Emita – Case Study – Gautrain Project July 2007. emita – Case Study – Gautrain Project Who is Bombardier? Project Background. Why South Africa?

emita – Case Study – Gautrain Project

July 2007


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 Aerospace

Bombardier Transportation

Bombardier

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

Breakdown of revenues by business segment

Bombardier: a diversified company

year ending 31 January, 2007

Aerospace56%

Transportation44%



Bombardier

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

CRJ200, CRJ700, CRJ705, CRJ900, Q100/200, Q300 and Q400 are trademarks of Bombardier Inc. or its subsidiaries.

CRJ700 CRJ705 CRJ900



Bombardier

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.



Products and Service

Propulsion and

Controls

Rail Control Systems

ServicesTransportation Systems

Locomotives & Freight Wagons

Metros Regional and Commuter trains

Intercity and High Speed Trains

Light Rail Vehicles

Bogies

42 Production Sites

in 21 countries

Bombardier Transportationaround the World

Bombardier TransportationWorldwide Bombardier - relevant market by geographic region

Asia-Pacific9% ($ 3.9)

North America15% ($ 6,2)

Europe62% ($ 26.3)

Other 14% ($ 6.0)

* 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.

Alstom17%

Siemens11%

Others27%

Rotem3%

CAF6%

Bombardier28%

Stadler7%

AnsaldoBreda1%

2005- 2007

Alstom24%

Siemens5%

Others20%

Bombardier44%2007

YTD

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.

Localisation % of project

Total project value


Level 2• Formulation of a joint venture / strategic alliance.

• Product designed by Bombardier Transportation.

• Project management split between Bombardier Transportation and local partner.


• Manufacture of carbodies by local partner.

• Final assembly and testing of vehicles by local partner.


Total project value


Level 3• Set up a Local Company.

• Product designed by Bombardier Transportation.

• Project management by Local Company.


• Manufacture of carbodies by local company.

• Final assembly and testing of vehicles by local company.


Total project value

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.

Private

Electrical & mechanical systems including rolling stockElectrical & mechanical systems including rolling stock

Civil works, stationsCivil works, stations

Black Economic EmpowermentBlack Economic Empowerment

Bombela - Concessionaire

Public

Project Structure: PPP Public Private Partnership

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.


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 2002

Bid September 2003

BAFO (Best And Final Offer) January 2005

FBAFO (Further BAFO) March 2005

Preferred Bidder July 2005

Effective Date (Commercial Close) 28 September 2006

Completion of Phase 1 +44 months

2010 Football World Cup June 2010

Completion of Phase 2 +54 months

Operating Concession 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

Documents

Emita – Case Study – Gautrain Project July 2007. emita – Case Study – Gautrain Project Who is Bombardier? Project Background. Why South Africa?