Johannesburg — TRANSNET announced yesterday it had secured a R2,2bn untied loan from a French development bank to partly fund the expansion of its container terminal in Cape Town and hinted that its multi- billion-rand investment plan might increase 10% over the next five years.

Transnet acting CEO Chris Wells declined to reveal what the interest rate, which was fixed, on the loan was.

Wells said the parastatal had negotiated a "competitive margin", indicating the spreads were low and this suggested the costs of borrowing were declining.

This loan facility, signed yesterday with Agence Francaise de Developpement Group (AFD), owned by the French government, sought to help double Cape Town Container Terminal's capacity to 1,4-million T EUs by 2012.

With credit markets still tight and illiquid, the deal underscores Transnet's drive to diversify its funding sources to finance its R80bn capital investment programme, which began last year, and to explore less costly alternatives of finance, including commercial bank loans, export credit finance and bonds.

Overall, Transnet plans to invest R4,6bn in the Cape Town terminal to deepen the harbour, refurbish the berths and replace container handling equipment.

Wells said that the loan, coming after months of negotiations with the development bank, would be rolled out over 15 years and came with a three-year drawn-down period.

He said the group intended to hedge exposure to the currency risk in a à 200m deal. The company, he said, intended entering a currency swap, a form of forward cover exchange rate contract, locking the exchange rate when the rand was still looking strong against the euro.

"What makes today's agreement with AFD particularly attractive to us is that although it is in euros, it can be disbursed to us in rands, a move that will boost our ability to manage our financial risk, particularly foreign exchange risk," Wells said.

Jean-Michel Severino, the CEO of AFD, which also provides finance to local municipalities, the Development Bank of Southern Africa and state-owned enterprises such as Acsa, described the agreement as a "milestone" for the development financial institution, saying this was a first step in a long-running partnership.

Severino said he believed the lead would build the port's capability to meet the growing capacity demand. He said that this loan, the first one extended to Transnet, was the largest that the bank had made to a single entity in sub- Saharan Africa.

Wells said he expected capital investment to increase 10% over the next five years, noting that this would likely be approved in the first quarter of next year.

The five-year R80,5bn capital investment programme got under way in the 2008- 09 financial year. He said Transnet reviewed new capital projects and the scope of the existing ones every year and confirmed the group would proceed with "all major and strategically significant projects".

The multi billion-rand capital investment plan was proceeding well despite the economic downturn, which hurt its revenue and cut volumes. Transnet sought to invest R20bn during this financial year as part of the group's five- year investment project . The company has already raised R14bn for the capital needs of its current financial year.