sasol view on line concessions

Sasol view on line concessions - Confidential Prepared by Afzal Banoo 04 June 2015 1

“Back to Rail - a Critical Analysis”

Sasol’s view for access to the line -concessions

Introduction• Background of Sasol

- 1940’s – Fischer Tropsch technology

- 1950’s – Factory in Sasolburg

- 1960’s – Coal to Liquids (chemicals)

- 1970’s – International Oil Crisis, JSE listing

- 1980’s – Expansion Sasol 2 & 3

- 1990’s – Global markets, advent of democratic landscape

- 2000’s – Export transport challenge, listing on NYSE

2Sasol view on line concessions - Confidential Prepared by Afzal Banoo 04 June 2015

Sasol Branch Line Theory

1. Fixed route with single user

2. Fixed route with multiple users

3. Variable route with single user

4. Variable route with multiple users


Obstacles and Challenges• Lease concession without exclusion

• Regulatory framework

• Permits & handover points

• Duration?

• Operating rights

• Core versus non-core

• Future / new users


Impacts and Opportunities• Continuum link• Reduction of locomotive idle times• Accurate planning, optimized execution• Efficient slot utilisation• Reduction of Transnet CAPEX• Profit sharing• Reduce risk• Growth of rail capacity• Support continental rail growth• Enhance feight migration from road to rail


Sasol Views• Rolling market demand strategy• Strategic partnerships• Public, Private Participation (PPP or PSP)• Support of line concessions• Sasol focus areas

– Sasolburg to Secunda– Secunda to Hamelfontein / Ermelo– Lephalale coal fields


8

60km 35km

Secunda

TrichardtHamelfontein

Ermelo

Piet Retief

Vryheid

Ulundi

Richards Bay

Mpumalanga

Kwazulu Natal

Swaziland

Sasol -----

TFR -----

Nsese Yard

Indian Ocean


Fixed time slot

Pass through uninterrupted

Sasolburg

Secunda

Springs

Vereeniging

Trichardt

Johannesburg

Nigel

Germiston

Meyerton

97km

100km

Devon

Mpumalanga

Gauteng

How will line concession benefit Sasol?• Improved turnaround times

• Lower expenditure on rolling stock

• Increase exports

• Migration of road to rail volumes

• Road network – lessen overload

• Improve safety – road accidents

• Value chain improvements

• Integration – one plant concept

• Flexibility of production, increase reliability

• Introduce new and more efficient technology

• Reduce constraints on branch lines

• Provide essential skills

• Job creation and poverty alleviation

• Maintenance programs – preventative and corrective

• Position itself for market booms or downturns

• Improve sales mix


Sasol Way Forward• Financial viability of line concession can outweigh security of supply

• Profitability versus trade-offs

• Competitive advantage

• Back to rail strategy

• Political influence

• Concession debate and decision

• Subsidized concessions

• High density versus low density branch lines

• Cross subsidization between high and low density lines

• Public interest versus private participation

• Industry synergy, very bright future of rail

• Relief of loss making operations for rail operator


Food For Thought• What happens to those lines should there be a significant

industry growth that requires the services of rail by TFR?

• What will happen along the line should the concessionaire find it difficult to make money and opt out of the deal, what will be the contingencies for continued service?

• Would it be better if an independent supplier in the form of “ACSA equivalent ” be established to focus specifically on branch line should there be no serious takers to the concept?


Closing

• Sasol supports and promotes:– Partnering Transnet to implement line concessions

– Evaluating high versus low density line concessions

– Debate permutations

– Make difficult decisions

– Develop strategic initiatives

– Implement branch line subsidized concessions

– Measure results


sasol view on line concessions

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