General Electric Co. (GE) will probably be named preferred bidder to supply 465 diesel locomotives to South Africa’s state-owned Transnet SOC Ltd. as part of a $3.2 billion investment, according people familiar with the matter.
Another manufacturer is set to be named preferred bidder for a contract to supply 599 electric locomotives, said the people, who declined to be identified because the decision isn’t public yet.
Africa’s largest economy is buying the diesel and electric locomotives to upgrade the country’s transport infrastructure and improve export capacity. The government has said the 35 billion rand ($3.2 billion) earmarked for the more than 1,000 locomotives will be spent over a seven-year period. Transnet, which operates railways, ports and pipelines, plans to spend a total of 307 billion rand over that period.
The Department of Public Enterprises, which oversees Johannesburg-based Transnet, yesterday said they will announce “one of the biggest infrastructure transactions in South Africa” on March 17.
The diesel locomotive contract may be worth less than $1 billion, based on calculations using prices Transnet paid in a different order announced in September.
Transnet spokesman Mboniso Sigonyela declined to comment on the deal. GE bid on the contract to supply diesel locomotives, spokeswoman Jennifer Erickson said in an e-mailed response to questions. She declined to comment further. Alstom SA, the French maker of trains and power equipment, responded to the locomotive tender in early 2013 and is now waiting for its outcome, said spokeswoman Virginie Hourdin.
Siemens AG (SIE), Europe’s biggest engineering company, withdrew from the tender after initially bidding for the electric locomotive part, according to a person familiar with the matter. A company representative declined to comment.
More than two-thirds of Transnet’s capital expenditure will be used to renew and expand the company’s freight rail infrastructure. The company plans to lift cargo volumes, which include coal, manganese and iron ore, to 350.3 million tons by March 2019, according to its website.
To create jobs and develop expertise, South African state-owned companies in the past preferenced suppliers who committed to manufacturing major parts of their offerings domestically.
GE, based in Fairfield, Connecticut, already built 143 locomotives for Transnet at a South African factory, according to the rail operator. The Export-Import Bank of the U.S. backed a 1.1 billion-rand loan to Transnet to pay for the engines, Transnet said in September. The company in 2012 also agreed to pay China’s CSR Zhuzhou Electric Locomotive Co. 2.6 billion rand for 95 locomotives.