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 country’s long term growth
PRASA’s three principal tasks at heart of strategy:
Modernisation
Short –Term visible improvements in quality of train services
Securing PRASA’s 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 year’s 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 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 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 – R million mainly due to lapsed contracts at Autopax
Wasteful expenditure – R5 million due to late payment interest charges  
Shosholoza Meyl challenges - 
Severe impact on PRASA’s 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, magistrate’s 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
Bridge City Rail Link with new Bridge City Station
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 PRASA’s Priority “A” corridors in terms of demand and rail activity.
Daily passengers on corridor = Peak hours passengers =
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( passengers  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. Progress on Key Infratructure Projects
Mamelodi Extension with new Greenview station, doubling of lines and upgraded Pienaarspoort and Mamelodi stations
Progress as at end September 2012
Doubling of line % 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 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 Government’s 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
~ direct and indirect jobs

37. 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
5 712 vehicles
7 224 vehicles

39. ROLLOUT OF THE NEW FLEET
Rollout of 360 vehicles per annum

40. INFRASTRUCTURE INTERVENTIONS
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. Modern Trains South African Factory Economic Development
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 Africa’s 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 BBBEE45

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
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
Educational Trust 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 PRASA’s intense modernisation to create a new modern commuter rail system by 2014/15.