TCTA

“Drawing on ancient wisdoms…

…and cutting edge know how

…to the benefit of all”

Portfolio Committee

13 October 2005

Agenda

Mandates

Highlights Financial Going concern Progress on projects Scorecard

Future

TCTA the Organisation

Who is TCTA? Established in 1986 to

manage the funding and financial risk management of the Lesotho Highlands Water Project

PFMA ~ Schedule 2 Public Entity

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

What do we do? Design

Construction

Funding and debt management

Income and risk management

Natural environment and social impact management

MISSION STATEMENTTCTA is a specialised liability management body for bulk water supply development in

the most cost-effective manner to the benefit of the water consumer.

Water Supply Chain

Footprints

Mandated Responsibilities

Integrated TreasuryManagement andFinancial Advisory

Services 20%

Integrated TreasuryManagement andFinancial Advisory

Services 20%

LHWP BWP VAAL PIPE LINEUMGENIWATER

OTHER WATER

BOARDS(On behalf of Government)

Implementation andFunding

(on behalf ofGovernment)

Implementation andFunding

(on behalf ofGovernment)

• Funding and Risk

Management

• Government Guaranteed

LHWP BWP• Implementation, Funding and Risk Management

• Recourse to income stream of BWP

VAAL PIPE LINE• Implementation, Funding and Risk Management

• Recourse to income stream of VRESAP

Governed by aservice level

agreement for high

level strategicservices.

Tarifing anddebt

managementservices

Debt bookR 20 billion

Total Project sizeR 1.6 billion

Total Project sizeR 2.4 billion

Debt under ManagementR 3.5 billion

Liability Managers for Bulk Raw Water

Infrastructure Development80%

Liability Managers for Bulk Raw Water

Infrastructure Development80%

TCTATCTA

Water BoardWater Board DWAFDWAF

National Water

Pricing Strategy

Implementation & Funding

Implementation & Funding

ORWRDP NWIAgency

SpringGrove

[ Project Phases ]

National Planning

DWAF

National Planning

DWAF Project Planning

DWAF

Project Planning

DWAF

Project preparation

Mainly TCTA

Project preparation

Mainly TCTA

Project implementation

TCTA

Project implementation

TCTA

Operation and maintenanceDWAF/TCTA

Operation and maintenanceDWAF/TCTA

UsersDemand by 2030

The Vaal River Eastern Sub-System

VRESS

Komati Subsystem

Usutu Subsystem

Heyshope Subsystem

Zaaihoek Subsystem

Grootdraai Subsystem

Witbank Subsystem

Middelburg Subsystem

Vaal Pipe Line160 mil m3/a

Eskom 338 mil m3/a

Sasol

123 mil m3/a

TCTA Revenue based on sales out of VRESS to

Eskom & Sasol

TCTA Revenue based on sales out of VRESS to

Eskom & Sasol

DWAFDWAF461 mil m3/a

Olifants Water Resource Project: Location

The Olifants Water Project: The Project Complexities

Funding Sources:DBSA, EIB, INCA, ADB, Commercial

Funding and Capital Markets etc

Nat

ion

al G

ove

rnm

ent

Lev

elP

rovi

nci

al &

Lo

cal G

ove

rnm

ents

Bankable

Mining portion economically viable,

not currently commercially viable

Water Resource DevelopmentR 3.65 Billion

Social portion of project

Un-Bankable

Bankable

Water Services DevelopmentR 2.0 Billion

Free basic water

Un-Bankable

IDP’s

National Government Treasury

National Government Treasury

Provincial and Local Government

DPLG

Provincial and Local Government

DPLG

• Grant Funding• Other Social Funding• Grant Funding• Other Social Funding

• Municipal Infrastructure Grant• Provincial Infrastructure Grant• Other Funding

• Municipal Infrastructure Grant• Provincial Infrastructure Grant• Other Funding

Domestic & Industrial users willing and able

to pay

Challenges:Challenges:

Balance National Governments risks of initially funding the project against social requirements and risks of impairing economic development

Financial Highlights

Changes in accounting treatment

GAAP adjustments During the current year, a change in the accounting policy with regards to

enduring benefit was effected resulting in the enduring benefit being treated as an intangible asset instead of a tangible asset. This change necessitated the reversal of the revaluation reserve (R125 million) which in turn has the effect of reducing the accumulated depreciation. This change in accounting policy has been processed retrospectively resulting in a reduction in enduring benefit of R116 million as at 31 March 2004.

