Asset Management Workshop November 2010 #424282v1.

Asset Management Workshop

November 2010

#424282v1

• SANRAL Mandate

• Corporate Governance

• Budgeting

• Funding

• Financial Reporting

• Revaluing assets

• Open Road Tolling (not discussed)

AGENDA

The SANRAL mandate

• 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

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

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.

Vision and Mission

E-xcellence

P-roactiveness

P-articipativeness

I-ntegrity

C-are

EP2IC

SANRAL’s Core Values

Minister (Regulator)

Governance and Control

Planning, Design, Construction, Operation, Management, Control, Maintenance & Rehabilitation of

National Roads

Chief Executive Officer

Board

MOT

Day to Day Business and Operations Management

SANRAL Staff

SANRAL RELATIONSHIP TO MINISTER and DOT

RegulationThe 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

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

What Do We Do?

• 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

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

The Bigger Picture

NATIONAL ROAD NETWORK (km)

Description Non Toll State Toll BOT Total

Dual

Carriageway610 520 443 1 573

4-Lane

Undivided11 299 240 550

2-Lane

Single12 429 1013 605 14 047

Total 13 050 1 832 1 288 16 170

% of SANRAL Network 81% 11% 8%

Corporate 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

Governance

• 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

Procurement Process

Budgeting for national roads

0

20

40

60

80

100

2008 2013 2018 2023 2028

Year

Ro

ad C

on

dit

ion

Cost Of Maintenance Delay – Sanral

Repair Cost = X / km

Good

Fair

Poor

Very Poor

3-5 Years

Repair Cost = 6X / km

5-8 Years

Repair Cost = 18X / km

(Ratio 1:6)

(Ratio 1:18)

Cost Of Maintenance Delay – Road User (2008r)

Good PoorR 0

R 2

R 4

R 6

R 8

R 10

R 12

R 14

R 16

R 18

R 20

0 2 4 6 8 10 12 14 16

International Roughness Index (m/km)

Roa

d U

ser C

ost (

R/k

m)

Toll 1 - Car

Toll 2 - Small Truck

Toll 3 - Med Truck

Toll 4 - Long Truck

Based on HDM-4 Modeling

Asset Preservation - Data

RoughnessRut DepthMacro TextureCrackingRavellingVideo

Surface Friction

Structural Strength

Centralised Database

Traffic

Bridge

DGPS

Unit Costs

SANRAL Budgeting Procedure

Instrumental Data

CBA

Priority List

PMSRDME

RUE

Bridge Inspections

BMSBDME

RUE

CBA

Priority List

Traffic

Projected Total Volume (Sites)No. America Europe Asia-Pacific Government Total

Sm. Systems 12,000 6,600 2,100 3,000 23,700Med. Systems 6,200 3100 560 950 10,810Lg. Systems 2,650 1850 180 400 5,080Total 20,850 11,550 2,840 4,350 39,590

Projected Total Revenue (billions of $)No. America Europe Asia-Pacific Government Total

Sm. Systems $1.12 $0.62 $0.20 $0.28 $2.21Med. Systems $1.59 $0.80 $0.14 $0.24 $2.78Lg. Systems $1.80 $1.26 $0.12 $0.27 $3.46Total $4.52 $2.67 $0.46 $0.80 $8.45

Super Project List

Budget Optimisation

Projected Total Volume (Sites)No. America Europe Asia-Pacific Government Total

Sm. Systems 12,000 6,600 2,100 3,000 23,700Med. Systems 6,200 3100 560 950 10,810Lg. Systems 2,650 1850 180 400 5,080Total 20,850 11,550 2,840 4,350 39,590



EasternProjected Total Volume (Sites)

No. America Europe Asia-Pacific Government TotalSm. Systems 12,000 6,600 2,100 3,000 23,700Med. Systems 6,200 3100 560 950 10,810Lg. Systems 2,650 1850 180 400 5,080Total 20,850 11,550 2,840 4,350 39,590



SouthernProjected Total Volume (Sites)




NorthernProjected Total Volume (Sites)




Western

Programming Programming Programming Programming

Pavement Management System

Bridge Management System

Funding

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

Toll and Non-Toll

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

SANRAL Funding

J-curve

J- curve

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

RA

ND

(B

ILL

ION

S)

YEAR

FIGURE 1: Gauteng Freeways - Phase 1; Existing Sanral Funded Toll Roads; N 17; R30;PWV 3/N4; N3 PMB to DBN; PROJECTED CUMULATIVE DEBT LEVEL AT 4% P.A. REAL INTEREST RATE

8% p.a. inflation rate

6% p.a. inflation rate

ENDOF FIN YEAR:

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

Rating

• 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)

BORROWING CAPACITY

Total Borrowing capacity = R48.91 billionTotal Guarantee = R38.91 billion {R31.91 billion (H Way) & R6 billion (SZ)}

TOTAL DEBT

BOND COU-PON

MATURITY COUPON DATES ISSUE AMT (million)

TYPE

NRA013 4.25 31 October 2013 30 April 31 October 1 560 CPI

NRA014 11.25 30 April 2014 30 April 31 October 140 Fixed

NRA018 12.25 30 November 2018 31 May 30 November 2 556 Fixed

NRA022 12.25 31 October 2022 30 April 31 October 2 200 Fixed

NRA023 5.00 31 May 2023 31 May 30 November 515 CPI

NRA028 12.25 30 November 2028 31 May 30 November 2 671 Fixed

HWAY20 9.75 31 July 2020 31 January 31 July 5 762 Fixed

HWAY23 5.50 07 December 2023 30 June 31 December 521 CPI

HWAY34 9.25 31 July 2034 31 January 31 July 1 779 Fixed

HWAY24 5.50 07 December 2024 30 June 31 December 211 CPI

HWAY35 9.25 31 July 2035 31 January 31 July 647 Fixed

THE SANRAL SUITE (Aug 2010)Spire Awards: BEST BORROWER 2008 & 2009

BEST ISSUER 2009 (HWAY20)

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

Current & Proposed Concessions

Financial Reporting

Statutory Reporting (Financial Statements)

• International Financial Reporting Standards

• Special approval from NT due to publicly traded debt & international funding sources

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

Financial Reporting

• 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

Reporting Challenges

Revaluing our assets

• 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

Asset Revaluation

• 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

Asset Revaluation (continued)

Depreciated replacement cost

• 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

Impairment

• 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

Comprehensive Asset register

Open Road Tolling (ORT)

Project Extent:PLANNED LANE ADDITIONS: 185 km (2010)

FUTURE UPGRADES:(223 KM)

PLANNED NEW ROUTES:

158 km

FINAL SCHEME:561 KM

Cape Town FMS Operations

Inge Mulder [email protected] www.nra.co.za

Fraud hotline 0800 204 558

mailto:[email protected]

http://www.nra.co.za/

Asset Management Workshop November 2010 #424282v1.

Documents

Transcript of Asset Management Workshop November 2010 #424282v1.