SADC - DFRC Presentation on Gautrain

December 2016

OUR JOURNEY TO A BETTER GAUTENG

Contents

1. The Past – Africa’s Largest PPP

2. The Present – Managing Complexity

3. The Future – Creating a Vision

The Past: Africa’s Largest PPP

Key Success Factors

1. Political leadership and will

2. Continuous and strong project leadership and technical team

3. Doing Gautrain as a PPP

4. Treasury involvement in funding

Existing Routes

Pre Gautrain- a challenging future

The Gautrain will promote

Public Transport

SMME & BBBEE Development

Tourism

Business development

The project stimulates

Economic growth

Investment

New development

Job creation

Design to

Restructure urban areas

Reduce travel distances,

time and cost

Improve city sustainability

Gautrain: More than Just Another Transport Project

Public Private Partnership

• Gautrain is a PPP Project

• Leading to a Concession Agreement

• Of the DBFOM type

• PPP Projects on National and Provincial levels are regulated by South African Public Finance Management Act Regulations (TR 16)

PPP Requirements • Feasibility

– Value for money • Public Sector Comparator (PSC)

(What will it cost if Government does the work through normal procurement process; and including completion and integration risk and cost)

– Affordability – Total cost of project, expressed in Net Present Value (NPV) – Yearly cost to the province (contingent liability) – Maintain the 80/20% ratio in social vs.. rest split in budget

– Risk transfer • Identify, cost and allocate various risks to the role

players best equipped to mitigate and manage them

PPP Contracts

• Public-Private-Partnership (PPP) contracts

– Output specification

– Client (authority) only defines the problem (essential minimum requirements)

– Turnkey project

– Contractor (concessionaire) bids to design, build, operate the project for the concession period

PPP Contracts (2) • Concessionaire takes all completion and integration risks

• Concessionaire offers a fixed price, fixed specification and fixed time frame (turnkey) contract

• Concessionaire is fully involved in the operation and maintenance of the system for the full concession period

• Concessionaire must hand over the system to the client at the end of the concession period in a prescribed condition

PPP Contracts (3)

• PPP contract allows for Concessionaire innovation and world-best-practice during design, construction, operations and maintenance

• PPP’s give access to private sector funds (local and international)

• However, potential problems, e.g. value engineering/scope changes, variations, less opportunity to claim, etc.

Major Phases of Project

PHASE PHASE NAME AND PERIOD PROVINCE

SUPPORT

1

PROCUREMENT

Apr 2000 – Sep 2006

Financial Close only in February 2007

Transaction

Advisors

2

CONCESSION DEVELOPMENT

28 Sep 2006 – 7 June 2012

Plus defects/liability/retention period

GMA staff and

Provincial

Support Team

3

OPERATION & MAINTENANCE

7 June 2012 – 27 March 2026

GMA

Procurement Process

• Request for Prequalification (RFQ) – February – May 2002 – Premier Shilowa announced on 2 May 2002 the

Bombela and Gauliwe consortia as pre-qualified bidders

• Request for Proposal (RFP) I – Discussions May – September 2002

• RFP II – Issued 29 November 2002 – Submitted 30 September 2003

Procurement Process (2)

• RFP III (Best and Final Offer/BAFO) – Constructive engagement with bidders – Draft Documents July 2004 – Final Documents Dec 2004 – Submit 26 Jan 2005 – Bidder Presentations 9+10 Feb 2005 – FBAFO March 2005 – Clarification Questions: briefing notes and

meetings – Analysis/Evaluation of proposals

Procurement Process (3)

• Negotiations with preferred bidder

• Sign Concession Agreement and Commence Construction (28 September 2006)

• Financial Close (January 2007)

Project partners

PUBLIC

PRIVATE

33%

25%

17%

17%

8%

Provincial Structure during Procurement Phase

Technical Committee

Legal Team

Financial Team

SED Team

Transaction Advisors

Political Committee

Project Leader

Project Co-ordinator

Project Cost

• Gautrain is a fixed price turn key project – Price had been fixed at the signing of the Concession Agreement

on 28 September 2006

• Provincial contribution R21,9 bn

• Private sector contribution R 3,2 bn

• R25,1 bn is expressed in nominal terms over the next 54 months

• Only the following increases in cost will be allowed: – Extra work through a Variation Order (only 2.1% of Project Value)

– Escalation higher than the escalation prediction of the Reserve Bank

Funding

• The public sector funding of the Gautrain's capital costs over the five year development period will be sourced from three places: – The GPG’s equitable share (i.e. the provincial budget (MTEF));

