TCTA

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
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 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.
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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
DWAF
Implementation Funding
National Water Pricing Strategy
LHWP
BWP
VAAL PIPE LINE
OTHER WATER BOARDS
UMGENIWATER
NWI Agency
Spring Grove
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
Debt book R 20 billion
Total Project size R 1.6 billion
Total Project size R 2.4 billion
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Project Phases
National Planning DWAF
Project Planning DWAF
Project preparationMainly TCTA
Project implementationTCTA
Operation and maintenanceDWAF/TCTA
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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

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Olifants Water Resource Project Location
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The Olifants Water Project The Project
Complexities
Water Resource DevelopmentR 3.65 Billion
National Government Treasury

Bankable
Un-Bankable

National Government Level
Mining portion economically viable, not currently
commercially viable

• 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 SourcesDBSA, EIB, INCA, ADB, Commercial
Funding and Capital Markets etc
IDPs
Challenges
Balance National Governments risks of initially
funding the project against social requirements
and risks of impairing economic development
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Financial Highlights
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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.

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Income Statementfor the year ended 31 March 2005
2005 RMillion Restated 2004 RMillion
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
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Balance Sheetas at 31 March 2005
LHWP 2005 Rmillion BWP 2005 Rmillion VRESAP 2005 Rmillion TOTAL 2005 Rmillion RESTATED TOTAL 2004 Rmillion
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
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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

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Funding Requirements per Project
Financial Year LHWP (Rmillion) BWP (Rmillion) VRESAP (Rmillion) TOTAL (Rmillion)
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
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LHWP BWP Total Sources of Funding
Capital Market Bonds 82 Foreign 6
Other funding 18 Local 94 Fixed 72
Floating 28
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Going Concern
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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

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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
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Vaal River system Debt, income and payments
22
Vaal Pipeline Project Status
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Project Timeline
Item Contract Status Timing
Construction
Pre-qualification of contractors VO20 VO21 ? ?
Appointment of contractors VO20 VO21 Oct 05 Nov 05
Commence with construction VO20 VO21 Nov 05 Dec 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 05
VO20 Pipe-line installation and supply VO21
Civil structures and mechanical, electrical,
instrumentation piping works
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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
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Berg Water Project Status
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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
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Overall view of the Dam Site
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Project Status
Dam Progress on embankment and
plinth Contractor BRPJV Contract value R548
million
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Project Status
ACCESS ROAD TO DAM SITE CONTRACTOR
DWAF CONTRACT PERIOD 8 MONTHS CONTRACT VALUE
R 18 MILLION
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La Motte Village
POWER/DONICO JV 40 HOUSES BIP 632 cc
(FRANSCHHOEK) 20 HOUSES BIP 611cc (DWARS RIVER)
20 HOUSES
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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

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Score card
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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.

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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
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BEE Procurement R263 million
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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
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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.
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Roadmap to Establish Agency
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TCTA Drawing on ancient wisdoms and cutting
edge know how to meet the growing demands of
a water stressed sub-continent andpromote the
dream of an African wide renaissance
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Thank You
Questions .
TCTA Martie van Rensburg Chief Executive
Officer Telephone [phone] Website
http//www.tcta.co.za e-mail
mvrensburg_at_tcta.co.za