Presentation to Parliamentary Portfolio Committee 11/19/10 11

Transcription

1 Presentation to Parliamentary Portfolio Committee Click 17 November to edit Master 2010subtitle style 11

2 Content of Presentation Overview Chairman of the Board: Dr. Snowy Khoza Highlights of Organizational Performance Chief Executive Officer: Mr. James Ndlovu Project Implementation Executive Manager for Project Management and Implementation: Mr. Johann Claassens Financial Highlights Chief Financial Officer: Ms. Halima Nazeer

3 Overview Click Chairman to edit of Master the Board: subtitle Dr. style Snowy Khoza 33

4 Establishment of TCTA Established in 1986 as an SPV to fund and implement bulk raw water infrastructure Non profit-making Schedule 2 Public Entity - PFMA Reports via Minister of Water Affairs to Cabinet and Parliament

5 DWA (Infrastruct ure Branch) TCTA Water Supply Value-Chain National Raw Water Resource Infrastructure Water Boards Oversight by CoGTA Municipali ty Distribution of water 55 Treat raw water to potable level End User 5

6 Operations Model 66 Mandate from the Minister of Water Affairs Financin g, costing, timeline Due diligence Obtain project risk rating, and competitive financing (local and international Procurem ) ent Type of funding BBBEE Enterprise Development Local Products Contractor dev. Skills transfer Local employment Design optimisati on Constructi on (incl. social compone nt) Job creation Poverty alleviation LED

7 Financial Model Funding is off-balance Sheet, i.e. no funding from National Treasury Funding relies only on implicit guarantees from Treasury (excluding Lesotho Highlands (LHWP), which is explicitly guaranteed) All projects are ring-fenced, i.e. no crosssubsidisation is allowed Debt repayment is funded through water tariffs, over 20 years Deficit is intended to ensure on-going affordability for end users; the deficit reverses after a few years, and is not related to TCTA s feasibility as a going concern. 77

8 Risk Model Stakeholder Agreements: Off-take agreements Construction agreements Implementation agreement Project Manageme nt (transferred to partners, e.g. contractors) Debt Managem ent (Revenue collection by DWA) 88

9 Board Oversight Provides strategic direction in support of the Government s developmental agenda Provides effective leadership, based on an ethical foundation, for the effective governance of risk 99

10 Highlights of Organisational Performance Click Chief to edit Executive Master Officer: subtitle Mr. style James Ndlovu 1010

11 Strategic Objectives Deliver to all mandates provided by the Minister, in accordance with specifications and within the agreed timelines and budget Facilitate social transformation and build sustainable communities by providing jobs and empowerment Operate the business projects and processes in a cost-effective manner, conscious of the imperatives of PFMA 1111

12 Strategic Objectives cont. Build the knowledge and capability of the organisation to generate lessons for project improvements, in pursuit of greater efficiencies in water delivery Ensure the continuous availability of highcalibre human capital for delivering on organisational mission into the future, while remaining a value-adding agile entity. 1212

13 Directives Issued to TCTA The funding & implementation of the following projects : Lesotho Highlands Water Project 2002: Berg Water Project 2004: Vaal River Eastern Subsystem Augmentation Project November 2007: Mooi-Mgeni Transfer Scheme - Phase 2; July 2008: Olifants River Water Resources Development Project; September 2008: Komati Water Scheme Augmentation Project; June 2009: Mokolo Crocodile Water Augmentation Project Moved from a single to a multiple project environment, including simultaneously raising finance and managing projects & associated knowledge

14 Highlights of Performance in 2009/10 Simultaneous Projects Environmental performance Institutionalized knowledge management Effective human resources management Operating surplus of R2 026 million (2009: R million) Unqualified audit report Strategic transformation & community empowerment

15 Strategic Transformation Preferential Procurement Enterprise Development Local Employment Skills development 1515

16 Community Empowerment Transferred Pietersdal Office Block to Free State Provincial Government Launched Charl Cilliers Victim Empowerment Center (VEC) Implementation of BWP SUP (Sustainable Utilization Plan) such as Transfer of La Motte Houses in Franschhoek Internship Programme 1616

17 Transformation: BBBEE Scorecard TCTA moved from 68 points (2009) to 80 points (2010) From Level 4 to Level 3 contributor BBBEE ELEMENT Maximum Score/Points 31 March 2010 Management Control Employment Equity Skills Development Preferential Procurement Enterprise Development Socio-Economic Dev

18 Going Concern TCTA is highly solvent over the long-term with no risk of being unable to service and repay debt TCTA is a going concern

19 Project Implementation Click Executive to edit Master Manager subtitle for Project style Management and Implementation: Mr. Johann Claassens 1919

