emita

– Case Study – Gautrain Project

July 2007

emita

– Case Study – Gautrain Project

   

Who is Bombardier?

Project Background.

Why South Africa?

The Future.

A competitive edge based on cheap labour is quickly eroded by new technology.

- Alvin Toffler, Futurist

An Introduction to Bombardier Transportation

Bombardier Bombardier Aerospace Bombardier Transportation www.bombardier.com

Bombardier

    

Corporate office based in Montréal, Canada.

Workforce of some 56,400 people worldwide as at January 31, 2007.

Revenues of $14.8 billion US for fiscal year ended January 31, 2007.

More than 96% of revenues generated outside Canada.

Listed on Toronto Stock Exchange (BBD).

Overview Bombardier: a diversified company Transportation 44% Aerospace 56% year ending 31 January, 2007 Breakdown of revenues by business segment

Bombardier Bombardier Aerospace Bombardier Transportation

Bombardier Aerospace

Bombardier Aerospace is a world leader in the design and manufacture of innovative aviation products and services for the regional, business and amphibious aircraft markets. It also offers

Flexjet

fractional ownership,

Skyjet

aircraft charter and management, technical services, aircraft maintenance and pilot training.

Flexjet

and

Skyjet

are trademarks of Bombardier Inc. or its subsidiaries.

Bombardier regional aircraft

Q100/200 Q300 Q400 CRJ200 CRJ700

CRJ200, CRJ700, CRJ705, CRJ900, Q100/200, Q300

and

Q400

are trademarks of Bombardier Inc. or its subsidiaries.

CRJ705 CRJ900

Bombardier Bombardier Aerospace Bombardier Transportation

Bombardier Transportation

Bombardier Transportation is the global leader in the rail equipment manufacturing and servicing industry. Its wide range of products includes passenger rail vehicles and total transit systems. It also manufactures locomotives, propulsion and controls and provides rail control solutions.

Bombardier Transportation

Products and Service Light Rail Vehicles Metros Regional and Commuter trains Intercity and High Speed Trains Locomotives & Freight Wagons Bogies Propulsion and Controls Transportation Systems Services Rail Control Systems

42 Production Sites in 21 countries Bombardier Transportation around the World

Bombardier Transportation Worldwide Bombardier - relevant market by geographic region Other

14% ($ 6.0)

Asia-Pacific

9% ($ 3.9)

Europe

62% ($ 26.3)

North America

15% ($ 6,2) * calendar year 2006 * in billions of dollars

Bombardier Transportation is growing



In 2006, Bombardier captured more than 30% of the global rail market, including more than 50% of the commuter - rail market segment.

Others 20% Others 27% Bombardier 28%

2005-

0% Stadler 4% 0%

2007 YTD

Bombardier 44% Stadler 7% Rotem 3% Siemens 5% AnsaldoBreda 1% CAF 6% Rotem 3% Siemens 11% Alstom 17% Alstom 24%

Localisation Expertise

 

Bombardier Transportation is the market leader in more than just railway products and systems.

We are also the world leader in localisation for the rail industry.



Our experience at integration of local suppliers and development of local industry is unmatched by any other supplier.

Types of Localisation



Level 1

•

Product designed and project - managed by Bombardier Transportation.

• • •

Utilisation of existing factory in local country.

Use of local suppliers.

Final assembly and testing carried out by local manufacturer on a sub-contract / licensing agreement.

Total project value Localisation % of project

Types of Localisation



Level 2

• • •

Formulation of a joint venture / strategic alliance.

Product designed by Bombardier Transportation.

Project management split between Bombardier Transportation and local partner.

• • •

Use of local suppliers.

Manufacture of carbodies by local partner.

Final assembly and testing of vehicles by local partner.

Total project value Localisation % of project

Types of Localisation



Level 3

• • •

Set up a Local Company.

Product designed by Bombardier Transportation.

Project management by Local Company.

• • •

Use of local suppliers.

Manufacture of carbodies by local company.

Final assembly and testing of vehicles by local company.

Total project value Localisation % of project

Examples of where has localisation been achieved



Level 1 - Romania

• Bucharest Line 2 project 

Level 2 - China

• Guangzhou Line 2 project 

Level 3 - India

• Delhi Metro RS2

Gautrain Project Background

South Africa: The Powerhouse of Africa

 • • • • • •

Gauteng:

• • •

Is less than 2% of South Africa’s surface area.

Is responsible for 47.7% of all employee remuneration in SA.

