Asset Management Workshop November 2010

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Asset Management WorkshopNovember 2010
424282v1
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AGENDA

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

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The SANRAL mandate
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Who Is SANRAL

• Established in April 1998 by an Act of Parliament
  as an independent operating company to operate
  South Africas 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

• 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

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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.

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SANRALs Core Values

• E-xcellence
• P-roactiveness
• P-articipativeness
• I-ntegrity
• C-are
• EP2IC

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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
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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 (SABT)
• 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

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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

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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

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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

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NATIONAL ROAD NETWORK (km)
Description Non Toll State Toll BOT Total
Dual Carriageway 610 520 443 1 573
4-Lane Undivided 11 299 240 550
2-Lane Single 12 429 1013 605 14 047
Total 13 050 1 832 1 288 16 170
of SANRAL Network 81 11 8
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Corporate Governance
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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

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Procurement Process

• Transparent and consistent procurement process
• International standards for terms and conditions
  FIDIC
• Promotion of SMMEs and BEE
• Segregation of duties as per SCM policy
• Evaluation, recommendation, award

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• Budgeting for national roads

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Cost Of Maintenance Delay Sanral
Repair Cost X / km
Repair Cost 6X / km
(Ratio 16)
Good
Fair
Repair Cost 18X / km
(Ratio 118)
Poor
3-5 Years
Very Poor
5-8 Years
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Cost Of Maintenance Delay Road User (2008r)
Poor
Good
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Asset Preservation - Data
Roughness Rut Depth Macro Texture Cracking Ravelli
ng Video
Surface Friction
DGPS
Centralised Database
Bridge
Structural Strength
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SANRAL Budgeting Procedure
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
Budget Optimisation
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Funding
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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

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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

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How Do We Deliver ?

• Transparent, intelligent procurement
• Use of technology
• - Intelligent Transport Systems (ITS)
• - Electronic Toll Collection (ETC)
• - Asset Management Systems
• Environmental sensitivity
• Promote entrepreneurship and support SMMEs
• Public Private Partnerships (PPP)

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J- curve

• J-curve

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Rating

• Moodys
• 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

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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)
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TOTAL DEBT
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THE SANRAL SUITE (Aug 2010)Spire Awards BEST
BORROWER 2008 2009BEST ISSUER 2009 (HWAY20)
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
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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

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Financial Reporting
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Financial Reporting

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

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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

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Reporting Challenges

• Going Concern technically insolvent
• Established with nominal asset value
• Incorporated roads at zero cost
• Toll roads gt J-curve effect
• Deferred Income Non-current liability ito IAS20
• Completeness of assets
• SANRAL Act gt ownership
• Registration of property cumbersome

Revaluation
Property verification
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Revaluing our assets
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Asset Revaluation

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

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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
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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

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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

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Open Road Tolling (ORT)
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Project Extent

• PLANNED LANE ADDITIONS 185 km (2010)
• FUTURE UPGRADES(223 KM)
• PLANNED NEW ROUTES
• 158 km
• FINAL SCHEME561 KM

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Open Road Tolling
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SANRAL principles for ORT

• One tag standard
• One account may include various vehicles
• Central clearing
• Full interoperability

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ORT - General

• SANRAL model
• TCH VPC National SANRAL initiative
• Central clearing with all current and future
  concessions
• Clearing with CTROM (current toll plazas)
• Integration of Natis and AARTO
• Utilising special enforcement unit to do
  violation processing enforcement

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ORT Building Blocks

• Consist of following
• Toll tag
• Kiosks/Mobile Kiosks
• Satellite Centres
• Technical Shelters and Gantries (Toll Point)
• Communications Backbone
• Central Operations Centre (ORT Back Office, TCH,
  VPC, ITS
• Disaster Recovery Centre
• Toll Signage
• User Services

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ORT Customer Service Centres
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Customer Centre Coverage _at_ 12 min reach
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Technical Shelters Gantries

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Communications Backbone

• SANRAL Provides
• Fibre Optic Backbone
• Combination of existing ITS fibre and fibre to be
  installed in median
• Contractor
• Backup/emergency coms

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ORT Central Operations Centre

• ORT Back Office
• Transaction Clearing House (TCH)
• Violations Processing Centre (VPC)
• New ITS ops centre

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ORT Back Office

• Receives Transactions from RSS
• Apply discounts
• Do manual NPR if ANPR failed for non e-Tag
  transactions
• Optimise completeness and compliancy of
  transaction, before forwarding to the TCH

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ORT - TCH

• Receive transactions from the ORT operator
• TCH links transaction to an account
• Does financial clearing
• If not successful forward to VPC
• Do account management call centre
• Manage tag logistics issues the tag to all ETC
  projects/Retail outlets

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ORT Violation Processing

• Potential violator identified if
• No tag or account
• Insufficient funds in account
• Vehicle not identifiable
• Transaction forwarded to VPC
• Send invoice
• Not successful - final invoice
• Not successful Infringement notice

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Violation Enforcement

• Enforcement Unit (traffic officers together with
  ORT contractor) is set up to do violation
  enforcement
• Not only toll all traffic violations
• Also attending to other requirements management
  of incidents

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Freeway ITS network
Figure 10.1 GFIP Phase 1
SANRAL ITS Network Implemented (210 km)
Expansion
JRA ITS
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Cape Town FMS Operations
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Thank You
Inge Mulder mulderi_at_nra.co.za www.nra.co.za
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