– provincial borrowing from the National Treasury; and

– a conditional grant from National Treasury via the National Department of Transport

• The conditional grant via the Department of Transport's budget makes up 50% of the public sector's capital costs of the project, with the provincial budget and provincial borrowing sums making up the remaining 50%

Project Financing

MTEF 26.1%

DoRA 44.2%

Equity 1.8%

Private Debt 9.5%

Provincial borrowing

18.4%

Gautrain Socio economic development success (Construction)

Gautrain Socio economic development (Construction)

The Present – Managing Complexity

Key Lessons

1. Keep the customers happy

2. Contract management drives Value for Money

3. Empowered public sector essential

4. Public sector drives change in a PPP

5. External dispute resolution poor value for money

Snap -Shot 1. 99% Availability and 98% Punctuality

2. Less than 0,4% fare evasion

3. Less than 1 security incidents / 1 million trips

4. Strong ridership Growth

5. Operating cost recovery ratio 1,1

6. Overcrowding and capacity constraints currently using entire fleet of trains

7. GMA established and about 82 staff

Gautrain - Ridership

Gautrain – Revenue (Nominal)

R 0

R 100 000 000

R 200 000 000

R 300 000 000

R 400 000 000

R 500 000 000

R 600 000 000

R 700 000 000

R 800 000 000

R 900 000 000

FY 12/13 FY 13/14 FY 14/15 FY 15/16

Gautrain Annual Fare IncomeWith year on year growth rate indicated

GPS

APS

25.3%

15.0%

7.9%

Fare Comparison

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

- 10.0 20.0 30.0 40.0 50.0 60.0 70.0

Trip

Co

st, R

Distance, km

Comparison of Orange Single Train Fares : 2011 to 2016

Minimum - Schedule 20 Maximum - Schedule 20 2015 2016 2014 2013 2012 2011

Managing Capacity As the following slides show, Gautrain

has addressed capacity issues by:

• Introducing 8-car trains

• Structuring the fares to encourage

travel outside of peaks

• Introducing a 10 minute timetable

― August 2011 ― March 2012 ― May 2102 ― September 2012 ― April 2013 ― August 2013 ― April 2014

Additional Rolling Stock

– Province has identified a latent demand and capacity constraint in relation to the Gautrain Rapid Rail Link system

– The actual passenger demand on the Gautrain system has exceeded realistic expectations and predictions

– To manage the provision of capacity, Province will require a total of 48 coaches, expanded depot and upgrade signalling

Being done as a Variation spanning over the end of the concession

DBSA is GMA financing partner

R4,5 billion project

Currently in procurement

Gautrain’s operations Socio-economic development success

Source: GMA SED report 2013/14 financial year

Gautrain’s operations Socio-economic development success

Source: GMA SED report 2013/14 financial year

Gautrain’s operations Socio-economic development success

Source: GMA SED report 2013/14 financial year

The Vision for the Future

Key Success Factors

1. Political leadership and will

2. Build on Gautrain lessons learned – what worked and what didn’t

3. Stick with PPP but tweak the model

4. Partner with the best we can

5. Lead the integration as a Province

6. Follow TR 16 closely

Gauteng Rail Network (Gautrain/ PRASA)

A new modern Gauteng is in the making

• Gauteng premier’s first State of the Province Address on 27 June 2014 in Thokoza, Ekurhuleni – Radically modernise the way Gauteng residents live

and work

– Ten pillars of radical transformation

• Gauteng has a 25 year Integrated Transport Master Plan with Rail as its Public Transport backbone

• Use public transport as an economic growth stimulant

Five key GRRIN outputs

• Integrated safe, affordable and reliable rapid rail public transport

• New transport orientated development nodes promoting higher density living

• Greener transportation solutions for a healthier community

• Enhancing economic integration and development

• Increase in local content, Business Development Job creation/opportunities

Dreaming Of a World-class Rail System To Connect Our People throughout Gauteng

• Integrated public transport

• At its core a rapid rail link system

• Increased infrastructure investment

• Spatial Development Initiatives to stimulate economic growth and job creation

Gauteng future

1. Car/ vehicle growth and

2. Road Congestion

3. Travel time savings if GRRIN implemented

4. Population Growth and land use

5. GRRIN model

6. Connectivity Challenges in Jhb North Western Sector

Car growth and Congestion in Gauteng

• 3,9 million 2014 to 6,6 million 2037

• 300/ 1000 population to 450/1000

• Significant car growth

• Congested road network

“The Cost of Doing Nothing”

