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Asset Management Workshop November 2010

Asset Management Workshop November 2010. #424282v1. AGENDA. SANRAL Mandate Corporate Governance Budgeting Funding Financial Reporting Revaluing assets Open Road Tolling (not discussed). The SANRAL mandate. Who Is SANRAL.

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Asset Management Workshop November 2010

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  1. Asset Management WorkshopNovember 2010 #424282v1

  2. AGENDA • SANRAL Mandate • Corporate Governance • Budgeting • Funding • Financial Reporting • Revaluing assets • Open Road Tolling (not discussed)

  3. The SANRAL mandate

  4. Who Is SANRAL • Responsible for strategic planning with regard to South African national road system • Finance, plan, construct, provide, operate and maintain roads in neighbouring countries upon request from the Minister of Transport and in agreement with the respective countries • Commercial principles, but not profit driven • Established in April 1998 by an Act of Parliament as an independent operating company to operate South Africa’s national road network • Established in terms of the National Roads Act of 1998 as a public company with a share capital within the requirements of the South African Companies Act • Governed by a board of directors (8 members) of whom 7 must be appointed by the Minister of Transport • Eighth member of the board is the CEO by virtue of office

  5. Vision and Mission Vision: To be recognised as a world leader in the provision of a superior primary road network in Southern Africa. Mission: As the custodian of a public good we are committed to the advancement of the Southern African community through:- • a highly motivated and professional team; • state-of-the-art technology; • proficient service providers; and • promoting the ‘user pay’ principle.

  6. SANRAL’s Core Values E-xcellence P-roactiveness P-articipativeness I-ntegrity C-are EP2IC

  7. SANRAL RELATIONSHIP TO MINISTER and DOT Minister (Regulator) MOT Board Governance and Control Chief Executive Officer Day to Day Business and Operations Management Planning, Design, Construction, Operation, Management, Control, Maintenance & Rehabilitation of National Roads SANRAL Staff

  8. Regulation • The South African National Roads Agency Limited and National Roads Act, No 7 of 1998 • Public Finance Management Act, No 1 of 1999 • External Auditor: Office of the Auditor-General • Internal Audit: Outsourced to Pricewaterhouse Coopers & BI Group (SAB&T) • Bankruptcy remote – may not be placed under judicial management or in liquidation except if authorised by an Act of Parliament • Exempt from Income Tax but toll portfolio is a vendor in terms of the VAT

  9. What Do We Do? • Responsible for proclaimed national roads: Toll and Non-Toll Network • Obligated by legislation to keep separate accounts for Toll and Non-Toll activities • Design, fund, maintain, operate and rehabilitate national roads • Manage approximately R18.5bn of annual spend • Manage toll road concessionaires • Levy tolls for the purposes of funding the Toll Road Network – with annual adjustments subject to the approval of the Minister of Transport • Provide safely engineered, well maintained roads

  10. The Bigger Picture • Road user is our client – SANRAL objective is to provide a safe well engineered road to the user – movement of people, services and goods • Value of time – Time is valuable, both commercial and private • To enable the economy to grow – creating wealth and job opportunities, saving on road user costs – sufficient infrastructure is required

  11. The Bigger Picture • In order to provide above, there are different focus areas: • As minimum, roads must be well maintained: • Routine road maintenance (crack sealing, pothole repair, grass cutting, road signs and markings, guardrails, etc) • Periodic maintenance – reseals and overlays • Rehabilitation • Available funding optimized using tools such as pavement management systems, HDM4 • Capacity improvements (combine with rehabs): • Additional lanes • Paved shoulders • Climbing lanes

  12. NATIONAL ROAD NETWORK (km)

  13. Corporate Governance

  14. Governance • Board and Top Management – Control and Direction • Enterprise-wide Risk Management • Risk Management Cluster • Board Ultimately Accountable • Measures against Fraud and Corruption: Zero Tolerance • Fraud Hotline (Whistle blowing) • Tip-Offs Committee • Forensic Investigations

  15. Procurement Process • Transparent and consistent procurement process • International standards for terms and conditions: FIDIC • Promotion of SMME’s and BEE • Segregation of duties as per SCM policy • Evaluation, recommendation, award

  16. Budgeting for national roads

  17. Cost Of Maintenance Delay – Sanral Repair Cost = X / km Repair Cost = 6X / km (Ratio 1:6) Good Fair Repair Cost = 18X / km (Ratio 1:18) Poor 3-5 Years Very Poor 5-8 Years