Reporting on IFRS The financial statements have been prepared in accordance with Revised

International Accounting Standards and new International Financial Reporting Standards (“IFRS”) for the first time. TCTA has elected to early adopt IFRS effective 01 April 2004.

Amounts for 2004 fully restated Impact on the impairment of the assets

The adjustments from GAAP to IFRS relate only to the accounting treatment for the enduring benefit which is changed to the cost model where before the revaluation model was adopted.

Income Statementfor the year ended 31 March 2005

2005

R’Million

Restated

2004

R’Million

Revenue * 1 655 1 541

Other Income 229 224

Royalties paid 228 208

Operating expenses 88 75

Operating surplus 1 568 1 482

Finance cost 2 206 1 558

Net deficit for the year 638 76

* Income is based on the part of the bulk raw water tariff due to TCTA at 122,4 cents per cubic metre (2004 : 116,1 cents per cubic metre), based on 1 351 million cubic metres (2004 : 1 325 million cubic metres) of water sales from the Vaal River system. 693 million cubic metres of LHWP was delivered into the system for the year

Balance Sheetas at 31 March 2005

LHWP

2005

R’million

BWP

2005

R’million

VRESAP

2005

R’million

TOTAL

2005

R’million

RESTATED TOTAL

2004

R’million

ASSETS

Non-current assets 15 529 195 8 15 732 15 951

Current assets 2 811 65 2 2 878 742

Total Assets 18 340 260 10 18 610 16 693

EQUITY AND LIABILITIES

Reserves and deficit (2 810) - - (2 810) (2 206)

Non current liabilities 14 375 100 - 14 475 16 188

Current liabilities 6 775 160 10 6 945 2 711

Total equity and liabilities 18 340 260 10 18 610 16 693

Funding: 2004/05

LHWP : Capital market R 2 329 million Repay Money market R 73 million Foreign loans R 21 million Average rate 7.84%

BWP: Loan funding : R 216 million (including refinanced bridging facility) Average rate 8.12 %

Capital charge received R 38 million

Funding Requirements per Project

Financial YearLHWP

(R’million)BWP

(R’million)VRESAP

(R’million)TOTAL

(R’million)

2005/2006 3 306 280 685 4 271

2006/07 1 074 308 1 212 2 594

2007/08 1 033 138 972 2 143

2008/09 2 892 246 408 3 546

2009/10 1 399 -27 0 1 372

2010/11 2 522 0 0 2 522

Total 12 226 945 3 277 16 448

LHWP & BWP: Total Sources of Funding

Capital Market Bonds 82 % Foreign 6 %Other funding 18 % Local 94 %

Fixed 72 %Floating 28 %

Total Debt as at 31 March 2005R 20 200 million

(LHWP and BWP)

Foreign Institutions

6%

WS0122%

WS0315%

WS0423%

BWP1%

WS0511%

WS063%

Other3%

WSP1-WSP57%

Commercial Paper Program

9%

Going Concern

Going concern : pilars

Balance between affordable, predictable tariff and a reasonable peak of debt

Income flows calculated to breakeven on a smoothed basis over the period of debt repayment

Reasonable repayment / peak of debt needs to be balanced with future large augmentation

Tariffing Principles

Constant tariffin

realterms

End user

affordability

Debtoutstanding

• Economic useful life of assets• Timing of future augmentation • Water consumed vs water delivered

• Economic useful life of assets• Timing of future augmentation • Water consumed vs water delivered

Tariffing Principles

Integrated approach to water pricing

Revenue RisksRevenue Risks

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

5,500,000,000

3/20063/20083/20103/20123/20143/20163/20183/20203/20223/20243/20263/20283/2030

Ra

nd

-

5.0

10.0

15.0

20.0

25.0

30.0

Ra

nd

Bil

lio

n

LHWP1 Debt Curve

LHWP1 Payments

LHWP1 Revenue

Vaal River system : Debt, income and payments

Vaal Pipeline Project Status

Project Timeline

Item Contract Status Timing

Construction:Pre-qualification of contractors VO20

VO21

Appointment of contractors VO20VO21

Oct 05Nov 05

Commence with construction VO20VO21

Nov 05Dec 05

Commence commissioning Jul 07

Delivery of water Oct 07

Environmental:Environmental Impact Assessment Report to

DEAT

Jul 05

Record of Decision issued by DEAT Oct 05VO20: Pipe-line installation and supply

VO21: Civil structures and mechanical, electrical, instrumentation piping works

Project Timeline (cont.)