• Analysis of the transport situation in 25-years’ time, shows that the consequences or “cost of doing nothing” will be severe, i.e. if current trends continue

• Vehicle population predicted to grow from 3.65 mil. to 6.57mil. • Peak hour person trips to grow from 2.2mil. to 3.9mil. • Weighted average peak hour road network speed will reduce from

48km/h to below 10km/h • Weighted public transport travel speed decline from 38km/h to

below 14km/h • Congestion nightmare, with the transport network, the economy

and the natural environment eventually choking • Major interventions and management of travel choices and

demand will be required to avoid this scenario

7% 9%

30% 53%

Base Year

9%

11%

31%

48%

2025 Demand on Base Year Network

39%

17%

22%

23%

2037 Demand on Base Year Network

0 - 20 km/h

20 - 40 km/h

40 - 60 km/h

> 60 km/h

“The Cost of Doing Nothing”

Gautrain Public transport system

Rapid Rail / Gautrain Speed profile: • 160 km/h Optimal distance • 62 – 75 km Passenger per hour • 7,500 – 20,000 pph

Gautrain Feeder System

GRRIN Integration with BRT in CoT, EMM and CoJ as part of feeder and distribution bus network.

Gautrain

Harambee BRT A RE YENG REA VAYA

Feeder Bus

Feeder Taxi • Marlboro • Rosebank

SANDTON

SUNNINGHILL FOURWAYS

COSMO

LITTLE FALLS

ROODEPOORT

RANDBURG

LANSERIA

SANDTON 2 SOWETO (JABULANI)

MAMELODI

SAMRAND

IRENE TSHWANE

EAST

BOKSBURG

LANSERIA

MIDFIELD

EASTRAND MALL

RHODESFIELD 2

ORTIA

HAZELDEAN

OLIEVENHOUTBOSCH

GRRIN Extensions Phase 1 Western Core Network

SANDTON MARLBORO

MIDRAND

CENTURION

HATFIELD

ROSEBANK

PARK

PRETORIA

RHODESFIELD

O.R. TAMBO

SAMRAND

IRENE

TSHWANE EAST

HAZELDEAN

MAMELODI

OLIEVENHOUTSBOSCH

SUNNINGHILL

FOURWAYS

COSMO

LITTLE FALLS

ROODEPOORT

JABULANI

RANDBURG

LANSERIA

EAST RAND MALL

BOKSBURG

SANDTON 2

LEGEND

North – South Commuter

East – West Commuter

Airport

MODDERFONTEIN

Phase 1

Metrorail

GRRIN Extensions – Phase 2

SANDTON MARLBORO

MIDRAND

CENTURION

HATFIELD

ROSEBANK

PARK

PRETORIA

RHODESFIELD

O.R. TAMBO

SAMRAND

IRENE

TSHWANE EAST

HAZELDEAN

MAMELODI

OLIEVENHOUTSBOSCH

SUNNINGHILL

FOURWAYS

COSMO

LITTLE FALLS

ROODEPOORT

JABULANI

RANDBURG

LANSERIA

EAST RAND MALL

BOKSBURG

SANDTON 2

LEGEND

North – South Commuter

East – West Commuter

Airport

MODDERFONTEIN

Phase 2

Metrorail

GRRIN Extensions: Phase 3-5

SANDTON MARLBORO

MIDRAND

CENTURION

HATFIELD

ROSEBANK

PARK

PRETORIA

RHODESFIELD

O.R. TAMBO

SAMRAND

IRENE

TSHWANE EAST

HAZELDEAN

MAMELODI

OLIEVENHOUTSBOSCH

SUNNINGHILL

FOURWAYS

COSMO

LITTLE FALLS

ROODEPOORT

JABULANI

RANDBURG

LANSERIA

EAST RAND MALL

BOKSBURG

SANDTON 2

LEGEND

North – South Commuter

East – West Commuter

Airport

MODDERFONTEIN

Metrorail

Phase 3- 5

CRADLE

Structure

• GRRIN is an ‘extension’ to the current network and therefore is considered a Brownfield project;

• Expected to be phased over a long construction period in order to consider both ridership demand and funding availability ;

• Expected lower government capital contribution for GRRIN in comparison to Gautrain, – hence the sourcing of non-government (external funding)

is paramount;

• Passenger demand, • Economic impact and • Funding/financing ability for the specific line sections

Contract structure

Thank You

William Dachs

COO Gautrain Management Agency

williamd@Gautrain.co.za

www.gautrain.co.za