  18. Cost Of Maintenance Delay – Road User (2008r) Poor Good

  19. Asset Preservation - Data Unit Costs Traffic Roughness Rut Depth Macro Texture Cracking Ravelling Video Surface Friction DGPS Centralised Database Bridge Structural Strength

  20. SANRAL Budgeting Procedure Eastern Northern Southern Western Programming Programming Programming Programming Instrumental Data Bridge Inspections Traffic RUE RUE PMS BMS RDME BDME CBA CBA Priority List Priority List Pavement Management System Bridge Management System Super Project List BudgetOptimisation

  21. Funding

  22. Toll and Non-Toll • In terms of the SANRAL Act the it is obliged to operate its toll roads separately from its other national roads • SANRAL maintains separate accounting records for Toll and Non-Toll related operations • There is no cross subsidisation between the Toll and Non-Toll businesses • Toll roads are deemed to be self-funding and for financial analysis are deemed to amortise over a period of 30 years

  23. SANRAL Funding • Monies appropriated through grants by Parliament (Non-Toll) • Debt Capital Markets for toll roads (Toll) • Toll road funding is supported by toll revenue income (Loan Supportable by Revenue Principle) • Raised in ZAR

  24. J- curve J-curve

  25. Rating Moody’s National Scale Issuer Ratings: (Non-guaranteed notes) Long-Term: Aa2.za Short-Term: P-1.za Global Scale Issuer Ratings: Long-Term: A3 Short-Term: P2

  26. BORROWING CAPACITY • Initial R6 billion guaranteed funding (SZ bonds) • R1 billion N1 loan – separate guarantee • R10 billion – non guaranteed funding (NRA bonds) • R31.91 billion guaranteed funding (HWAY bonds & others) Total Borrowing capacity = R48.91 billion Total Guarantee = R38.91 billion {R31.91 billion (H Way) & R6 billion (SZ)}

  27. TOTAL DEBT

  28. THE SANRAL SUITE (Aug 2010)Spire Awards: BEST BORROWER 2008 & 2009BEST ISSUER 2009 (HWAY20)

  29. Current & Proposed Concessions Current Concessions • N4 East, Maputo Development Corridor – 420km • N3 Cedara, Heidelberg – 512km • N4 West, Platinum Highway – 484km Proposed Concessions • N1/N2 Winelands Toll Highway (Tenders closed 1 Nov 10) • N2 Wild Coast Toll Highway (ROD received) • R300 Ring Road

  30. Financial Reporting

  31. Financial Reporting Statutory Reporting (Financial Statements) • International Financial Reporting Standards • Special approval from NT due to publicly traded debt & international funding sources

  32. Financial Reporting Management Reporting • Non-toll and Toll separate • Forecasts done on monthly basis per project on mySAP (ERP) • Non-toll balanced to zero for budget • Toll allowed to budget for deficit due to finance charges and ‘J-curve’ effect

  33. Reporting Challenges • Going Concern: technically insolvent • Established with nominal asset value • Incorporated roads at zero cost • Toll roads > J-curve effect • Deferred Income: Non-current liability ito IAS20 • Completeness of assets • SANRAL Act > ownership • Registration of property cumbersome Revaluation Property verification

  34. Revaluing our assets

  35. Asset Revaluation • Investment Property • 1500 properties • Normal valuation (NPV) method • R1.1 billion (2009) • Road Reserve Land • 126 153.9 ha • Corridor method > Legal opinion • Using comparable sales of ‘across the fence’ properties • Adjusted for services & access

  36. Asset Revaluation (continued) • Road Reserve Improvement • 16 170km, 3 000 bridges & culverts • R 144.8 billion • Standards for road building given specific traffic and topography • Pavement & Bridge condition Depreciated replacement cost

  37. Impairment • Toll roads: Loan Supportable by revenue (LSR) methodology • Recoverable amount over a rolling 30 year period • Non-toll: Depreciated replacement • Non-cash generating unit, therefore no guidance in IFRS • IPSAS 21: value in use for non-CGU = depreciated replacement cost

  38. Comprehensive Asset register • Property verification project • ITIS (maps, RDS, status of each property) • Identification & Verification, then transfer • Valuation of all properties • Condition of roads & bridges • Condition survey every 2 years • Bridge inspection every 3 years • Detailled loaded into ITIS

  39. Open Road Tolling (ORT)

  40. Project Extent: PLANNED LANE ADDITIONS:185 km (2010) FUTURE UPGRADES:(223 KM) PLANNED NEW ROUTES: 158 km FINAL SCHEME:561 KM

  41. Cape Town FMS Operations

  42. Thank You Inge Mulder mulderi@nra.co.za www.nra.co.za Fraud hotline 0800 204 558

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