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TCTA

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. Who is TCTA?

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TCTA

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  1. TCTA “Drawing on ancient wisdoms… …and cutting edge know how …to the benefit of all” Portfolio Committee 13 October 2005

  2. Agenda • Mandates • Highlights • Financial • Going concern • Progress on projects • Scorecard • Future

  3. 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 TCTA the Organisation MISSION STATEMENT TCTA is a specialised liability management body for bulk water supply development in the most cost-effective manner to the benefit of the water consumer.

  4. Water Supply Chain

  5. Footprints

  6. Mandated Responsibilities TCTA Integrated Treasury Management and Financial Advisory Services 20% Liability Managers for Bulk Raw Water Infrastructure Development 80% Water Board Implementation & Funding DWAF National Water Pricing Strategy LHWP BWP VAAL PIPE LINE OTHER WATER BOARDS UMGENIWATER Spring Grove NWI Agency Implementation and Funding (on behalf of Government) ORWRDP Implementation and Funding (on behalf of Government) (On behalf of Government) LHWP BWP VAAL PIPE LINE Tarifing and debt management services Governed by a service level agreement for high level strategic services. • Implementation, Funding and Risk • Management • Recourse to income • stream of BWP • Implementation, Funding and Risk • Management • Recourse to income • stream of VRESAP • Funding and Risk Management • Government Guaranteed Debt under Management R 3.5 billion Total Project size R 1.6 billion Total Project size R 2.4 billion Debt book R 20 billion

  7. [ Project Phases ] National Planning DWAF Project Planning DWAF Project preparationMainly TCTA Operation and maintenanceDWAF/TCTA Project implementationTCTA

  8. The Vaal River Eastern Sub-System VRESS Komati Subsystem Usutu Subsystem Users Demand by 2030 Heyshope Subsystem Eskom 338 mil m3/a Zaaihoek Subsystem 461 mil m3/a DWAF Sasol 123 mil m3/a Grootdraai Subsystem Witbank Subsystem TCTA Revenue based on sales out of VRESS to Eskom & Sasol Middelburg Subsystem Vaal Pipe Line 160 mil m3/a

  9. Olifants Water Resource Project: Location

  10. The Olifants Water Project: The Project Complexities Water Resource DevelopmentR 3.65 Billion National Government Treasury Bankable Un-Bankable Mining portion economically viable, not currently commercially viable National Government Level • Grant Funding • Other Social Funding Social portion of project Provincial and Local Government DPLG Water Services DevelopmentR 2.0 Billion • Municipal Infrastructure Grant • Provincial Infrastructure Grant • Other Funding Bankable Un-Bankable Domestic & Industrial users willing and able to pay Free basic water Provincial & Local Governments Funding Sources:DBSA, EIB, INCA, ADB, Commercial Funding and Capital Markets etc IDP’s Challenges: Balance National Governments risks of initially funding the project against social requirements and risks of impairing economic development

  11. Financial Highlights

  12. 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.

  13. Income Statementfor the year ended 31 March 2005 * 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

  14. Balance Sheetas at 31 March 2005

  15. 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: 2004/05

  16. Funding Requirements per Project

  17. LHWP & BWP: Total Sources of Funding Capital Market Bonds 82 % Foreign 6 % Other funding 18 % Local 94 % Fixed 72 % Floating 28 %

  18. Going Concern

  19. 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

  20. Tariffing Principles Revenue Risks Tariffing Principles Integrated approach to water pricing • Economic useful life of assets • Timing of future augmentation • Water consumed vs water delivered Constant tariff in real terms End user affordability Debt outstanding

  21. 30.0 5,500,000,000 5,000,000,000 25.0 4,500,000,000 20.0 4,000,000,000 Rand Billion Rand 15.0 3,500,000,000 LHWP1 Debt Curve LHWP1 Payments 3,000,000,000 LHWP1 Revenue 10.0 2,500,000,000 5.0 2,000,000,000 - 1,500,000,000 3/2006 3/2008 3/2010 3/2012 3/2014 3/2016 3/2018 3/2020 3/2022 3/2024 3/2026 3/2028 3/2030 Vaal River system : Debt, income and payments

  22. Vaal Pipeline Project Status

  23. Project Timeline VO20: Pipe-line installation and supply VO21: Civil structures and mechanical, electrical, instrumentation piping works

  24. Project Timeline (cont.)

  25. Berg Water Project Status

  26. Project Status: 31 March 2005

  27. Overall view of the Dam Site

  28. Project Status Dam : Progress on embankment and plinth Contractor : BRPJV Contract value : R548 million

  29. Project Status ACCESS ROAD TO DAM SITE CONTRACTOR: DWAF CONTRACT PERIOD: 8 MONTHS CONTRACT VALUE: R 18 MILLION

  30. La Motte Village POWER/DONICO JV: 40 HOUSES BIP 632 cc (FRANSCHHOEK): 20 HOUSES BIP 611cc (DWARS RIVER): 20 HOUSES

  31. Project Timeline

  32. Score card

  33. Social empowerment : Training • Training provided by the dam construction contractor 1 426 attendees  • Training provided by the Working for Water programme 609 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.

  34. BEE : Spend by contractors • Black economic empowerment • Targets are based on 25% of the total contract value of R 548 million. 

  35. 35% 3% 9% 2% 51% Black companies Black empowered companies Black influenced companies No Did not submit EDA BEE: Procurement – R263 million

  36. TCTA diversity profile Senior Management Management All 49 % 51 % 54 % 46 % 50 % 50 % Male Female 62 % 38 % 54 % 46 % 50 % 50 % Black White

  37. Future

  38. 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 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.

  39. 2005 2006 2007 2008 TCTA support TCTA alignment of and review systems & governance TCTA staff Branch integration establishment Branch fully functional and TCTA project improve systems Branch detailed integration design Business Branch as a self - sufficient Case business unit Cabinet Agency implementation Agency Agency decision planning establishment accreditation Establish institutional regulatory capacity Agency legislation Roadmap to Establish Agency

  40. TCTADrawing 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

  41. Thank You Questions …. TCTA Martie van Rensburg Chief Executive Officer Telephone: (012) 683 1200 Website: http://www.tcta.co.za e-mail: mvrensburg@tcta.co.za

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