Transnet and BHP Billiton (BHP) have signed a 10-year US$2.1bn agreement for the export of coal on rail in South Africa.

The agreement makes Australia-based mining firm BHP the first major customer of South Africa’s state-owned freight transport company to commit to a long-term ‘take-or-pay’ contract, in which BHP is obliged to pay for Transnet’s trains regardless of whether or not they are used.

In a statement, Transnet confirms that the agreement with BHP marks the first of 28 it hopes to secure with coal exporting customers in South Africa by the end of November this year.

The intention is for each exporter, through the Richards Bay Coal Terminal (the world’s largest export coal terminal), to sign individual 10-year contracts commencing on April 1, 2014 and ending on March 31, 2024.

As part of a 10-year expansion plan, Transnet is increasing rail line capacity in the country from 73 million tonnes to 81 million tonnes over the next seven years, and has committed to moving 810 million tonnes of coal over the next 10 years, including performance guarantees. The take-or-pay aspect crucially provides Transnet with revenue certainty throughout the length of the contracts.

5% of the contracted rail tonnage will be allocated to emerging mining companies through a transparent allocation process, which will help introduce new players to the market, Transnet confirms.

Statistics from the World Coal Association reveals that South Africa is the world’s fifth largest coal exporter as well as Africa’s largest producer. BHP is the country’s largest coal exporting firm, according to Bloomberg.