In 2005 its 2.8 million households generated 35% of the country's household expenditure, spending R302 billion (~£24 billion).

Is responsible for 50.4% of all company turnover in SA.

Accounts for some 33% of GDP of South Africa.

Accounts for about 10% of Africa's GDP and is the fourth largest economy in Africa.

Has the most developed infrastructure in Africa.

Has an estimated population of 8,8 million.

Attracts over 52% of the seven million international tourists who come to South Africa.

Project Structure: PPP Public Private Partnership Bombela - Concessionaire Electrical & mechanical systems including rolling stock Civil works, stations Black Economic Empowerment Public Private

Gautrain Project - Key Success Factors

       

Market Knowledge.

Market Presence and Track Record – Bombardier has executed a number of successful projects in South Africa.

Local Knowledge – Bombardier Transportation SA (Pty) Ltd.

Patience and Staying Power – South Africa is evolving fast.

2010 World Cup was a major driver – the right timing.

Good legal & Financial Framework in South Africa.

Local Partnerships leverage competitiveness.

Hard work.

Gautrain Project - Key Challenges to Success

     

Timescale – a major multi-faceted project completed in 54 months will be a huge accomplishment.

NIPP – National Industrial Participation Program

• All Government Projects with an import value of more than US$10 million have to do offset trade / investment of 30% of the import value.

Socio Economic Development – Black Economic Empowerment – Affirmative Action.

South African Foreign Exchange Regulations.

Local Taxation.

Local labour relations and availability of Skills.

emita – Case Study – Gautrain Project

Technical specifications of the Train

      

Reliability, Safety and Security paramount.

International ‘Standard Gauge’.

Maximum speed: 160 km/h.

24 modern state of the art trains

• • Bombardier’s standard ‘Electrostar’ product platform.

Fully customised for the Gautrain Project.

Different seating for commuters and air passengers.

Frequency every 10 to 30 minutes.

Operating hours 05:30 to 20:30

Project Timescales

         

Pre-Qualification Bid BAFO (Best And Final Offer) FBAFO (Further BAFO) Preferred Bidder Effective Date (Commercial Close) Completion of Phase 1 2010 Football World Cup Completion of Phase 2 Operating Concession 2002 September 2003 January 2005 March 2005 July 2005 28 September 2006 +44 months June 2010 +54 months A further 15 years

Government’s Implementation Process



Four pillars

• •

Political will & commitment from Government Viable project (base case design)

Technical Financial Legal/Institutional •

Funding (for Infrastructure & Operations)

Government’s portion Private Sector’s portion •

Community acceptance & buy-in

Socio-economic benefits Power of expropriation

Current status

       

Month 10 of the Project.

Honeymoon period.

In Preliminary or Detailed Design mostly.

Procurement is underway.

Civil Construction has begun.

They have started on the 15 km tunnel.

Gauteng Province is pleasant to deal with.

Too early for ‘Lessons Learned’ yet.

www.gautrain.co.za

Business Setup in the Local Office (85 staff)

      

We run the business in South Africa as we do in Europe.

Bombardier is a strong process - driven project Company.

Top Management has international Bombardier experience.

Strong emphasis on local people with local knowledge in Middle and Senior Management.

Language is English, corporate culture is Bombardier, flavour is South Africa.

IS infrastructure as in Europe.

Time Zones: North America, UK, South Africa.

Why South Africa?

          

Why South Africa?

Bombardier is a Global Player with few competitors. We monitor all International Projects in all countries all the time.

We are active in South Africa.

Government Spending Program – Gauteng Blue IQ.

Right timing - 2010 World Cup.

Viable Project in its own right.

Economic Growth.

Excellent Financial & Banking System in place.

Sophisticated investors.

Sound Infrastructure.

Small market.

Infrastructure Development is ongoing.

The Future

The Future for Bombardier in South Africa

       

The Powerhouse of Africa.

The Gateway into Africa.

Government Development Planning Program.

This Project establishes the credibility of Bombardier in the local marketplace.

Expect sustained Economic Growth.

Excellent Financial & Banking System in place.

Sound Infrastructure.

Infrastructure Development is ongoing.

Challenges

       

Crime & Political Stability.

International Perceptions.

Sustainability of the business.

Skills Retention in the country.

Continued Economic Growth necessary for long-term Projects.

Government Projects: NIPP.

Private Sector: SE, BEE, AA.

Low Cost competitors from the East – dumping.

Thank you.

www.bombardier.com