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Portfolio Committee. 14 October 2004. Martie van Rensburg Robert Mbwana. [ Agenda ]. 1 . Presentation of 2004 Annual Report TCTA – the entity Report on Lesotho Highlands Water Project Report on Berg Water Project Report on Umgeni Water Treasury Management The future - PowerPoint PPT Presentation

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  • Portfolio Committee14 October 2004Martie van RensburgRobert Mbwana

  • [ Agenda ] 1. Presentation of 2004 Annual ReportTCTA the entityReport on Lesotho Highlands Water ProjectReport on Berg Water ProjectReport on Umgeni Water Treasury ManagementThe future

    2. Comments on National Water Resource Strategy

  • [ Who is TCTA? ]

    Section 138A, Water Act 1956 replaced by National Water Act 1998, Chapter 10

    Notice of Establishment 1986 version from Treaty between RSA and Lesotho, revised in 2000 creating a wider mandate

    PFMA schedule 2 powers

    Report via Minister of Water Affairs and Forestry to Cabinet and Parliament

  • [ TCTA = position in water sector ]

  • [ Liability Management ]

  • [ TCTA The Multi-Project Environment ]

    [ UMGENI WATER]Governed by SLACurrent debt R 3 500 millionRedemption assets R 1 200 million

    [ OTHER ]Mhlathuze Water, Bloem WaterTariffing and debt management services[ LHWP ] Funding and Risk Management on behalf of GovernmentDebt is explicitly Government GuaranteedCurrent debt - R 17 900 million Current assets - R934 million

    [ BWP ]

    Funding, Risk Management and Implementation on behalf of GovernmentNo Government Guarantee Project FinancedCurrent debt - R 30 millionForecast capital expenditure - R 1 500 million

    [ OTHER ]

    Funding, Risk Management and Implementation for DWAF on future projectsLiability Managers for Bulk Raw Water InfrastructureIntegrated Treasury Management Services

  • [ Specialised Liability Management ]EnterpriseRiskManagement

  • [ Risk Management ]

  • [ TCTA: Risk Management Principles ]SCENARIO & STRESSTESTING:

    Manage peak and tail of debt curve based on following scenarios:Zero and negative growth in demandChanges in:inflationreal interest ratestiming of future augmentationIN ORDER OF PRIORITYOPTIMAL CAPITAL STRUCTURE(Fixed/Floating)ASSET/LIABILITY MATCHING(Refinancing & Forward Interest Rate Risk)REDEMPTION PORTFOLIO MANAGEMENT(Large Debt Maturities)PRO-ACTIVE INTEREST RATE RISK MANAGEMENT

  • [ TCTA: Tariffing Principles ]Constant tariffin realtermsEnd useraffordabilityDebtoutstanding Economic useful life of assets Timing of future augmentation Water consumed vs water delivered

  • [ TCTA: Funding Principles ]

    HOW Manage overall maturity structure of debt in a risk sensitive manner

    Exploitation of opportunistic funding opportunities

    Active marketing of funding programmes

    Contribute and participate in building better markets

    Through ongoing dissemination of information to investorsFundingPro-actively manage funding to achieve lowest weighted average cost of funding

  • [ Project implementation philosophy ]

    Implement the most appropriate and cost effective, timeous solution within an acceptable risk framework;Co-operative partnerships will be entered into with due regard for cost impact, appropriate risk allocation and accountability;All arrangements formalised with agreements;Appropriate remedies will be implemented to mitigate the impact of the Project on the environment and community; andDevelopment principles to be applied:Utilisation of local labour and businessesEffective balance between labour intensive methods and impact on cost and timingCo-ordination to fit in regional and local development plans

  • [ TCTA the entity - 2004 highlights ]Increased focus on governance and assurance (legal and internal audit ) functionsBoard efficiacy review healthyEnterprise wide risk assessment Increased focus on risk managementLong term Credit Rating ZA AAA with and without guarantee (excluding impacts of BWP)Organisational development culture print and DNALearning and development Full compliance to BEE and PPPFMARated under top ten performing companies > 25 % senior female

  • [ Employment Equity ]* Black includes African, Indian and Coloured.

    CATEGORYBLACK MALE*BLACK FEMALE *WHITE MALEWHITE FEMALETOTALExecutive134311Management135211Professionals330511Support05027TOTAL51491240

  • [ Segmental Income Statement ]LHWP Lesotho Highlands Water ProjectUmgeni Water treasury management services

    LHWP2004RmillionUW2004RmillionTOTAL2004RmillionTOTAL2003Rmillion

    Revenue1 53831 5411 332Royalties paid208-208184Operating expenses78381103Operating surplus1 252-1 2521 045Finance cost1 351-1 3511 098Net deficit for the year99-9953

  • [ Segmental Balance Sheet ]

    LHWP2004RmillionBWP2004RmillionTOTAL2004RmillionTOTAL2003Rmillion

    ASSETSNon-current assets15 8723415 90613 911Property, plant and equipment14 9133414 94713 907Long-term financial market investments942-9424Receivables and prepayments17-17-Current assets77711788691Receivables and prepayments4424446341Short-term financial market investments335-335350Cash and cash equivalents-77-Total assets16 6494516 69414 602