20 Building on the Multi-Project Environment Revenue Recourse Mandate Activities Peak of debt Constructio n info: Commence d Completed Repayment of debt 2020 T C T A Liability management for bulk raw Click water to infrastructure edit the outline Implementation development & Funding text Mandates format Advis LHWP ory BWP VRESAP MMTS2 ORWRDP2 KWSAP MCWAP 1 DWAF Second Outline Income Cost recovery Level stream of from DWAF Explicit Government Guaranteed Fund Risk mngmnt O&M of assets R 20 billion Income stream of BWP Implied guarantee Implement Fund Risk mngmnt R 1,4 billion Income stream of VRESAP Implied guarantee Implement Fund Risk mngmnt R 3,3 billion Income stream of MMTS2 Implied guarantee Implement Fund Risk mngmnt + R 2 billion years after construction Income stream of ORWRDP2 Implied guarantee Implement Fund Risk mngmnt + R 10 billion (Dam & BDS) Dam: BDS: years after construction KWSAP Implied guarantee Third Outline guarantee Implement Implement Level Fund Risk mngmnt Expected: - VRESAP-2 mngmnt - LHWP-2 Fourth Outline Level Fifth Construction cost + R 2 billion Outline Level Sixth 20 years after construction Outline + R 2 billion 20 years after construction Income stream of MCWAP Implied Fund Risk (approximately R7.5 billion ) MCWAP -2 (approximately R11 bn)

21 Lesotho Highlands Water Project

22 Lesotho Highlands Water Project Institutional Arrangements DW A RSA Chief Engineer Appoint Board RSA Government TCTA LHWC LHWC Responsible/Accountable GOL Government LHDA Appoint Board Non - Treaty O+M Manager to report on O+M Appointment require LHWC approval 22

23 Lesotho Highlands Water Project Status Phase I continued to deliver water to Vaal System 784 million m³ - Royalty payments to Lesotho R 342 million Phase I debt being repaid from revenues from water sales out of the Vaal System Phase II approved by Cabinet end 2008 subject to an Agreement Provide water to RSA Lesotho considering their Hydropower options

24 Berg Water Project

25 Berg Water Project Inaugurated in March 2009 attracted 4 awards for construction and environmental excellence Project operated and maintained by DWA as part of the Western Cape Water Supply System Continued to deliver water to City of Cape Town as part of WCWS Operation of the dam continued to meet the environmental requirements first dam in SA

26 Vaal River Eastern Sub-system Augmentation Project

27 Vaal River Eastern Sub-system Augmentation Project VRESAP provides water to two key strategic industries: Sasol in Secunda Eskom Power Stations in Mpumalanga Province Water delivery commenced in June 2009 when DWA declared the project operational Project operated and maintained my DWA as part of VRESS Revenues from water sales amounted to R 145 million project debt of R3.2 billion expected to be repaid by 2028 Termination of contract due to poor performance replacement contractors successfully appointed Final costs expected within the approved budget of R2.7 bn Final completion of the project June 2011

28 Mooi-Mgeni Transfer Scheme: Phase 2

29 Mooi-Mgeni Transfer Scheme: Phase 2 Augment the Mooi-Mgeni system in KZN for water supply via Umgeni Water to ethekwini, umgungundlovu and Msunduzi Municipalities KZN economic hub Project comprises a dam in the Mooi River and a water conveyance system project budget estimated at R1.7 bn Project in final preparation stage: Finalisation of institutional arrangements Securing of long-term funding mainly DFI funding Construction tendering

30 Komati Water Supply Augmentation Project Matla Power Station

31 Komati Water Scheme Augmentation project Augment the Komati System from the Vaal Eastern Sub-System with 57 million m³ pa to supply water to Eskom s Duvha and Matla power stations and later the new Kusile Power Station all in Mpumalanga Province Infrastructure includes a pump station next to Rietfontein weir and 68 km of pipeline - project budget R1.7 bn Project in final preparation stage: Finalisation of institutional arrangements

32 Olifants River Water Resources Development Project: Phase 2 De Hoop Dam

33 Olifants River Water Resources Development Project: Phase 2 MOKOPAN E FLAG BOSHIELO DAM Olifants-Sand RWS POLOKWAN E LEBOWAKGO Mphahele MO and Groothoek RWS Flag Boshielo RWS STRYDPOORT MOUNTAINS Olifantspoort South RWS JANE FURSE Nebo Plateau RWS MOOIHOE K Lebalelo RWS BURGERSFOR T Tubatse RWS STEELPOOR T TOWN DE HOOP DAM MOTOTO LO De Hoop Dam EPSS

