Transnet seeks state help for new S.Africa pipeline

JOHANNESBURG, June 4 (Reuters) - The pipeline unit of South Africa's logistics group Transnet [TRAN.UL] hopes for a capital injection from the government to fund a new fuel link after the country's regulator rejected its bid to raise tariffs, it said.

The pipeline is meant to replace the old multi-product line from Durban to Johannesburg, built in 1965, which carries mainly petrol and diesel and which is nearing the end of its life.

The National Energy Regulator of South Africa (NERSA) said last month it was not in a position to set tariffs that would help Transnet recover the costs of its investments, and had opted for an average tariff adjustment across the board.

Transnet Pipelines' Chief Executive Charl Moller said he saw no real possibility for a public-private partnership (PPP) for the 12.7 billion rand ($1.57 billion) project at this stage as it would require a change of Transnet's state-owned structure.

"A PPP is still on the table, but it's not a real alternative at the moment ... we are looking at a capital injection from our shareholder, the government," he said.

Transnet had initially planned to build a 16-inch pipeline between Durban on the coast and the Gauteng province, but government urged the company to plan for a 24 inch line to meet future demand growth.

"Within that lies the answer ... the difference could help with deciding the state injection," he said.

Moller said the company would break the project up into two phases, with the second one delayed by one year, to ease the capital burden.

"But you still don't compromise the security of supply because you get the parts you need at the right time to fill demand at that time," he said.