The Gautrain project consists of the Gautrain Rapid Rail Link (Gautrain), which is a state-of-the-art rapid rail network operating in Gauteng. The Gauteng provincial government (GPG) undertook the Gautrain project, which was constructed between 2007 and 2010, commencing with partial operation in 2010 and full operation in 2012. The project comprised the construction, operation and financing of approximately 80 km of railway lines with 10 stations, between Johannesburg and Pretoria, and Sandton and OR Tambo International Airport (ORTIA), with extensive feeder and distribution services at each station.
The system has been operating for 5 years and performance has exceeded expectations as evidenced by higher than projected passenger demand and the standing-to-seated passenger ratio that is now breaching the comfort levels during peak hours. The growth experienced to date and that projected by Gautrain Management Agency (GMA) management indicates that the Gautrain capacity is stretched to the point that in the peak periods the available rolling stock is now close to maximum capacity, and therefore not able to meet further market demand (current and forecast). Given the current capacity constraints during peak hour and future passenger growth projections made by GMA, GMA management have determined that the Gautrain system will require a total of 48 new coaches and related infrastructure at an estimated cost of R4 billion, where debt funding requirement is approximately R3.5 billion.
THE DBSA’S CATALYTIC ROLE
The current concession ends on 31 March 2026. This leaves approximately nine years to fund the additional rolling stock and related infrastructure under the current structure. Given the timeframe left on the current concession, it is not economical for Bombela Concession Company (BCC) to fund the additional rolling stock and there is no incentive for BCC to encumber itself with further debt.
GMA therefore mandated the DBSA as mandated lead arranger (MLA) to develop a funding solution that is independent of the current concession and that can be funded over a period of 15 years through a special purpose vehicle that will avail the additional rolling stock and related infrastructure to the system via a lease agreement. This structure will allow for the assets to be funded across concessions, given the constraints noted above.
As the MLA, the DBSA approved a facility of R3.5 billion to meet the full debt requirement of the project, allowing GMA to implement the procurement process with assurance that the project is fully funded. In addition, the approved facility allows GMA to perform an independent value-for-money benchmarking exercise (i.e. debt funding competition – DFC) to ensure that the DBSA’s funding is priced competitively.
The DBSA’s funding proposition meets the need for a funding solution that:
• Takes a view on provincial government risk
• Funds across concession periods
• Provides long-dated funding, in this case 15 years.
In addition, in November 2016, the DBSA in its capacity as the Secretariat for the Infrastructure Investment Programme for South Africa (IIPSA), further secured a R40 million Project Preparation Grant from IIPSA to:
• Assist GMA with direct transaction costs relating to outstanding project preparation activities
• Provide funding for the reimbursement of bidder costs incurred in relation to the design of the depot enhancements that are required as part of the bidder’s response to the RFP. The concept of partial bidder reimbursements was used in the original Gautrain project and proved highly effective in accelerating and reducing risk and improving the quality and pricing of bidder responses. As such, GMA will do so in return for commitments from bidders to expedite the design process and achieve financial close faster.
OTHER PROJECT SUPPORT TO GMA GAUTRAIN
The DBSA is currently involved in providing project preparation support to GMA on the Gautrain expansion phase 2, which will entail Gautrain expanding the current rail network into new suburbs/locations within the province.