S.Africa's Transnet considering billions in capex cuts - sources

JOHANNESBURG, Oct 7 (Reuters) - South African logistics
utility Transnet is considering up to 200 billion rand ($14.5
billion) in cuts to its capital expansion plans over the next
three years, two sources at the company said, as the global
demand for iron ore and coal stalls.
The utility, four years into a seven-year plan to spend
336.6 billion rand expanding railways, pipelines and ports, held
meetings last week at which it decided to cut projects that were
not sure to generate revenue, one source said.
A second senior source confirmed the "drastic" plans meant
capital spending over the next three years under the plan was
likely to drop to 100-150 billion rand because demand for the
iron ore that Transnet ships is falling on slow growth in China.
"It's because of the downturn - the volumes are not matching
that well with the capital expenditure," said the source, adding
that the company's plans to expand its coal and manganese lines
would not be affected.
However, Transnet spokesman Mboniso Sigonyela said the
firm's capital expenditure plans were unchanged.
"We expect to continue with our programme in line with
market demand. Our current seven-year rolling plan is 336.6
billion rand," he said.
After years of neglect, Transnet is catching up on building
and maintaining infrastructure but it can't fund it all from its
own profits and has had to tap the markets and borrow heavily in
recent months.
Financing costs increased by more than 9 percent last year
and as Transnet wants to stay inside a self-imposed gearing
limit of 50 percent, it now has to cut back.
One source said the up-front payment for 1,000 new
locomotives had added to the pressure on its funding position.
At its results in July, Transnet said it still had more room
to borrow, but it is being hit hard by a slowdown in commodity
exports and a general weakness in Africa's most advanced
economy, now forecast to grow at less than 2 percent this
year.
The senior source at Transnet said the firm had negotiated
with unions to avoid any layoffs "in the next two years or so".
($1 = 13.6835 rand)