  • [ Segmental Balance Sheet ]BWP Berg Water Project

  • Lesotho Highlands Water Project

  • [ LHWP ]

  • [ Lesotho Highlands Water Distribution ]Normal

    Emergency

  • [ Governance Structure ]

  • [ TCTA LHWP 2004 Highlights ]Inauguration of phase 1B and completion of Phase 1 celebrated in March 2004Project of the Century Award SAICEAsset and Liability management focus R 18 billion debt managed2nd largest issuer of bonds (next to government)Successful prosecution by Lesotho Government and Authorities on bribery and corruption chargesCompletion of phase 1 impacts on institutional structures in LesothoRaised R 2 .7 billion of funding

  • [ TCTA LHWP 2004 Highlights ]Launched first split maturity bond R 1 billionOperating surplus of R 1. 3 billionPlanned defecit after interest paid R 99 million due to project finance principles used in water tariff structureAC 133 compliantWater volumes : Delivered : 687 million m3Sold : 1 325 million m3 R 1.5 billion

  • [ LHWP: Sources of Funding ]As at 31 March 2004 R 17 809 millionOther3%Foreign Institutions7% WS0121% WS0317% WS0425% WS0510%WSP1-WSP56%Commercial Paper Program11%Capital Market Bonds79 % Foreign 7 %Other funding21 % Local 93 %

    Fixed73 %Floating 27 %

  • [ Tariff Composition ]

  • [ LHWP: Debt Maturity Profile and Liability Curve ]

  • [ LHWP Social aspects ]RSA Eastern Free StateLearnershipsTourismEducationDisabled persons

    LesothoCompensation (individual and community)ResttlementAccess roadsFood security and agricultureRural water supply

  • Berg Water Project

  • [ Location of Project ]

  • [ Western Cape Water System ]Volvlei Dam Theewaterskloof DamKogelberg DamBerg River DamDWAFTCTA Water IncomeCity of Cape TownSteenbras Dam Wemmershoek Dam WaterDeliveredSalableWaterWater DeliveredOther UsersOther Sourceseg Misverstanddam

  • [ Public Public Partnership Agreements ]City of Cape TownDWAFTCTASupply of water from WCS to CCT

    Conditions of SupplyAgreement 1:Agreement 2: Payment for water incl. BWP to TCTAImplementation

    Payment of watercharge

    Collection of income

  • [ TCTA 2004 Business highlights ]Agreements signed April 2003Dam type selection completed and procurement of contractorsEnvironmental :Environmental Monitoring CommitteeApproval of environmental management planFranschhoek First policy Long term credit rating AA+Long term funding on placeFutureImpact mitigationHousingPublic participation

  • [ TCTA score card ]Employment OpportunitiesProcurement Opportunities

    EmploymentLocalTotalDam contract72111Access Road contract153198Working for water252252TOTAL477561

    EmploymentLocalDam contract6Working for water21TOTAL27

  • [ TCTA score card ]Training Opportunities

    TrainingTrainingdaysNumber of Local PersonsWorking for water19448TCTA1 07166TOTAL1 265114

  • [ TCTA score card ]SMME Training and SupportOutcome of training and support

    Training and SupportNumber of SMMEs3 Training courses14

    2 Local joint venture tenders submitted for La Motte construction housing

  • [ BWP: Debt Curve in Actual Rand Value ]

  • Umgeni Water

    Treasury Management

  • [ Umgeni Water Treasury Management Services ]

    Service LevelAgreement

    Phases

    Status

    CompleteCompleteCompleteIn Progress Ministerial Directive started 11 July 20012 Year SLAJuly 01 - July 03SLA extendedJuly 03 - July 05Phase 1Phase 2Phase 3Phase 4

  • [ Umgeni Water - Phase 1]Full treasury operations take-on Market MakingCash ManagementPortfolio ManagementAccounting, Compliance, AuditRisk Management

    Full data take-on and due diligence

    Legal & Regulatory compliance

    Full Business AnalysisVision, MissionLong-term business plansTariff modelLong-term cash flow analysisAccounting policy & procedures

    Phase 1

    Situation analysis and take-on

  • [ Umgeni Water Phase 2 ]Reviewed of tariffing methodology

    Broad strategy for Umgeni restructuring

    Gap Analysis between current treasury model and that required to support core business

    Input into annual financial statements

    Phase 2

    Tariff, debt and treasury model review

  • [ Umgeni Water Phase 3 ]

    BALANCE SHEET RE-ENGINEERING:

    Exited Market Making - 28 November 2003 : Closure Market Making portfolio and repo bookElimination of cash flow risk associated with market makingFreeing up of financial assets used for Market Making to support redemption portfolios

    Greater Achievement of Asset / Liability Matching Minimize re-financing and forward starting interest rate risk through restructuring of structured loans and UG55 / UG66 debt buybackNegotiated R1 billion in amortizing debt to support balance