoornet’s Service Offerings
Heavy Haul
Blockload
Intermodal
Purpose-built bulk
conveyor belts
Fixed origin and
destination point with
high level of empty
returns, and focused
asset utilization
Terminal-toterminal blockloads
with priority path
status
Fixed schedule service
Charter service
19
Less than
Blockload
Varying OD’s, many
operational moves,
poor asset utilisation
Consolidation service
Spoornet Market Strategy
Market Defense
Strong relationships with
base-load industries through:
•dedicated service
and tight integration with
•their production processes
Market Capture
of Bulk freight through:
Efficiency improvements
translated into a competitive
service offering
20
Market Attraction
through Rail and Road
partnerships to service the
needs of growing, non-bulk
sectors of the economy
via intermodal solutions
Efficiency focus for Rail
Focus Area
Optimal planning and execution of resources
Quality and cost of service delivery
Asset utilisation and efficiency
Ring-fence rolling stock fleets and reduce cycle
time
Reduction in safety and security incidents
Streamlined customer interface
Execution of Backlog Maintenance, Capital
Programme and improved maintenance practices
Labour Productivity and Change Management
21
Measures
Increase locomotive reliability
Spoornet Capital Investments
●
Rolling Stock Maintenance
Key Projects
& Backlog
•Coal & Ore line expansions
Reliability
●
•Locomotive Renewal Programme
Stabilisation
o 110 AC/DC for Coal line
Fleet Rightsizing & Standardisation
o 212 Diesel-electric
Upgrades
o 163 AC/DC for General Freight
Expansion
General Freight
Majuba Power Station
o Rolling stock fleet renewal &
Coal and Iron Ore Export lines
●
modernization
o Train authorisation systems
Rail Master Planning: future
o Infrastructure electrical systems
o Relocation of CTC offices
R34bn (US$5bn)
Investment over next 5 years
US$1.3bn invested in 2006
o Optic fibre cabling
o Upgrade & sustain rail infrastructure:
R4bn p.a. over next 5 years
22
The Competitive Challenge for South Africa
Global trade routes
SA trade routes
10k km
14k km
12k km
SA is essentially a bulk net exporter:
equidistant from all the main global markets
23
Influenced by global logistics trends…
●
Sourcing of product is a global game
●
Choice is influenced by agility and cost of the total
supply chain
●
Balance of power shifting to carriers
●
Focus on Intermodalism and Integration
●
Pressure on developing countries to reduce the cost of
doing business
●
Global Revival of Rail
 Rail is catalyst in positioning emerging economies
 Infrastructure investment critical
 Regulation of modal competition
24
Global Customer Requirements for Rail
●
Heightened pressure for world-class competitiveness
●
Efficient rail is a competitive advantage for customers
to get product to market – 5 “R’s” of Rail:
 Right Place
 Right Time
 Right Quantity
 Right Cost
 Right Condition
Rail is an integral part of the total supply chain,
rail operators need to think outside the ‘rail’ box
25
Rail in the Customers’ Supply Chain
●
●
●
For Customers the world is flat in terms of supply
and demand
Rail is the critical link between supply and demand
Rail is part of a production system
 Each component needs to focus on product delivery
 Each component needs to perform based on quality
standards
 Each component needs to invest
in technology to improve
 If the production line fails
the factory stops
Supply Chains are global production lines
26
Future Outlook
●
Volume based growth strategy & philosophy
●
Capital investments to capture market
growth (10% of GFB to 22% over 5 years)
●
Investments in sustaining growth
●
Sharper focus on customer service
Reduce switching cost from road to rail
27
Thank You
28