34 Olifants River Water Resources Development Project: Phase 2 Main beneficiaries (50/50): social needs (Government agenda - provide basic water services by 2014) water requirements for further mining developments Social portion funded by fiscus and commercial portion offbudget by TCTA Phase-2 (b) to (h) Distribution system implemented by TCTA R7.9bn water services a further R7 bn Funding constraints due to mines reluctance to sign unconditional off-take agreements world economic downturn DWA/TCTA approached National Treasury for MTEF allocation awaiting outcome Project to proceed in Phases priority to social needs Construction expected to start in Sep 2011 water delivery

35 Mokolo-Crocodile Water Augmentation Project

36 Mokolo-Crocodile Water Augmentation Project

37 Mokolo-Crocodile Water Augmentation Project Main beneficiaries Phase 1: Eskom s Medupi Power Station, Exxaro, Lephalale Local Municipality Phase 2: Further power stations Eskom/IPP s, Sasol, Secondary Developments Composition Phase 1 46km pipeline and pump station & acquire existing infrastructure transfer water from Mokolo Dam 40 million m3/a Phase 2 abstraction weir Crocodile River, pump station and 128km pipeline - utilizing return flows transfer 197 million m3/a Phases 3 & 4 Further pipeline and water transfer return flows Implementation Phase 1 Budget R2 billion Construction Start Jul 2011 Water Delivery Jun 2013 Phase 2 to 4 Budget R10 to 15 billion Construction start uncertain 3737

38 Financial Highlights Click Chief to edit Financial Master Officer: subtitle style Ms. Halima Nazeer 3838

39 Fundamental Accounting Principles Each project is ring-fenced Costs of infrastructure reflected as asset until debt fully repaid, then handed back to DWA (LHWP intangible asset right of receipt of water owned by Lesotho Highlands Development Authority) Full cost recovery from water sold to end-users Constant tariff in real terms which increases with: Consumer Price Index annually Projects may need to increase borrowings in the first number of years after completion to maintain constant tariff Repayment of debt within reasonable period (e.g. 20 years) Should not be longer than the economic useful life of the asset Timing and cost of future augmentations schemes Affordable structure to the end-user

40 Project Financing Approach The first number of years of a project is designed to result in a shortfall in interest costs, hence the deficit. The project financing approach adopted means that this deficit was anticipated. In the project tariff setting, the debt is deliberately allowed to grow to allow for affordable tariffs. This is the first year that accounting surpluses were recorded on LHWP (R99 million).

41 Project Financing Approach contd. The graphs below illustrates the principles:- BWP 100 Annual Surplus/(Deficit) & Liability Curve Step-down tariff - CCT Low Demand Curve

42 Project Financing Approach contd. LHWP 24 Cumulative Forecast Liability Curve & Annual Operating Surplus/(Deficit)

43 Statement of comprehensive income as at 31 March R Million 2009 R Million Comments Revenue VRESAP was declared operational on 1 June 2010 LHWP and BWP increased due to volumes and Other Income 3 8 Recovery of La Motte of R5million in 2010 Rental income tariff Royalties paid (342) (325) Volume of water delivered was 18million m3 more than 2009 Other Operating expenses (392) (288) Increased activities on new projects, as these projects have gained momentum in the current year. All administration costs not directly attributable to construction has to be expensed VRESAP depreciation of works for the first time (R81m) Operating surplus Net finance costs (2 177) (1 965) Finance income Increase in LHWP short term investments toward the end of 2009 financial year Finance cost (3 026) (2 604) VRESAP finance costs reflected on Income Statement for the first time (previously capitalised) Increase in interest on WS04 due to incremental funding

44 Project Capital Projections (excluding LHWP) Cum Cost to Date TOTAL PROJECT COST - Capital Expediture (excluding O&M) (Forecast) / Budget 2010/ / / / / / / / /19 TOTAL (R million) (R million) (R million) (R million) (R million) (R million) (R million) (R million) (R million) (R million) BWP 1, ,626 VRESAP 2, ,698 MMTS ,667 ORWRDP 212 1,058 1,058 3, ,985 KWSAP ,736 MCWAP ,885 MCWAP ,055 2,233 2,895 2,498 1, ,673 Total 4,888 2,938 3,160 6,756 3,582 3,623 2,883 1, ,271 Cum Total 4,888 7,826 10,986 17,741 21,324 24,947 27,831 29,350 30,271 44

45 TCTA is a Going Concern The income agreements allow for a CPI adjusted increase on an annual basis as well as automatic triggers. Debt will be repaid over the planned repayment period and the organization is a going concern. The External Auditors have confirmed that TCTA is a going concern. 2009/10 Financial year Operating surplus of R2 billion Deficit of R152 million (after funding costs) 45

46 Thank you Questions