e r 2 - Umgeni Water

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Chapter| DebtManagementandd Fundingg RequirementsChapter 16.DebtRequiremmentsManagement andFundingg16. 116.1.1Long Termm Cash FloFow andOutstandingDebtt ProjectionsIntroductionBasedonn thedebt maturity profileandd cumulativedebtcurve,thefollowing key k issueshavebeenidentifiedd andare takeninto account inn termss off creatingthee short, mediumm and long-termfundingstrategy::1.Capital structureeA keyprinciple to t managingthe outstandingdebt is too target the optimum capitalstructureof70 % fixedd and30 % floatingg interestrate so as too minimise volatility of o bothh the tarifff andincomee statement.2. Asset/liabilitymatcmchingA furtherkeyprinciplee to managingg Umggeni Water’s debt is to matchh the matumuritydatess andquantum of debtt outstandingin anyy year too the freecash generated by operationss after servicinginterest and operational expenditure.Therestill existss a mismatchbetweenliabilitiesandd freecash. Thiss needss to be pro-actively managed on an on-gogoing basis.Figure16. 1: Asseet-Liabilityy Matching1 5001 00 00500Asset LiabilityMatching(Based on BalanceSheet ValuVues)R'm--500'08'09'10'11' 12'13'14' 15'16-1 00 00-1 500-2 00 00-2 500LiabiitiesAsset3.Optimal DebtLevellThekey driver in determining theoptimal level off debtfor Umgeni Waterwass the abiliaity toservicee debtgiven thecash flows generatedafter capitalexpenditure.. A best-casescenarioisthat for every R1 R of debttoo bee repaid, there is R1.4R40 of operational cashflow after capitalexpenditure to fundd thee repayment.Pagee 122Umgeni WateWer Five-Year Business Plann | 201121/2012to 2015/2016
| Debt Management and Funding Requirements Chapter4. Redemption portfolioHaving debt with large bullet repayments, such as the UG21 bond, exposes Umgeni Water toforward starting interest rate and refinancing risk. These risks can be eliminated throughredemption portfolio management.16.1.2 Funding StrategyTable 16-1: Funding requirements (2010/11 to 2015/16)FUNDING REQUIREMENTS Short-term Medium-Term Long-TermFinancial Year (R'm) F11 F12 F13 F14 F15 F16Operational Cash flows 665 666 654 715 806 845Capex - Gross (Escalated) (548) (628) (690) (705) (644) (835)Net Operating and Capex cash flow 117 38 (36) 10 162 10Capex - Grants - 19 70 63# #Refinance - Capital (existing Debt net of asset capital) (113) (119) (121) (108) (112) (118)EIB * - 76 261 20 (20) (20)Refinance - Finance costs (existing Debt) (81) (98) (79) (64) (56) (52)EIB - - (14) (30) (32) (30)Net Incremental Funding (77) (84) 81 (109) (58) (210)Requirement p.a.Net (Funding) Investing requirementsOpening Balance Call investments 924 847 763 844 735 677Net Investing (Funding) requirements ^ 847 763 844 735 677 467* European Investment Bank# awaiting confirmation for the receipt of R15m in F’15 and R15m in F’16.^ The net investing (funding) portion excludes the R 200 million liquidity buffer as reflected in the balance sheet.Short-term funding strategy: FY10 to FY12• All surplus cash is to be invested in short-term financial assets or longer dated if not needed in the short-term.• Early repayment of existing annuity loans to be evaluated and if evaluation yields favourable results thenterms of repayment to be negotiated with the relevant lender. The loans identified as potentially favourablein terms of early settlement are shown in Table 16.2.Table 16-2: Loans identified as potentially favourable in terms of early settlementLender Loan Number Maturity Interest rate Capital outstandingDBSA 27 30 Sept 2012 14.5% R11.5mDBSA 47 30 Sept 2017 9.79% R19.5mMedium-term: FY13 to FY16The medium term funding requirements indicate that Umgeni Water will not require additional borrowings abovethe EIB drawdown in F’14 and that it holds sufficient funds to cover any incremental funding.Umgeni Water Five-Year Business Plan | 2011/2012 to 2015/2016 Page 123
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Chapter| Foreword by the ChiefExecu
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Page 95 and 96: Table 15.12: Umgeni Water Income St
Page 97 and 98: | Financial Plan ChapterTable 15.14
Page 101 and 102: Table 15.18: Umgeni Water Cash Flow
Page 103 and 104: Table 15.20: Msinsi Holdings Balanc
Page 105 and 106: Table 15.22: Umgeni Water Services
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e r 2 - Umgeni Water

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