Montana will go along for the ride

Montana has been with Prasa since 2006, when he was sent to stabilise its operations and its balance sheet after the commuter bus and rail business was ejected from Transnet in a dysfunctional state. His contract was due to expire at the end of April next year.

"The board has asked me to extend my contract and I have agreed. I will be here to ride on the new trains which we will build in SA," he said.

Montana is the driving force behind the programme to replace SA's suburban rail system with the acquisition of as many as 7,224 locally-built new coaches. The programme has been split into two 10-year phases, with 3,600 coaches to be manufactured in each phase. The state requires that a minimum local content of 65% be achieved for the coaches.

Gibela Rail Transportation, a consortium of French transport giant Alstom and local engineering company Actom, has been selected as the preferred bidder for the design, manufacture and maintenance of the new fleet. Gibela has committed to as much as 69% local content in the coaches it builds.

Testing of the trains is scheduled to begin in 2015, with the new trains being fully operational and integrated into the network from 2016.

Black economic empowerment

A minimum of a 30% stake in the contract company has been set aside for broad-based black economic empowerment (BBBEE), valuing the deal's transformation stake at about R15bn. The BBBEE process was to have been completed by the end of January this year, but according to the project manager of the renewal programme, Piet Sebola, the response from black investors had been overwhelming, with 74 companies submitting proposals.

Montana said Prasa was seeking clarification on some of the details in the proposals from interested participants.

"We are having a very rigorous process to make sure that we have the right partners in Gibela. It was clear that after the first round of reviewing proposals we needed to do more work and the board agreed with us," Montana said.

The selection of the empowerment partners for Gibela has raised eyebrows, with critics questioning the wisdom of demanding a "forced marriage" on such a complex and long-term capital-intensive programme.

"If there is this 'forced marriage', as people have been saying, then we must be sure that we select the right partners," Montana said.

"We think that in the next three weeks we can complete this process and we are hoping the board can finalise this matter in July. But we are not waiting for that to be complete - we are working in parallel. We are negotiating with Gibela and we are working towards the June date for financial close for this transaction," he said.

Montana said the trust deeds for an education trust and the employee share trust were being finalised, and under this structure, a 10% stake will be held in trust for Prasa employees and 3% will be held in an education trust.

The balance of the stake would be split between investors who are active in the rail engineering sector (10%) and passive investors (7%).

Source: Business Day via I-Net Bridge