Item Status Timing

Funding: Credit rating agency appointed

Credit rating announcement Oct 05

Bridging finance Aug – Oct 05

Long-term project funding

* Discussions with potential funders

* Funding evaluation

* Funding finalised / Signing of agreements

Sep – Oct 05

Oct – Nov 05

Nov – Dec 05

Commercial Paper Programme Sep – Oct 05

Revenue:First receival of revenue Oct 07

Berg Water Project Status

Project Status: 31 March 2005

Project Component % Complete Start Date Completion Date

Access Roads 100 % February 2004 January 2005

Construction Village 70 % January 2005 October 2005

Dam Contract 30 % June 2004 December 2007

Supplement Scheme 0 % July 2005 December 2007

Overall view of the Dam Site

Project Status

Dam : Progress on embankment and plinth

Contractor : BRPJV

Contract value : R548 million

Project Status

ACCESS ROAD TO DAM SITE

CONTRACTOR: DWAF

CONTRACT PERIOD: 8 MONTHS

CONTRACT VALUE: R 18 MILLION

La Motte Village

POWER/DONICO JV: 40 HOUSES

BIP 632 cc (FRANSCHHOEK): 20 HOUSES

BIP 611cc (DWARS RIVER): 20 HOUSES

Project Timeline

River monitoring started September 2002

Infrastructure Construction Access Road Construction Housing

Feb 2004 – Nov 2005

Feb 2004 – Dec 2004

Jan 2005 – Nov 2005

Dam Construction June 2004 – Dec 2007

Supplement Scheme July 2005 – Aug 2007

Target Date for Impoundment May 2007

Commencement of Water Supply Summer 2007

Score card

Social empowerment : Training

Training provided by the dam construction contractor1 426 attendees 

Training provided by the Working for Water programme609 workers for 2 083 days. 

SMME training TCTA facilitated local SMME training. This training support was specifically provided in preparation for the La Motte housing contract.

BEE : Spend by contractors

Black economic empowerment

Targets are based on 25% of the total contract value of R 548 million. 

Group Target Cummulative % to date

Cummulative value to date

Black Enterprise (BE) 15% 39,77% R14,7 million

Black Economic - - -

Empowerment 20% 34,65% R12,8 million

Local business 5% 9,81% R3,6 million

SMME 10%   34,65% R12,8 million

BEE: Procurement – R263 million

2%

51%

35%

3%

9%

Black companies Black empowered companies

Black influenced companies No

Did not submit EDA

TCTA diversity profile

BlackWhiteBlackWhite

MaleFemaleMale

Female49 %51 %49 %51 %

62 %38 %62 %38 %

All

54 %46 %54 %46 %

54 %46 %54 %46 %

50 %50 %50 %50 %

50 %50 %50 %50 %

ManagementSenior

Management

Future

NWRIA: Road Map

1 April 2005

Construction unit

Ring fenced into

Branch within DWAF.

OBJ: Implement effective systems and process to support business by 1 April 2006 and start drafting the Agency Bill.

1 April 2005

Construction unit

Ring fenced into

Branch within DWAF.

OBJ: Implement effective systems and process to support business by 1 April 2006 and start drafting the Agency Bill.

1 April 2006

Move clusters (4) into Branch and apply systems. Finalise draft bill.

1 April 2007

Manage and run branch as proto Agency for one year before Incorporation into Agency.

1 April 2008

Start operating as an Agency.

1 April 2008

Start operating as an Agency.

Roadmap to Establish Agency

Business Case

2005 2006 2007 2008

Branch establishment

Branch detailed design

Branch fully functional and improve systems

Agency implementation planning

Agency establishment

Agency legislation

TCTA staff integration

Agency accreditation

Establish institutional regulatory capacity

TCTA alignment of systems & governance

TCTA project integration

Branch as a self-sufficient business unit

Cabinetdecision

TCTA support and review

TCTA

Drawing on ancient wisdom’s and cutting edge know how…

…to meet the growing demands of a water stressed sub-continent and…

…promote the dream of an African wide renaissance

Questions ….

Thank You

TCTA

Martie van Rensburg

Chief Executive Officer

Telephone: (012) 683 1200

Website: http://www.tcta.co.za

e-mail: mvrensburg@tcta.co.za